Economy:
U.S. productivity rose at a 2.3% annualized rate in the second quarter. The consensus estimate was for a 1.7% increase. Productivity and Costs, Second Quarter 2019, Preliminary
U.S. productivity rose at a 2.3% annualized rate in the second quarter. The consensus estimate was for a 1.7% increase. Productivity and Costs, Second Quarter 2019, Preliminary
The Cleveland Fed's median CPI was up 2.9% through July. Median CPI: Latest Data
The Atlanta Fed's sticky price CPI rose 3.4% in July on an annualized basis and 2.5% Y-O-Y. Sticky-Price CPI - Federal Reserve Bank of Atlanta
There are some inflationary pressures building in the economy. The BLS core CPI was up 2.2% Y-O-Y through July. Consumer Price Index Summary Headline CPI is lower due primarily to the recent decline in energy prices.
Both the Stock Jocks and the Bond Ghouls ignored the July inflation numbers.
The Atlanta Fed's sticky price CPI rose 3.4% in July on an annualized basis and 2.5% Y-O-Y. Sticky-Price CPI - Federal Reserve Bank of Atlanta
There are some inflationary pressures building in the economy. The BLS core CPI was up 2.2% Y-O-Y through July. Consumer Price Index Summary Headline CPI is lower due primarily to the recent decline in energy prices.
Both the Stock Jocks and the Bond Ghouls ignored the July inflation numbers.
Mortgage Rates Drop Significantly - Freddie Mac
Government's Estimate of Retail and Food Sales for July: +.7%:
The consensus estimate was for a .3% increase.
China to counter latest U.S. tariffs as Trump vows deal on U.S. terms - Reuters I do not see China taking a knee and kissing Donald's shoes while singing God Bless America.
US consumer sentiment August 2019 preliminary (92.1 vs 97 consensus estimate and 98.4 in July)
The stock market received a lift last Friday due in part to Lying Don's claim that the recent trade talks with China were "productive" and "very good", whatever that may mean factually, and the trade war will be "fairly short" (suggesting the end is near).
Donald added that "China "very much" wanted to make a deal, and he asserted again that the U.S. position becomes even "stronger" and China's position weaker as the talks drag on. Trump says China talks 'productive'; Trump says trade war with China will be fairly short - Reuters
Donald, Larry Kudlow, and treasury secretary Mnuchin have been using the words "constructive" and "productive" to describe the talks for over a year now.
Maybe progress is being made.
It would be foolish IMO, however, to believe anything that Donald says on this subject (or any other for that matter) since he is trying to boost stock prices by making these statements.
Ray Dalio: China could weaponize US Treasury holdings in trade war
Rubenstein: Trump needs a China trade deal or risk losing reelection Donald's key to reelection is a good economy on election day. If the country is in a recession with unemployment spiking, then he will probably lose. His unfavorable and strongly unfavorable ratings (unusually elevated for a U.S. President) are far too high to win with the economy weakening substantially.
A continuation of the trade war with China would make a recession next year far more likely.
Trump's latest Gallup popularity rating is at 41% with a good economy. Trump's Latest Approval Rating Stable, at 41%
Trump's highest approval rating in a Gallup poll over the first 2 1/2 years of his Presidency was 46% with a low at 35%.
The highest approval ratings of Eisenhower, Kennedy, Nixon, Carter, Reagan, G.H.W. Bush, Clinton, G.W. Bush, and Obama over the same term in office were 75%, 83%, 67%, 75%, 68%, 89%, 59%(Clinton), 90% and 69% (Obama) respectively (see previous link).
Government's Estimate of Retail and Food Sales for July: +.7%:
China to counter latest U.S. tariffs as Trump vows deal on U.S. terms - Reuters I do not see China taking a knee and kissing Donald's shoes while singing God Bless America.
US consumer sentiment August 2019 preliminary (92.1 vs 97 consensus estimate and 98.4 in July)
The stock market received a lift last Friday due in part to Lying Don's claim that the recent trade talks with China were "productive" and "very good", whatever that may mean factually, and the trade war will be "fairly short" (suggesting the end is near).
Donald added that "China "very much" wanted to make a deal, and he asserted again that the U.S. position becomes even "stronger" and China's position weaker as the talks drag on. Trump says China talks 'productive'; Trump says trade war with China will be fairly short - Reuters
Donald, Larry Kudlow, and treasury secretary Mnuchin have been using the words "constructive" and "productive" to describe the talks for over a year now.
Maybe progress is being made.
It would be foolish IMO, however, to believe anything that Donald says on this subject (or any other for that matter) since he is trying to boost stock prices by making these statements.
Ray Dalio: China could weaponize US Treasury holdings in trade war
Rubenstein: Trump needs a China trade deal or risk losing reelection Donald's key to reelection is a good economy on election day. If the country is in a recession with unemployment spiking, then he will probably lose. His unfavorable and strongly unfavorable ratings (unusually elevated for a U.S. President) are far too high to win with the economy weakening substantially.
A continuation of the trade war with China would make a recession next year far more likely.
Trump's latest Gallup popularity rating is at 41% with a good economy. Trump's Latest Approval Rating Stable, at 41%
Trump's highest approval rating in a Gallup poll over the first 2 1/2 years of his Presidency was 46% with a low at 35%.
The highest approval ratings of Eisenhower, Kennedy, Nixon, Carter, Reagan, G.H.W. Bush, Clinton, G.W. Bush, and Obama over the same term in office were 75%, 83%, 67%, 75%, 68%, 89%, 59%(Clinton), 90% and 69% (Obama) respectively (see previous link).
+++++
Markets and Market Commentary:
Cisco earnings Q4 2019 (Cisco's China business declined by 25% on an annualized basis)
Cisco Systems CEO Chuck Robbins: China enterprises shunned them
Chinese boycotts of U.S. products and services is just one non-tariff retaliation move.
OPEC sees bearish oil outlook for rest of 2019, points to 2020 surplus
Cisco Systems CEO Chuck Robbins: China enterprises shunned them
Chinese boycotts of U.S. products and services is just one non-tariff retaliation move.
OPEC sees bearish oil outlook for rest of 2019, points to 2020 surplus
Macy’s results indicate that the retail environment is worse than we thought, analysts say - MarketWatch There is of course an ongoing shift to retail purchases online. WMT reported the day after Macy's, beating expectations with a 37% surge in U.S. online revenues. Walmart U.S. Q2 comp sales grew 2.8% and Walmart U.S. eCommerce sales grew 37%
Dillard’s Stock Tumbles as Sales Fall and Losses Widen
Canopy Growth, world’s largest pot company, lost $1 billion in three months - MarketWatch
GE shares drop after whistleblower raises red flags on its accounting calling GE a "bigger fraud than Enron" Analyst says that GE is headed for a bankruptcy.
Banks tumble into a bear market, but not all are no-touch stocks
Fed's Bullard says only a 'sustained' bond inversion would be a bearish signal; Rising Global Recession Odds Signal More Credit And Market Risks For Financial Institutions: Forbes (noting that the Fed's recession model based on yield inversion has a higher probability now than in July 2007).
The U.S. Treasury is about to flood the market with debt to fund a $1 trillion deficit. Here’s why that is a worry - MarketWatch
U.S. GDP real growth, likely to be around 2% this year, is being fueled by factors that will not or can not continue long term.
Those fiscal and monetary stimulus measures can be generally characterized as follows: (1) tax cuts likely to reversed meaningfully when the Democrats regain control over congress and the presidency; (2) U.S. federal budget deficits running close to $1 trillion annually in the 11th year of an economic expansion; (3) negative real interest rates that are lower than during prior depressions and (4) more consumer spending funded by new debt.
Dillard’s Stock Tumbles as Sales Fall and Losses Widen
Canopy Growth, world’s largest pot company, lost $1 billion in three months - MarketWatch
GE shares drop after whistleblower raises red flags on its accounting calling GE a "bigger fraud than Enron" Analyst says that GE is headed for a bankruptcy.
Banks tumble into a bear market, but not all are no-touch stocks
Fed's Bullard says only a 'sustained' bond inversion would be a bearish signal; Rising Global Recession Odds Signal More Credit And Market Risks For Financial Institutions: Forbes (noting that the Fed's recession model based on yield inversion has a higher probability now than in July 2007).
The U.S. Treasury is about to flood the market with debt to fund a $1 trillion deficit. Here’s why that is a worry - MarketWatch
U.S. GDP real growth, likely to be around 2% this year, is being fueled by factors that will not or can not continue long term.
Those fiscal and monetary stimulus measures can be generally characterized as follows: (1) tax cuts likely to reversed meaningfully when the Democrats regain control over congress and the presidency; (2) U.S. federal budget deficits running close to $1 trillion annually in the 11th year of an economic expansion; (3) negative real interest rates that are lower than during prior depressions and (4) more consumer spending funded by new debt.
Trump:
Delusional Don blamed the FED for the market's plunge last Wednesday.
Perhaps some reporter, who is willing to have their head chopped by Donald, needs to ask him to list the companies that have moved production out of China back to the U.S. rather to another low cost foreign country like Vietnam. Even competent reporters fail to challenge Donald's claims enough or sufficiently.
