Economy:
Trump's tax cut isn't giving the US economy the boost it needs
Calculated Risk: The Failed Promises of the 2017 Tax Cuts and Jobs Act (TCJA)
The real economy has benefited far less from these tax cuts than the stock market, a result easily predicted before the legislation was passed by the GOP controlled Congress and signed into law by a republican president.
Tax savings received by publicly traded corporations have mostly been redeployed into share buybacks, dividend increases and acquisitions that have or will result in job layoffs.
The increase in profits has been goosed by the share buybacks that have led to higher stock prices that benefit primarily the top 10%, with most of the gains concentrated in the top 1% who do not need more money and are unlikely to spend their windfalls to support the real economy.
These tax cuts will lead to larger federal budget deficits that will move forward by several years the Day of Reckoning for the U.S. government manifested by a series of failed treasury auctions where the FED has to buy the unsold bonds with newly created money.
The end result, which is probably a 2030s event, will be a crash in the USD and a worldwide depression assuming climate change does not kill us all before then. Maybe it will be timed on the 100th anniversary of 1929. The Stock Jocks have difficulty seeing beyond the near future when there is money to be made in the here and now.
Trump says he's considering payroll tax cut despite White House denial
Trump and others in his administration are sending inconsistent signals about the current economy. Donald in particular can say that the economy is the best ever and then say it needs more stimulus now, which are not consistent but the Duck could care less about consistency.
One problem with all of this talk coming from Donald and Kudlow about the need for more tax cuts, a major cut in the FF rate, and restarting QE, is that the dominant message