One of the more common Trump lies is his claim that China pays U.S. tariffs, knowing full well that those tariffs on paid by U.S. importers.
Trump, Navarro only White House officials blaming volatility on Fed Both are wingnuts IMO.
Delusional Don blamed the FED for the market's plunge last Wednesday.
One of the more common Trump lies is his claim that China pays U.S. tariffs, knowing full well that those tariffs on paid by U.S. importers.
Trump, Navarro only White House officials blaming volatility on Fed Both are wingnuts IMO.
The Trumpster Steve King (R-Iowa) has a theory that he wants to share: Rep. Steve King says humanity might not exist if not for rape and incest - The Washington Post
That reminded me of the republican Todd Atkins's claim that women have some kind of mechanism to prevent impregnation after a rape. 'Legitimate rape' rarely leads to pregnancy, claims US Senate candidate | US news | The Guardian
The coroner concluded that Epstein committed suicide notwithstanding Donald's suggestion that Clintons had him murdered to prevent the disclosure of some imagined nefarious scheme.
Perhaps the coroner missed the mark left by Hillary's dart containing the crazy juice that caused the suicide.
Her use of an invisible cloak to hide her entry and her effective skydiving skills, which allowed her to enter the prison through a window opened by an unnamed co-conspirator, were successful in avoiding yet another murder charge brought by a Trumpster D.A.
Donald is doing whatever he can to provoke one of his True Believers into assassinating Congresswoman Omar. These two inflammatory tweets are just the latest salvos from the Duck:
The last tweet reflects one of Donald's reelection strategies that will work on the millions whose brain cells calcified soon after birth.
The odds that one of the several wingnut followers will follow through increases with each venomous attack by Despicable Don.
+++++
1. Pare (discussed out of trade time sequence):
A. Sold 13 GIS at $55.02-Used Commission Free Trade:
Quote: General Mills Inc. (GIS)
General Mills Inc. Interactive Charts
GIS Analyst Estimates
Closing Price Last Friday: GIS $55.02 +$0.69 +1.27%
GIS 1 Year Chart: Powerful burst up from December $36+ low attributable IMO mostly to investor desperation for yield and secondarily to slightly improved results
Profit: $134.13 (excludes earlier transaction)
Position Before Pare: Average Cost Per Share $41.1
Position After Pare: Average Cost $39.29
Most of my profit is in my remaining shares, which is a typical small ball trading result when this strategy is successful.
I sold all of my shares purchased with dividends at a profit which is another result when this trading strategy is successful.
By selling the shares bought with the dividend profitably, I in effect increased their dividend yield by harvesting the original dividend plus the share price appreciation on the shares bought with those dividends. I also eliminate the possibility for those shares that the dividend yield will in effect go down due to decreases below the costs per share.
Dividend: Quarterly at $.49 per share/ $1.96 annually (currently frozen as GIS digests the Blue Buffalo acquisition)
Last Ex Dividend Date: 7/9/19 (paid 8/1/19)
Dividend Reinvestment: Turned off effective for the next payment based on valuation
Dividend Yield at a TC of $39.29 = 4.99%
Last Substantive Discussion: Item # 3.A. (3/25/18 Post)
Current Position: 27+ shares
Will consider eliminating at over $60
The recent rapid decline in interest rates has contributed to the GIS price increase as investors become even more desparate for yield.
Maximum Position: 200 Shares
Purchase Restriction: Small Ball Rule
Lowest Cost Lot: Bought at $36.75
Item # 5 A. Bought 2 GIS at $40.25, 2 at $39.45, 10 at $38.3 and 5 at $36.75-Used Commission Free Trades (12/29/18 Post)
Realized GIS Gains 2007-2019 = $1,955.14 (snapshots for 2007-2018 realized gains can be found in Item 1.B; no realized losses yet)
Last Earnings Report discussed at What's Next For General Mills After Encouraging Q2? (NYSE:GIS) | Benzinga and at General Mills Makes Progress Toward Steadying the Ship-The Motley Fool
That reminded me of the republican Todd Atkins's claim that women have some kind of mechanism to prevent impregnation after a rape. 'Legitimate rape' rarely leads to pregnancy, claims US Senate candidate | US news | The Guardian
The coroner concluded that Epstein committed suicide notwithstanding Donald's suggestion that Clintons had him murdered to prevent the disclosure of some imagined nefarious scheme.
Perhaps the coroner missed the mark left by Hillary's dart containing the crazy juice that caused the suicide.
Her use of an invisible cloak to hide her entry and her effective skydiving skills, which allowed her to enter the prison through a window opened by an unnamed co-conspirator, were successful in avoiding yet another murder charge brought by a Trumpster D.A.
Donald is doing whatever he can to provoke one of his True Believers into assassinating Congresswoman Omar. These two inflammatory tweets are just the latest salvos from the Duck:
The odds that one of the several wingnut followers will follow through increases with each venomous attack by Despicable Don.
+++++
1. Pare (discussed out of trade time sequence):
A. Sold 13 GIS at $55.02-Used Commission Free Trade:
Quote: General Mills Inc. (GIS)
General Mills Inc. Interactive Charts
GIS Analyst Estimates
Closing Price Last Friday: GIS $55.02 +$0.69 +1.27%
GIS 1 Year Chart: Powerful burst up from December $36+ low attributable IMO mostly to investor desperation for yield and secondarily to slightly improved results
Profit: $134.13 (excludes earlier transaction)
 |
| 2019 Realized Gain Realized 30 Shares + $146.14 |
Position Before Pare: Average Cost Per Share $41.1
Position After Pare: Average Cost $39.29
Most of my profit is in my remaining shares, which is a typical small ball trading result when this strategy is successful.
I sold all of my shares purchased with dividends at a profit which is another result when this trading strategy is successful.
By selling the shares bought with the dividend profitably, I in effect increased their dividend yield by harvesting the original dividend plus the share price appreciation on the shares bought with those dividends. I also eliminate the possibility for those shares that the dividend yield will in effect go down due to decreases below the costs per share.
Dividend: Quarterly at $.49 per share/ $1.96 annually (currently frozen as GIS digests the Blue Buffalo acquisition)
Last Ex Dividend Date: 7/9/19 (paid 8/1/19)
Dividend Reinvestment: Turned off effective for the next payment based on valuation
Dividend Yield at a TC of $39.29 = 4.99%
Last Substantive Discussion: Item # 3.A. (3/25/18 Post)
Current Position: 27+ shares
Will consider eliminating at over $60
The recent rapid decline in interest rates has contributed to the GIS price increase as investors become even more desparate for yield.
Maximum Position: 200 Shares
Purchase Restriction: Small Ball Rule
Lowest Cost Lot: Bought at $36.75
Item # 5 A. Bought 2 GIS at $40.25, 2 at $39.45, 10 at $38.3 and 5 at $36.75-Used Commission Free Trades (12/29/18 Post)
Realized GIS Gains 2007-2019 = $1,955.14 (snapshots for 2007-2018 realized gains can be found in Item 1.B; no realized losses yet)
Last Earnings Report discussed at What's Next For General Mills After Encouraging Q2? (NYSE:GIS) | Benzinga and at General Mills Makes Progress Toward Steadying the Ship-The Motley Fool
2. Bought 30 Suncor (SU) at $29.78, 10 at $28.65 and 5 at 27.61-Used Commission Free Trades:
Average Cost Per Share = $29.28
Closing Price Last Friday: SU $28.10 +$0.49 +1.77%
Website: Suncor
2 Year Chart as of 8/15/19: Bear Market Trend:
Oil extends decline on trade worries, recession fears - MarketWatch
In today's Barrons, a subscription publication, the cover story discusses energy stocks favorably due to their price downdrafts, dividend yields, more restrained capital investment discipline, and a recovery in oil demand. Chevron and Other Oil and Gas Stocks to Love - Barron's Suncor is mentioned as one of the unloved stocks.
The article correctly notes in my opinion that Suncor has less risk than major E & P companies that explore for oil "because its enormous oil-sands reserves—equal to more than 30 years of production—make it more of an oil manufacturer than an exploration company."
My Category: Contrarian value + income with a risk of a value trap depending on future course of energy prices
SU | Suncor Energy Inc. Analyst Estimates | MarketWatch
2019: $3.34 (as of 7/26/19)
2020: $3.23
Alberta eases oil curtailment quotas again | CBC News; Alberta again eases oil output curtailments - Suncor Energy Inc. (NYSE:SU) | Seeking Alpha
Last Discussion: Item # 2 Sold 50 SU at $40.95 (8/16/14 Post)(profit snapshot = $598.05)-Item # 2 Bought 50 SU at $28.67 (12/29/11 Post)
The elimination in August 2014 was fortunate in that a long term bear market in energy stocks started that summer.
Maximum Position: 100 Shares
Purchase Restriction: Small Ball rule
Current Position: 45 shares at average cost per share of $29.28
Dividend: Paid in CADs; Quarterly at C$.42 per share (C$1.68 per share annually)
{subject to 15% withholding tax for a U.S. citizen when owned in a taxable account; no withholding pursuant to the U.S.-Canada tax treaty when held in a U.S. citizen's retirement account}
The dividend yield for SU owners will depend on the CAD/USD exchange rate.
Assuming a CAD/USD exchange rate of .75, no change in the penny rate, and a total cost per share of $9.28, the dividend yield would be about 4.3% before the Canadian withholding tax.
The variables will change, particularly the exchange rate for each dividend payment.
The after tax dividend yield will depend in part on whether or not the U.S. investor can recover the Canadian tax payments as a foreign tax credit.
That issue does not arise when held in a U.S. citizens retirement account since the existing tax treaty between the U.S. and Canada does not permit Canada to collect a tax for payments made by non-pass through Canadian corporations into those retirement accounts. That exemption started on 12/27/13.
See generally:
Journal Understanding Tax Implications of Foreign Stocks;
Understanding Taxation of Foreign Investments;
Foreign Dividend Withholding Tax Guide-Intelligent Income by Simply Safe Dividends;
Claiming Foreign Taxes: Credit or Deduction? | Charles Schwab
Some brokers may fail to claim the appropriate tax classification for the proper withholding amount in a taxable account and/or the exemption from withholding when a non-pass through Canadian corporate dividend is paid into a U.S. citizens retirement account.
Some U.S. entities may have to fill out a form to gain the more favorable 15% tax rate: How to Update Canadian Tax Withholding Information - Fidelity I had to do that with a trust that I administered.
Canada will withhold 15% when the dividend is paid by a Canadian REIT into a retirement account since there is no taxation at the corporate level.
For foreign countries that withhold a tax on dividends, Canada may be the only one that does not impose a tax on dividends paid by Canadian "regular" corporations into a U.S. citizens retirement account. When a tax is collected on a dividend paid into a retirement account, there is no way to recover that tax payment through a federal tax credit. Consequently, I would never own in an IRA a foreign dividend stock whose host country taxes the dividend payments.
Next Ex Dividend Date: 9/3/19
Dividends - Suncor
Dividend Reinvest: Yes at less than $35 per share
One Year Total Return as of 8/16/19 = -28.58 %
Canadian energy producers have been widow makers since the summer of 2014
DRIP Returns Calculator | Dividend Channel
Broker Reports:
S & P (7/29/19): 4 stars with a $34 PT
Morningstar (8/1/19): 4 stars with a $36 FV
Credit Suisse (7/25/19): Outperform with a C$53 PT
Last Earnings Report (Q/E 6/30/19): Suncor Energy reports second quarter 2019 results; Suncor Energy's (SU) CEO Mark Little on Q2 2019 Results - Earnings Call Transcript | Seeking Alpha
There was a deferred tax gain of C$1.12B in the second quarter. Operating profit was C$.8 per share compared to $C.73 in the 2018 second quarter. The consensus estimate was for C$.80.
Selected excerpts:
"Cash flow provided by operating activities, which includes changes in non‑cash working capital, was $3.433 billion ($2.19 per common share) in the second quarter of 2019, compared to $2.446 billion ($1.50 per common share) in the prior year quarter.
Net earnings were $2.729 billion ($1.74 per common share) in the second quarter of 2019, compared to $972 million ($0.60 per common share) in the prior year quarter and included a one‑time deferred income tax recovery of $1.116 billion ($0.71 per common share) to reflect the staged reduction of Alberta’s corporate income tax rate from 12% to 8% over the next four years.
Total Oil Sands production during the second quarter of 2019 increased to 692,200 barrels per day (bbls/d), from 547,600 bbls/d in the prior year quarter. Despite being limited by production curtailments, Oil Sands achieved a new second quarter production record, with the increase due to improved Oil Sands utilization and an increase in Fort Hills production. Fort Hills production was 89,300 bbls/d, compared to 70,900 bbls/d in the prior year quarter.
Exploration and Production (E&P) had 111,700 bbls/d of production in the second quarter, including improved Hebron production of 23,600 bbls/d, following the completion of the sixth production well during the quarter.
Suncor’s total upstream production was 803,900 barrels of oil equivalent per day (boe/d) during the second quarter of 2019, compared to 661,700 boe/d in the prior year quarter, marking a second quarter production record. The increase was primarily due to lower planned Oil Sands maintenance, improved reliability at Syncrude and the ramp up of Fort Hills and Hebron production throughout 2018, partially offset by the impact of mandatory production curtailments in the province of Alberta, which began January 1, 2019.
Refining and Marketing (R&M) delivered strong financial results, despite the impact of planned maintenance in the quarter, due to improved refining margins and higher crude throughput. Quarterly funds from operations were $932 million and operating earnings were $677 million, compared to $892 million and $671 million, respectively, in the prior year quarter.
Refinery crude throughput was 399,100 bbls/d and refinery utilization was 86% in the second quarter of 2019, compared to 344,100 bbls/d and a utilization rate of 74% in the prior year quarter. Both periods were impacted by major planned maintenance, however ..
The company paid $658 million in dividends and repurchased $552 million of its common shares during the quarter.
Suncor has revised its full year outlook range for capital expenditures to $4.9 – $5.4 billion, down from $4.9 – $5.6 billion to reflect the company’s continued focus on capital discipline, and Syncrude cash operating costs per barrel have been increased to $36.50 – $39.50 from $33.50 – $36.50 due to additional costs associated with driving sustained reliability improvements at Syncrude." (emphasis added)
The stock sold off in response to this report which was released after the close on 7/24/19:
3. Intermediate Term Bond Basket Strategy:
A. Sold 1 Duke Energy 3% SU Maturing on 6/15/2025:
Profit Snapshot: +$11.61
Item # 1.C. Bought 1 Duke 3% SU at a TC of 98.289 (6/14/17 Post) YTM was then at 3.166%.
Finra Page: Bond Detail
Issuer: Duke Energy Corp. (DUK)
Sold at 100.090
YTM at 100.09 = 2.983%
B. Verizon Redemption of Retail Notes:
These two bonds paid interest semi-annually. The last payment was made on 6/15/19. The interest payments shown in the preceding snapshot would be for 2 months.
I mentioned in my last post that Verizon was about to exercise its optional redemption right for these bonds maturing in 2024 and 2027.
These bonds were sold as part of Fidelity's retail note program. Bonds sold in a broker's retail corporate note program are generally illiquid given the small number of bonds sold.
The payments at the $1K per bond par value indicates that there was no make whole provision attached to an early optional redemption.
The typical make whole provision will generally have two significant positive effects when interest rates are declining as they have been this year.
First, the bond will trade higher than one without a make whole provision which operates as a call protection. Both of these bonds would be trading a few percent over par value-if there were make whole provisions in their prospectuses. The end result is that profit opportunities are effectively removed given the optional redemption right at par value.
Second, if there was a make whole provision, Verizon would not have exercised the optional call right since the make whole provision would be punitive to it for bonds maturing in 2024 and 2027. The call protection benefits the bond owner when interest rates have declined to such an extent that the reinvestment options would produce significantly less income which is the case now.
To illustrate those two points, look at the Verizon 3.376% SU maturing on 2/15/2025. This bond is currently trading at about a 5% premium to par value. The bond is not likely to be called due to a make whole provision contained in the prospectus. Earlier this year, the bond was trading near 96. If an investor bought the bond at 96, there would at least be an option available to sell it at 105. This bond has over $4B outstanding so it is liquid. A profit opportunity and liquidity would not be available for the Verizon 3.4% retail note maturing in 2027 that was just called at par value.
VZ 3.376% SU 2/15/2025 Make Whole Provision:
4. Short Term Bond/CD Ladder Basket Strategy:
B. Verizon Redemption of Retail Notes:
These two bonds paid interest semi-annually. The last payment was made on 6/15/19. The interest payments shown in the preceding snapshot would be for 2 months.
I mentioned in my last post that Verizon was about to exercise its optional redemption right for these bonds maturing in 2024 and 2027.
These bonds were sold as part of Fidelity's retail note program. Bonds sold in a broker's retail corporate note program are generally illiquid given the small number of bonds sold.
The payments at the $1K per bond par value indicates that there was no make whole provision attached to an early optional redemption.
The typical make whole provision will generally have two significant positive effects when interest rates are declining as they have been this year.
First, the bond will trade higher than one without a make whole provision which operates as a call protection. Both of these bonds would be trading a few percent over par value-if there were make whole provisions in their prospectuses. The end result is that profit opportunities are effectively removed given the optional redemption right at par value.
Second, if there was a make whole provision, Verizon would not have exercised the optional call right since the make whole provision would be punitive to it for bonds maturing in 2024 and 2027. The call protection benefits the bond owner when interest rates have declined to such an extent that the reinvestment options would produce significantly less income which is the case now.
To illustrate those two points, look at the Verizon 3.376% SU maturing on 2/15/2025. This bond is currently trading at about a 5% premium to par value. The bond is not likely to be called due to a make whole provision contained in the prospectus. Earlier this year, the bond was trading near 96. If an investor bought the bond at 96, there would at least be an option available to sell it at 105. This bond has over $4B outstanding so it is liquid. A profit opportunity and liquidity would not be available for the Verizon 3.4% retail note maturing in 2027 that was just called at par value.
VZ 3.376% SU 2/15/2025 Make Whole Provision:
4. Short Term Bond/CD Ladder Basket Strategy:
A. Sold 2 AON 2.8% SU Maturing on 3/15/21:
Profit Snapshot: +$22.23
Item # 4.C. Bought 2 AON 2021 SU at a TC of 98.825 (7/18/18 Post) YTM then at 3.322%.
FINRA Page: Bond Detail
Issuer: Aon PLC (AON)
AON | Aon PLC Analyst Estimates
AON SEC Filings
Sold at 100.471
YTM at 100.471 = 2.428%
I still own 2 bonds and will likely hold them until maturity. Item # 1.B. (4/1/17 Post)
B. Sold 1 McDonalds 2.75% SU Maturing on 12/9/20:
Profit Snapshot: $14.95
Item # 3.A. Bought 1 MCD 2.75% 2020 SU at a TC of 98.855 (12/2/18 Post)
FINRA Page: Bond Detail
Issuer: McDonald's Corp. (MCD)
MCD Analyst Estimates
Sold at 100.48
I still own 1 bond held in my IB taxable account, which I intend to keep until maturity. Item # 2.D. Bought 1 MCD 2.75% 2020 in IB Account at a TC of 99.607 (10/3/18 Post)
5. Regional Bank Basket Strategy:
A. Pared HBAN: Sold 104+ at $14.65 and 102+ at $14.57:
Quote: Huntington Bancshares Inc. Stock (HBAN)
HBAN | Huntington Bancshares Inc. Analyst Estimates | MarketWatch
2019 $1.32 (as of 7/26/19)
2020 $1.36
Y-O-Y Projected E.P.S. Growth = 3.03%
Closing Price Last Friday: HBAN $12.93 $0.51 +4.11%
These two transactions eliminate my position held in my Schwab taxable and Vanguard Roth IRA accounts.
I am keeping the position in my Fidelity taxable account which is subject to the small ball purchase restriction. The lowest cost lot was bought at $11.8 (Used Commission Free Trades: 1/9/18 Post) The current position in that account is 51+ shares with an average cost per share of $13.48.
Profit Snapshots = $142.62
Item #1 Bought 100 HBAN at $13.87-In a Roth IRA Account (3/17/19 Post)
Dividend: Quarterly at $.15 per share ($.6 annually), recently raised from $.14
Huntington Bancshares Incorporated Declares 7% Increase In Quarterly Cash Dividend On Its Common Stock
Huntington Bancshares boosts dividend to yield nearly double its peer group - MarketWatch
Next Ex Dividend Date: 9/16/19
Dividend Reinvestment: Yes
Dividend Yield at $13.48 (average cost remaining shares) = 4.451%
Highest Cost Remaining of Remaining Lots: 10 shares at $14.68 (first lot bought in small ball chain)
All remaining lots were bought with commission free trades and the reinvestment of dividends.
Last Earnings Report (Q/E 6/30/19):
"Net income for the 2019 second quarter of $364 million, an increase of 3% from the year-ago quarter. Earnings per common share (EPS) for the 2019 second quarter were $0.33, up 10% from the year-ago quarter. Tangible book value per common share as of 2019 second quarter-end was $7.97, a 10% year-over-year increase. Return on average assets was 1.36%, return on average common equity was 13.5%, and return on average tangible common equity was 17.7%.
2 basis point increase in the FTE net interest margin (NIM) to 3.31%. The NIM expansion reflected a 28 basis point year-over-year increase in average earning asset yields and an 8 basis point increase in the benefit from noninterest-bearing funds, partially offset by a 34 basis point increase in average interest-bearing liability costs.
Efficiency ratio of 57.6%, up from 56.6%.
Repurchased $152 million of common stock (11.3 million shares at an average price of $13.40 per share).
Net charge-offs equated to 0.25% of average loans and leases, up from 0.16%
Average loans and leases increased $3.0 billion, or 4%, year-over-year, including a $1.7 billion, or 5%, increase in consumer loans and a $1.3 billion, or 4%, increase in commercial loans.
Average core deposits increased $3.3 billion, or 4%, year-over-year, driven by a $2.4 billion, or 11%, increase in money market deposits and a $2.1 billion, or 54%, increase in core certificates of deposit.
Nonperforming asset ratio of 0.61%, up from 0.57%."
All of those numbers are on the positive side of the ledger. One concern that I have about regional banks is that the charge-off and non-performing loans/assets ratios are probably at a cyclical bottom for this expansion cycle. The next major move in those ratios will be up.
The other problem for HBAN and regional banks in general is the flat yield curve that compresses net interest margins.
Huntington Bancshares Incorporated Reports 2019 Second Quarter Earnings Of $0.33 Per Common Share
Analyst Response to Brokerage Report: Slightly Positive
My response was the same.
Analyst Reports Recently Reviewed: Generally viewed with no enthusiasm
Argus (May 2019): Hold
S & P (July 2019): 3 stars with a 12 month PT of $14
Morningstar (June 2019): 3 stars with a FV of $15
HBAN 5 Year Chart : Showing two channel periods of chop.
The first channel is largely between $9.5 to $11.5 occurring 7/14 to 11/16.
The second channel was created after a price pop in November 2016. The new channel is moving mostly between $12 to $16 per share.
5 Year Annual Average Total Return (through 7/26/19) = +11.32%
KRE Over Same Period = 9.38%
DRIP Returns Calculator | Dividend Channel
HBAN Trading Profits: +$576.75 ($434.13 in prior trades)
6. Junk Bond Basket:
A. Sold 2 Albertsons 7.11% SU Maturing on 7/22/27:
Profit Snapshot: $82.6
Finra Page: Bond Detail
Credit Rating: B+ from S & P
This bond was one of the holdovers from my junk bond basket.
Almost all of those bonds were sold or redeemed by the issuers several years ago.
I have since transitioned to higher quality bonds as I focus more on the return of my money rather than the return on my money.
Trading for this bond is not active.
In order to sell it, I had to request a bid which is not the optimal way to sell a bond but was the only way to get rid of this 2 bond lot.
The the total out-of-pocket exposure for the bonds bought pursuant to that defunct junk bond ladder strategy is less than $7K, with most of that in 4 CoreLogic (CLGX) 7.55% SU notes maturing on 4/1/2028:
All of these bonds are still owned since they are hard to sell. Part of the reason is that issuers have reduced the outstanding number through repurchase offerings.
The First American bond is now a Corelogic obligation. Bonds Detail (rated at B+); Bought 1 CoreLogic 7.55% Senior Bond Maturing 4/1/2028 at 84.95 (2/22/12 Post); Item # 3 Bought 1 7.55% CoreLogic Senior Bond Maturing 4/1/2028 at 94.975 (4/29/11 Post) This bond is not liquid after the issuer bought in a tender offer most of them
CoreLogic Inc. (CLGX); CoreLogic Reports Second Quarter 2019 Financial Results
I have realized gains in the trust certificate PJS that contained this bond as its underlying security (realized PJS gains at $2,291.52/redeemed by the owner of the call warrant):
The May Department store and Compass bank bonds were bought when the ratings were in junk territory.
The May bond is now a Macy's obligation and is currently rated at BBB-/Baa3. Bond Detail A downgrade back into junk territory within 12 months or so would not be surprising. Item # 2. Bought 1 Macy's Bond Maturing in 2030 @ 99.5 I did recently try to sell this bond at 118 without success.
The Compass bank bond has been upgraded since my purchase to Baa2/BBB. Bond Detail
Both the Hercules and Compass bonds are junior in priority to senior debt.
The Hercules 2029 6.5% junior bond is now an Ashland Global Holdings Inc. (ASH) obligation and is currently rated at BB. Bond Detail About $52M is still outstanding: Page F-30 Annual Report; Item # 2 Bought 1 Hercules 6.5% Junior Bond Maturing on 6/30/29 at 86 (6/24/11 Post)
Profit Snapshot: +$22.23
Item # 4.C. Bought 2 AON 2021 SU at a TC of 98.825 (7/18/18 Post) YTM then at 3.322%.
FINRA Page: Bond Detail
Issuer: Aon PLC (AON)
AON | Aon PLC Analyst Estimates
AON SEC Filings
Sold at 100.471
YTM at 100.471 = 2.428%
I still own 2 bonds and will likely hold them until maturity. Item # 1.B. (4/1/17 Post)
B. Sold 1 McDonalds 2.75% SU Maturing on 12/9/20:
Item # 3.A. Bought 1 MCD 2.75% 2020 SU at a TC of 98.855 (12/2/18 Post)
FINRA Page: Bond Detail
Issuer: McDonald's Corp. (MCD)
MCD Analyst Estimates
Sold at 100.48
I still own 1 bond held in my IB taxable account, which I intend to keep until maturity. Item # 2.D. Bought 1 MCD 2.75% 2020 in IB Account at a TC of 99.607 (10/3/18 Post)
5. Regional Bank Basket Strategy:
A. Pared HBAN: Sold 104+ at $14.65 and 102+ at $14.57:
 |
| 102+ Shares Roth IRA |
 |
| 104+ Shares at $14.65 |
HBAN | Huntington Bancshares Inc. Analyst Estimates | MarketWatch
2019 $1.32 (as of 7/26/19)
2020 $1.36
Y-O-Y Projected E.P.S. Growth = 3.03%
Closing Price Last Friday: HBAN $12.93 $0.51 +4.11%
These two transactions eliminate my position held in my Schwab taxable and Vanguard Roth IRA accounts.
I am keeping the position in my Fidelity taxable account which is subject to the small ball purchase restriction. The lowest cost lot was bought at $11.8 (Used Commission Free Trades: 1/9/18 Post) The current position in that account is 51+ shares with an average cost per share of $13.48.
Profit Snapshots = $142.62
 |
| 104+ Shares +$83.71 |
 |
| 102+ Roth IRA Shares + $58.91 |
Dividend: Quarterly at $.15 per share ($.6 annually), recently raised from $.14
Huntington Bancshares Incorporated Declares 7% Increase In Quarterly Cash Dividend On Its Common Stock
Huntington Bancshares boosts dividend to yield nearly double its peer group - MarketWatch
Next Ex Dividend Date: 9/16/19
Dividend Reinvestment: Yes
Dividend Yield at $13.48 (average cost remaining shares) = 4.451%
Highest Cost Remaining of Remaining Lots: 10 shares at $14.68 (first lot bought in small ball chain)
All remaining lots were bought with commission free trades and the reinvestment of dividends.
Last Earnings Report (Q/E 6/30/19):
"Net income for the 2019 second quarter of $364 million, an increase of 3% from the year-ago quarter. Earnings per common share (EPS) for the 2019 second quarter were $0.33, up 10% from the year-ago quarter. Tangible book value per common share as of 2019 second quarter-end was $7.97, a 10% year-over-year increase. Return on average assets was 1.36%, return on average common equity was 13.5%, and return on average tangible common equity was 17.7%.
2 basis point increase in the FTE net interest margin (NIM) to 3.31%. The NIM expansion reflected a 28 basis point year-over-year increase in average earning asset yields and an 8 basis point increase in the benefit from noninterest-bearing funds, partially offset by a 34 basis point increase in average interest-bearing liability costs.
Efficiency ratio of 57.6%, up from 56.6%.
Repurchased $152 million of common stock (11.3 million shares at an average price of $13.40 per share).
Net charge-offs equated to 0.25% of average loans and leases, up from 0.16%
Average loans and leases increased $3.0 billion, or 4%, year-over-year, including a $1.7 billion, or 5%, increase in consumer loans and a $1.3 billion, or 4%, increase in commercial loans.
Average core deposits increased $3.3 billion, or 4%, year-over-year, driven by a $2.4 billion, or 11%, increase in money market deposits and a $2.1 billion, or 54%, increase in core certificates of deposit.
Nonperforming asset ratio of 0.61%, up from 0.57%."
All of those numbers are on the positive side of the ledger. One concern that I have about regional banks is that the charge-off and non-performing loans/assets ratios are probably at a cyclical bottom for this expansion cycle. The next major move in those ratios will be up.
The other problem for HBAN and regional banks in general is the flat yield curve that compresses net interest margins.
Huntington Bancshares Incorporated Reports 2019 Second Quarter Earnings Of $0.33 Per Common Share
Analyst Response to Brokerage Report: Slightly Positive
My response was the same.
Analyst Reports Recently Reviewed: Generally viewed with no enthusiasm
Argus (May 2019): Hold
S & P (July 2019): 3 stars with a 12 month PT of $14
Morningstar (June 2019): 3 stars with a FV of $15
HBAN 5 Year Chart : Showing two channel periods of chop.
The first channel is largely between $9.5 to $11.5 occurring 7/14 to 11/16.
The second channel was created after a price pop in November 2016. The new channel is moving mostly between $12 to $16 per share.
5 Year Annual Average Total Return (through 7/26/19) = +11.32%
KRE Over Same Period = 9.38%
DRIP Returns Calculator | Dividend Channel
HBAN Trading Profits: +$576.75 ($434.13 in prior trades)
6. Junk Bond Basket:
A. Sold 2 Albertsons 7.11% SU Maturing on 7/22/27:
Profit Snapshot: $82.6
Finra Page: Bond Detail
Credit Rating: B+ from S & P
This bond was one of the holdovers from my junk bond basket.
Almost all of those bonds were sold or redeemed by the issuers several years ago.
I have since transitioned to higher quality bonds as I focus more on the return of my money rather than the return on my money.
Trading for this bond is not active.
In order to sell it, I had to request a bid which is not the optimal way to sell a bond but was the only way to get rid of this 2 bond lot.
The the total out-of-pocket exposure for the bonds bought pursuant to that defunct junk bond ladder strategy is less than $7K, with most of that in 4 CoreLogic (CLGX) 7.55% SU notes maturing on 4/1/2028:
The First American bond is now a Corelogic obligation. Bonds Detail (rated at B+); Bought 1 CoreLogic 7.55% Senior Bond Maturing 4/1/2028 at 84.95 (2/22/12 Post); Item # 3 Bought 1 7.55% CoreLogic Senior Bond Maturing 4/1/2028 at 94.975 (4/29/11 Post) This bond is not liquid after the issuer bought in a tender offer most of them
CoreLogic Inc. (CLGX); CoreLogic Reports Second Quarter 2019 Financial Results
I have realized gains in the trust certificate PJS that contained this bond as its underlying security (realized PJS gains at $2,291.52/redeemed by the owner of the call warrant):
The May Department store and Compass bank bonds were bought when the ratings were in junk territory.
The May bond is now a Macy's obligation and is currently rated at BBB-/Baa3. Bond Detail A downgrade back into junk territory within 12 months or so would not be surprising. Item # 2. Bought 1 Macy's Bond Maturing in 2030 @ 99.5 I did recently try to sell this bond at 118 without success.
The Compass bank bond has been upgraded since my purchase to Baa2/BBB. Bond Detail
Both the Hercules and Compass bonds are junior in priority to senior debt.
The Hercules 2029 6.5% junior bond is now an Ashland Global Holdings Inc. (ASH) obligation and is currently rated at BB. Bond Detail About $52M is still outstanding: Page F-30 Annual Report; Item # 2 Bought 1 Hercules 6.5% Junior Bond Maturing on 6/30/29 at 86 (6/24/11 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.
I heard a theory that this time the inversion is different. I'm not remembering what's the usual according to this theory.
ReplyDeleteSo I'll say usual is long end is growing fine, but short end exceeds it. The theory says this time it's the opposite. Long end is simply coming down faster than short end. so the usual assumption that inversion matters doesn't apply.
Unfortunately we are now living with extreme. On one side is Trump. The far progressive left isn't much different. These two, Omar & Tliab are calling for destruction of Israel's existence (BDS.) Then fuss when Israel doesn't want to let them come play footsy with incitement. Both they and Trump use Jews as a football in their games.
Weert has been barred from countries. There's an Israeli rep who was barred from USA by Obama's office for being extremist. Trump was disinvited from EU/UK events.
Moderate voices, middle, are missing and needed.
https://www.vox.com/policy-and-politics/2019/3/6/18251639/ilhan-omar-israel-anti-semitism-jews
DeleteI am not concerned about Israel being circumspect in granting a visa to Omar & Tliab. That is Israel's decision.
I am concerned that the President personally intervened for political reasons, attempting to tar the entire Democrat party with the beliefs of those two congresswoman, and is directing a barrage of attacks against them that could easily result in violence.
https://www.rollcall.com/news/guns-found-in-new-york-home-of-man-who-threatened-to-shoot-rep-ilhan-omar
If I went through a long litany of immoral acts committed or sanctioned by the U.S. government, and that would be a very long list, would that make me anti-American? Or would I simply be acknowledging the past in order to convince as many people as I can that the nation can do better in the future?
You mention three concerns which I share. One is that Trump is drumming up violence through his comments at/about these two women. He's been drumming up bigotry from before he ran, and it's been increasing threat of violence with each one, at individuals he's targeted, and at all sorts of groups, Muslims, Hispanics, Women, the planet, and on and on. Terrifyingly so, and in reality, stats are reflecting it.
ReplyDeleteAnother is that Trump's triangulation is working. He's both mainstreaming these two, and their bigotries, and his own bigotries at the same time. And putting the DNC into a spot trying to contain and react to this farther left faction, which is potentially harmful to the DNC's success. Further left can add some useful ideas to a party, but not when it moves the whole party over so that independents lose interest. That is his motive obviously, to improve his own chances. And if not, to at least make a lot of people miserable, as a sociopath likes to see around them.
Another is that Trump intervened. Well, he's horrible. We know that by now.
I have another concern which your article highlights. Antisemitism is flying around. From the farther left, from the right. And there's very little reaction to it outside the Jewish community. Instead, it's starting to get mainstreamed.
I'm not following your last paragraph. Is it proxy for Israel and these two?
If about Israel, this isn't about thoughtful, accurate discussions of policy. These two are advocating for the ending, dissolving of Israel, i.e war.. Their itinerary was to go to Palestinian with no mention of Israel, & to meet with only extremist groups well outside mainstream of any kind (their sponsor organization claimed a blood libel about Jews using blood on matzah at Passover). Their comments about Israel have not been in context, nor accurate. There's much to discuss in every direction, and to look for solutions. These two aren't doing any of that hard work. They are vilifying towards their end goal, and hoping it sticks.
The Jewish community frequently has programs to thoughtfully discussion policies and actions that might help. One of the best is an annual tour around the US of "Arabs in Israel" in one day seminars, where Arab Israeli leaders talk from their perspectives to Jewish communities. The idea that Israelis don't thoughtfully talk about the situation, and push away that discussion, is itself one of the false claims about Israelis and Jews. BTW, non-Jewish folks are welcome at these events & calls, if you are ever interested.
Land: My last paragraph was non-directional as to country.
DeleteInstead, I was making a point that criticizing any country's policies including my own, which I frequently do, is not tantamount to calling for the destruction of that country, hating the country, or even not liking the country.
As far as I am concerned, I would be fine if the squad members were all retired by the voters in 2020. They are not helping matters.
I would disagree with you conclusion that they have called for the destruction of Israel. I do understand that you have that opinion and hold it passionately.
Their clear support for boycotting products made in Israel through the Boycott, Divestment and Sanctions movement is not IMO equivalent to calling for Israel's destruction.
I would not view an American who boycotts products and services sold by Trump supporters as anti-American.
Boycotts can be criticized at times as non-productive discussions but have at times worked to change policies (e.g. I recall in Nashville boycotts of businesses by blacks in the 1960s that change policies. In just one example, I recall a restaurant in a downtown department store required blacks to be segregated at the lunch counter. A boycott by blacks of the department's store products changed that policy).
As to their sponsor of the West Bank tour, an organization called Miftah, there are anti-semite articles and discussions on their website.
https://www.nationalreview.com/2019/08/ilhan-omar-and-rashida-tlaib-partnered-with-vicious-anti-semites-to-plan-their-trip-to-israel/
I have not examined those articles, but am simply noting what "conservative" commentators published by the National Review and the Washington Examiner have said about that organization.
I would note, however, that Miftah has sponsored trips to the West Bank by other U.S. congressman in the past without objection from Israel or anyone else.
In 2016, Reps. Matt Cartwright (D-Pa.), Dan Kildee (D-Mich.), Mark Pocan (D-Wis.), Luis Gutierrez (D-Ill.) and Hank Johnson (D-Ga.) all went on a five-day trip to Israel and the West Bank sponsored by the group.
Thanks for the reply. I agree with a lot so will respond only on what's different.
DeleteI do not call a boycotts, calls to destroy a country, lol. Boycotts are fine. There are places I don't buy from. However THIS boycott's goal as stated by it's originators is to wipe out the country. They are doing that aim cleverly, by calling for one state. Demographically that will wipe out the Jewish majority and make it a 23rd Arab state. It's merely a continuation of the '48 and '67 wars.
The demographics have been a known problem to this solution for a long time. It's where the boycott got the idea. This is not about pressuring israel to change any policies. It's about destroying Jewish self-rule as offensive on it's face. I appreciate you're putting it as my being passionate but that's not it. It's simply fact that this BDS boycott's goal is to spread information in a way that will lead to the end of Israel. They aren't planning to do it economically. They are planning to isolate and vilify Israel until it seems unreasonable that they won't take in 5 million non-citizens who have their own government and national ambitions, just because they want to take over Israel.
Arab PA rulership's goal is to take over Israel, all of it, Hamas & Fatah say that on their own state TV all the time. This boycott if it reaches it's goal, accomplishes taking over Israel, all of it, by Arabs. That's all there is to this.
One of the huge problems is that the boycott's objectives are not being accurately reported in the news.
Maher quoted it's originator on his program, Barghouti, and has a lot more to say.
https://www.mediaite.com/tv/bds-is-a-bullsht-purity-test-for-democrats-bill-maher-rants-against-boycott-israel-movement/
Omar Barghouti who created BDS says "No rational Palestinian would ever accept a Jewish state in Palestine" and says more comments like that. Barghouti's family member, who's looked at as an important PA leader, served many years for successful terrorist murders. So for Omar, he's in that environment. The key is that these type of statements about ending Israel, are made by all the prominent leaders of the BDS movement.
Jews have been fighting garbage for a long time. When the mainstream community is concerned that something is garbage... it's worth listening to Jewish perspectives on attacks on the Jewish community. BDS is about destroying Israel.
Yes, Miftah has brought other congress people, without comment. That merely shows that it takes A LOT for Israelis to start objecting to intolerant things. Those visitors weren't calling for Israel's destruction, and didn't label it a trip to Palestinian with Israel wiped out even in their trip's itinerary name. They visited with Israeli reps (Israel-Arab, not sure if any Jewish ones) and some normal organizations. Omar & Tlaib brought it all to a whole new level. The law that caused their ban is specific against BDS because it calls for the end to Israel. Muslims visit Israel in droves every year, and Muslims hold high offices in Israel, so insinuations that it's about them being Muslim were hurtfully false.
DeleteI'll try to find some good resources:
ADL links:
https://www.adl.org/resources/backgrounders/bds-the-global-campaign-to-delegitimize-israel
https://www.adl.org/resources/fact-sheets/response-to-common-inaccuracy-israel-is-an-apartheid-state#.V5ZUhPkrLct
https://forward.com/opinion/418744/bds-is-linked-to-terrorists-just-as-you-suspected/
ACJ is moderate left of center: https://www.ajc.org/issues/bds
"BDS markets itself as a non-violent movement to boycott, divest from, and sanction Israel to get it to withdraw to its pre-1967 borders. While many rank and file members of the movement sincerely want peace and are lured in by this human rights façade, BDS leadership in fact seeks nothing less than the elimination of Israel as a Jewish state. "
As an aside, Israel offered the Arabs to withdraw from '67 borders right after the 6 day war. They got back the "famous 3 nos: no Israel, no negotiation, no peace" reply repeated several times.
I was diagnosed with cancer. I feel okay, but need to spend time on that. So I can't do as much as I'd like here.
I would like to hear your investing thoughts.
Land: Sorry to hear about the cancer diagnosis. I figured that may be the case when you mentioned that you were seeking a second opinion, but I did not want to ask until you wanted to say.
DeleteAs to investments, my first rule now is to avoid buying almost all bonds. Interest rates may continue to decline which will only cause me to sell more bonds. Since I was extremely overweighted in bonds before the latest decline, I owned bonds at my apex somewhere over 300 different bonds, so I have a lot to sell. I have not yet tried to sell my Tennessee municipal bonds and have simply been gradually reducing my investment grade corporate bonds.
The low interest rates now, and the likelihood that they will continue well into 2020 and possibly beyond, has caused me to shift my focus to dividend paying stocks that have not run up too much in price, with dividend yields in excess of 4% for the most part.
So far, I have started small ball programs in 3 electric utility stocks: Dominion (D), Duke Energy (DUK) and Centerpoint (CNP). All had 4%+ yields when I bought them. I will discuss those purchases later. Most electric utility stocks now have a dividend yield south of 4%.
I have also sold some low yielding Dominion (D) SU bonds already, so I can use the proceeds to buy more of the common when and as the price declines.
I also started a small ball purchase program in Ryder (R) at $46.25, the day before its ex dividend date last Friday. The chart looks awful but valuation is appealing.
https://www.marketwatch.com/investing/stock/r
That is another one that will be discussed at some point.
You mentioned VYM earlier and that is a good one for dividends. I do not own it but bought it in a family's members account ten years ago and have left it alone.
The Fidelity equivalent ETF is probably the Fidelity High Dividend ETF (FDVV), which is commission free to Fidelity customers.
https://www.marketwatch.com/investing/fund/fdvv
When buying stock ETFs now, I am using my small ball purchase restriction and have started at position in FDVV. I want stocks to go way down.
NOBL is another ETF that I will buy using the small ball purchase restriction.
I have bought the ETF JRI since its stock positions are in what I would broadly call "bond like" stock sectors as well as preferred stocks in those sectors.
https://www.cefconnect.com/fund/JRI
Portfolio Holdings as of 3/31/19:
https://www.sec.gov/Archives/edgar/data/1539337/000175272419051200/JRI.htm
I may buy more since I am running out of yield options for proceeds from maturing securities.
I am starting to nibble on some energy stocks and discussed a recent nibble in Suncor shares in this post. That sector is where money has gone to heaven over the past 5 years.
I will be discussing other yield purchases that I have recently made over the next 4 weeks or so.
I am staying away from yield sector for now, which is regional banks given the major tailwind created by the yield curve. There are a large number of them however that pay more than 4% and I may be tempted after further price declines. Generally, that sector is now in a bear market.
Thank you! It's lymphoma. Acting lowgrade, but with indications it will need treatment, but will know more at appt this week.
DeleteYou timed a lot of the bond buys well. I don't mess with bonds. I don't know enough. Just try to use them for information.
I am surprised VYM's not getting bought for the div as rates go down. But I'm holding onto it. A quick look and NOBL is 1.45%? that seems low for div aristocrats as the name says. JRI is interesting.
My CVX is humming along. Only took 5 years to turn green. But nice div along the way. I've never looked at Suncor.
It's a market that takes navigation....!
Land: Energy stocks have substantially underperformed the S & P 500 since the 2014 summer. CVX may be the best among the mega caps but the overall average annual total return numbers over the past five years is 2.41%.
DeleteThis energy stock bear market may last a lot longer than my patience for holding a loser. I would expect that a buyer now of several energy stocks would have at some point a good total return within 5 years. But that remains to be seen.
As to NOBL, Marketwatch has the yield at 2.01%. Over the past 4 quarters the total dividend per share was $1.39 which would be a 2.01% yield based on the $69.19 close today.
Over a longer time period, dividend growth can beat the yield of high dividend paying stocks that grow their dividends slowly, not at all and/or cut them from time to time.
My general opinion now is that central banks will continue their extremely abnormal monetary policies for a variety of reasons until a long and persistent rise in inflation makes them move back to an interest rate normalization mode.
Trump demanded today a 100 basis point FF cut and wants the FED to start up QE again.
Seeing that posted, it is a longer write up than I thought it was.
ReplyDeleteAnyway, do you have thoughts on the inversion being different than usual?
The idea being that this time rates on the far end or low so the rates on the short end can cross more easily.... and that usually rates on the far end are climbing, when the short end suddenly crosses over.
Mostly I think "this time is different" are excuses. But was curious if it maybe has some validity.
Land: I have discussed in previous posts arguments that this inversion is different given the unusual historical anomalies that exist now.
DeleteThe main anomaly is that Central Banks throughout the developed world have suppressed intermediate and long term rates to abnormally low levels and consequently those interest rates are no longer market signals but CB manipulated rates.
The underlying thesis in the historically correct recession predictions made in yield inversion models is that the intermediate and longer term rates are market driven and reflect a consensus opinion about economic growth.
A corollary is that negative nominal foreign sovereign debt has resulted in institutions driving up the price of U.S. treasury intermediate and longer term debt instruments.
On the flip side of the longer term rates, this argument maintains that the FED raised the FF too high and consequently the lower end of the yield curve has been juiced higher by an irrational FED move toward normalized interest rates even though the highest rate achieved was extremely low for an economic recovery, let alone one in its tenth year.
It remains to be seen whether this argument will prove correct. It does have a rational and factual basis in that CB monetary policies have been extremely abnormal when measured by their longevity and their existence during an economic expansion cycle.
And, something is amiss big time when about $16 trillion dollars of debt has negative nominal yields and that pile is growing. That can not last for long and there will be blood in the streets when there is an adjustment to historical positive spreads to the anticipated inflation rates.
For now, I will go with reliability of recession predictions made by the inversion models based on a long and accurate historical record.
Even if the Fed cuts the FF rate by .5% more this year, bringing the range down to 1.5% to 2% from the current 2 % to 2.25%, there could still be an inversion between the 10 year and the 3 month treasury bill.
The ten year yield has been falling and may continue to decline. The high for this year was 2.79% and is now at 1.55%. A .50% cut in the FF rate may only bring the 3 month treasury bill down to where the 10 year is now.
There is also a lot of weak economic data outside of the U.S. already that is consistent with a worldwide synchronized growth slowdown that could result in a recession. Germany for example reported negative GDP growth for the second quarter. A hard Brexit, which looks more probable than not, could tilt both the U.K. and Europe into a recession with some blowback into the U.S. economy. China is in a downshift as well. The U.S. growth indicators are slowing. I expect real GDP growth this year near 2% with the numbers faltering in the second half.
Notwithstanding the opinions expressed by Donald, the current U.S. slowdown has absolutely nothing to do with the level of interest rates which are abnormally low and are consistent only with rates prevailing in a major depression economic cycle. The 30 year treasury bond just hit an all time low.
You know, I know you've said all that about abnormal rates. I didn't pick up on what it meant about inversion as an indicator, until the way you put it here.
DeleteSeems to me if long term rates are going below short term... and short term are being kept unusually low by various Central Banks... that leaves the theory of inversion as indicator intact. Plus a lack of tools available. However, that counter idea that the inversion is caused by the Fed raising too quickly, seems possible.
The debt is a worry. I keep suspecting that's why the Donald keeps pushing for the Fed to lower rates. It means if the economy heats up to normal, the USA debt sheet will create a real problem. I am hoping the next president helps straighten out the budget and debt.
Slow downs have not resulted in recessions and recovered. It's hard to know what to do with the slow down data.
Thanks. That helped clarify a bunch of things for me.
Land: I would emphasize that the current treasury rates are only consistent with an ongoing depression based on what has actually happened in recorded history prior to the 2008 Near Depression.
DeleteSomething is way off kilter.
That fact creates some doubt about what any recession signal from the past may mean now.
The recession signal conveyed by the inversion models are to be given weight now given their reliability and that economic data is consistent with a movement in that direction.
Another point is that both most western governments, including the U.S., will have far fewer stimulus options, both monetary and fiscal, available when the next financial crisis develops, and one will happen, compared to the 2008 Near Depression where just about everything conceivable was used to avert another Great Depression.
That fact alone makes another financial crisis far more dicey and more likely to morph into a depression than the last one. When one considers that worldwide debt has probably grown by more than $60 trillion since 2008, as the world tried to solve a debt crisis by issuing vastly more debt, the fuel is already present for a robust blowup when the fuse is lit even if governments and CBs had options to combat it.
To correct a typo in the previous comment, if the FED reduces the .5% more later this year, the new range would be 1.5% to 1.75%.
So the signals may not be as predictive as in the past, and less indicative of a recession coming.
DeleteBut when it comes, our tool box is rusty, missing tools, and flooded with water.
I would attribute the stock market's rise today mostly to a Bloomberg story that Germany claimed it could spend an extra $55B to stimulate its economy if needed.
ReplyDeletehttps://www.bloomberg.com/news/articles/2019-08-18/germany-says-it-could-spend-extra-55-billion-if-crisis-hits
Germany is one of the few western countries that have substantial capacity to engage in fiscal stimulus. That nation can sell debt at negative interest rates and has a budget surplus.
https://tradingeconomics.com/germany/government-budget
There was also happy talk by Kudlow and Navarro over the weekend assuring us all that there way no way that the U.S. would experience a recession next year. Navarro opined that the bull market would continue through the November 2020 election and beyond provided, of course, Donald was reelected.
Kudlow claimed that the Trump administration was considering a 10% tax cut for the middle class.
Today market the second straight trading session where interest rates moved up some.
U.S. 10 Year Treasury Note
1.611% +0.051%
Last Updated: Aug 19, 2019 at 4:48 p.m. EDT
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
https://www.marketwatch.com/story/treasurys-sell-off-on-german-stimulus-prospects-and-trade-hopes-2019-08-19?mod=mw_latestnews
iShares 20+ Year Treasury Bond ETF
$144.04 -$2.09 -1.43%
https://www.marketwatch.com/investing/fund/tlt
I missed all that news. I assumed the rise is because it hit supports the other day, capitulated thought kind of moderately. Is now in the upswing. I expect down tomorrow, maybe day after, then back to humming again.
ReplyDeleteUnless/until the next unsettling tweet.
These seem like good reasons to explain a rally. 10% tax cut. With what money? By removing SS? And how's he getting House to help him win with a tax cut?
Land: Both the NYT and the WP have front page stories this evening that Trump is considering a tax cut but the discussions are in the "early stages". A payroll tax cut similar to what Obama did in 2011 and 2012, when the employee withholding number was reduced from 6.2% to 4.2%, but then allowed to go back to 6.2% in 2013.
DeleteThe general idea appears to be as fiscally irresponsible as possible to help Donald win re-election.
Donald is blaming Powell or anyone other than Donald that pops into his mind after watching Fox. Donald says the economy is the best ever, "tremendous" is the word most commonly used by the Duck, but for some reason needs all of this extra stimulus before the election.
No thought is given as to why the economy is actually sluggish after a $1 trillion plus annual budget deficit for the F/Y ending in September, the massive tax cuts for corporations and wealthy individuals (really it was all about the middle class in that last tax cut or so we were told by Donald) and interest rates that are already at Great Depression levels.
Still, when there is money to be made in the here and now based on what may happen in the near future, the problems created by fiscally irresponsible actions will simply be someone else's problem down the road and the Stock Jocks can party some more for the time being.
Yep I plan to join the party. While keeping eyes open for sending of the exuberance turning into a Roman Toga party, with wild highs and lows and signs to .... leave before all the high and happy people.
ReplyDeleteThat's a little colorful for my usual writing-- but you get the idea.
Sadly, he may get it.
ReplyDeleteIn which case I'll be buying.
ReplyDeleteDividend Growth ETF (VIG) vs. High Dividend ETF (VYM)
ReplyDeleteAnnual Average Total Returns Through 8/19/19
3 Years
VIG 13.36%
VYM 8.98%
5 Years
VIG 10.99%
VYM 8.52%
10 Years:
VIG 13.07%
VYM 12.85%
Sourced:
https://www.morningstar.com/etfs/arcx/vym/performance
https://www.morningstar.com/etfs/arcx/vig/performance
VYM Expense Ratio: .06% & 419 stocks
VIG Expense Ratio: .06% 184 stocks
While I just eyeballed the two portfolios, VYM has been underperforming as of late possibly due to its weightings in banks and energy stocks.
I did not see a bank or energy stock in VIG's top 100 holdings. 3 are in VYM's top 10 ten: JPM, XOM, & CVX
XOM has been a particularly poor performing stock as I noted in recent post where I discussed a small ball purchase. CVX has managed a total annual average return of slightly more than 2% over the past five years which I noted above. I did not recall owning recently CVX but see that I did buy and sell 30 shares as part of a dividend capture strategy.
Item # 2.A. (9/11/17 Post)
https://tennesseeindependent.blogspot.com/2017/09/observations-and-sample-of-recent.html
ALL MY BONDS, AND, LIKE YOU, I WAS MOSTLY IN BONDS UNTIL A MONTH AGO. NOW,I AM SO WEIGHED DOWN WITH CASH, NOW, I FEEL LIKE MONTGOMERY WARD'S SEWELL AVERY, WHO FAMOUSLY DIED AFTER WAITING THROUGH THE TERM FOUR ADMINISTRATIONS, WITH NARY A SINGLE REPEAT OF THE DEPRESSION HE FORESAW. WHY, DO YOU THINK THE MARKET HAS FAILED TO TAKE INTO ACCOUNT BREXIT? WHAT DO YOU THINK THE NEAR TERM PROSPECTS ARE FOR THE BONDS IN THE ETF JNK, AND THOSE LIKE IT. I HAVE A FEW ETFS AND THE UNDERLYING BONDS AS WELL, AND THEY ARE NOT EASY TO UNLOAD...THANKS! JAMES N, A FELLOW PENSIONER, NOW. WELL, I DO TEACH 2 CLASSES....
ReplyDeleteJessie: It is just my opinion that junk bond yields do not properly compensate for their risk. I still own a few which I detailed in Item # 6 above that are holdovers from a junk bond basket that I had several years ago.
DeleteWhen I bought those junk bonds, mostly in 2011 and 2012 as I recall, I ended up with a weighted average yield of over 12% and yet I barely was able to end up with a positive total return even though a number of them paid off in full that were bought at deep discounts. The problem was the defaults.
https://www.marketwatch.com/story/rising-defaults-in-high-yield-bonds-puts-this-year-on-track-for-post-2008-crisis-record-warns-goldman-sachs-2019-08-17
I still have a serious allocation to very high quality Tennessee Municipal bonds that are mostly long term maturities and those have done extremely well.
Those bonds are hard to sell and most will probably turn into intermediate term bonds due to issuer optional redemption rights mostly in the 2024 to 2026 time frame.
I am selling corporate bonds which, along with issuer optional redemptions which are coming at me fast and furious now, are building up my cash level. Fidelity still pays about 1.8% in its government MM fund but that will keep coming down.
For now, I am redeploying some proceeds from bond sales and early bond redemptions into dividend paying stocks yielding more than 4%. But, I do not know how long that will last.
My depression forecast is a 2030 to 2035 time event triggered by a series of failed treasury auctions. The recession probability within 12 to 18 months is about 30% to 40% based in part on the yield inversion models.
https://markets.businessinsider.com/news/stocks/next-recession-forecast-new-york-fed-model-highest-since-2009-2019-7-1028338398
I have been deploying some cash into 28 and 56 day term treasury bills bought at auction, when the brokerage account sweep option pays substantially less. Those rates are falling fast. The next auction is tomorrow.
1 month treasury bill:
https://www.marketwatch.com/investing/bond/tmubmusd01m?countrycode=bx
I still own somewhere over 150 separate corporate bonds. I will not be buying any at current yields.
That's quite a difference. That's the same one you compared VYM to in the past. I buy to add to what I have, but I should diversify on this. Or make my own top 20.
ReplyDeleteSome of my CVX was bought high, but some was bought lower. It's been underwater until recently. So why sell while it's finally improved...
XOM was the preferred company, but CVX has more yield & I went with it. Dumb luck. I didn't understand how to assess. Shell & Total are still underwater. I think they cleared for a while, but I didn't sell. Total is European so that's why on that. Shell's European but doesn't act like it is as much as Total, but still down.
Noticed EEM. It's not a long term buy because of div rate. But it's at the bottom of a trading range. Maybe a good buy here? Could that part of the world swing upward for a while, is the question.
I must say this condition isn't boring. My bacteria fighting cells are way down & diving. So we'll see in a week, do more testing (see if new vitamins were triggering it) - if as expected, it's a triggered autoimmune reaction, you treat the underlying condition. So.... need to wear a mask in crowds, not eat anything you can't peel like berries (who'd have thought?). Even lettuce is off limits. And not floss. Time to use that collection of mouthwash samples I've been meaning to try out. I've never convinced myself to use them regularly. All the rest of the numbers were similar to before, so it's not the condition itself heating up. I was going to have to decide whether to treat or do watch and wait. Maybe my body's just trying to decide for me. So weird - I don't feel different at all. If it wasn't for paperwork, I wouldn't know.
Oh, I met a guy at the post office who carries around a pen for when he has to sign things. That's not a bad idea for everyone.
I feel for you Land.
DeleteMaybe some couch potato videos that I made will cheer you up some. My much old brother was in town recently and this is what happens when two old geezers try to relieve the boredom:
https://www.youtube.com/channel/UCatU_MV4WQF39CPET55CyPw?view_as=subscriber
The videos are in in southern. YouTube has a translator option for those who insist on speaking the King's English.
CVX is generally though of as better than Exxon. I made that argument when I bought the 30 shares that I flipped.
Item # 4.A.
https://tennesseeindependent.blogspot.com/2017/07/observations-and-sample-of-recent_31.html
Emerging market stocks have been just awful for several years compared to the S & P 500.
I am buying VWO as part of my small ball commission free ETF "buying program", but I am only up to 10 shares with the last lot bought at $38.89 last November. Those stocks will do better than the S & P at times but you have to have a good memory to recall when that last happened.
The annual average total return is just 3.79% over the past ten years.
http://performance.morningstar.com/funds/etf/total-returns.action?t=VWO®ion=USA&culture=en_US
China ETFs and mutual funds have been rewarding for me so far as short term trades since that market does go parabolic from time to time.
Those are too funny!! Put a smile on my face!! Much appreciated. I only see one person in them?
DeleteIn a funny way they are actually good ways to exercise while being a couch potato. Although I don't have a baseball bat. I will have to substitute a short broom. Or the broken hoe handle that came with this house.
I was okay with the accent. When I moved further sound, I learned a little southern. Not enough to be fluid.
But enough to know to be not quite as dead pan sarcastic without mentioning it's a joke. (When I said "I don't like you at all" meaning, "I like you a lot as a friend" this deep southern friend's face fell so much. It took him courage to ask me why I didn't like him. It took me a while to figure out why, what?)
I do like learning other cultures...
Now I have to go write a note to the nurse and ask complicated questions like... can I eat grapes if I peel them?
(Obviously I just need to use common sense about everything. In about 3 weeks I'll know more & more onto the next stage, treating.)
On the market, I was surprised at how much climb today. I was expecting more warbling and closer to 50%. One problem with buying the bottom with indices is that those aren't what have the biggest gain potential during a recovery time.
I'm not sure why CVX is considered better than XOM. In a few years when I first bought, you bought XOM. I asked some questions, and realized Exxon had better number and indicators at that time, and picked up some tips on how to look at a stock. Maybe by now that's changed for them both...
The VWO would be a trade buy - I have to look more closely at the technicals (which I don't know much about still.) That parabolic is what I'd hope to catch. Otherwise, it's been in a trading range and going nowhere...!
Land: My much older brother shot the videos with his IPhone. I am the featured actor. I could do one a day but decided to live my enduring contribution to humanity at 6 couch potato exercise videos.
DeleteIn a fairly typical analyst report released today and summarized in Barron's, a BMO analyst believes that Chevron will outperform due its strong position in the Permian basin and a "sustained 5% dividend growth". CVX was initiated by that analyst at outperform with a $165 target price.
Exxon was rated at neutral but has in the analyst's view the best in class upstream portfolio. The analyst noted correctly IMO that “the stock underperformed over the past five years as relative [return on capital employed] deteriorated, growth was the lowest among peers, and [capital expenditure] increased while peers exercised more caution.” He expects those problem to reverse
"over the next three years as upstream production growth, driven by the Permian and Guyana drives peer-leading [debt-adjusted cash flow] per share growth, a key driver of relative stock performance.”
For the most part, emerging markets have been difficult to trade and have underperformed U.S. stocks. I would call the EM ETFs, broad or country specific, as difficult trades.
I am just playing small ball with XOM now. It is decidedly out of favor among investors and I would not guess when the worm will turn. I did add a few shares below $68 and will buy no more than 30 altogether using commission free trades. I bailed before I reached 30 shares when I last started to build a position.
6/18/18 Post
Item #1.A. Sold 18 XOM at $81.33-Used Commission Free Trade
https://tennesseeindependent.blogspot.com/2018/06/observations-and-sample-of-recent_18.html
Exxon was trading at near $91 in October 2007, so it would be fair to say I am not chasing one that is in a parabola spike skyward.
The goal of couch potatoing is to lounge, so six seems like the right number.
DeleteI have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/08/observations-and-sample-of-recent_21.html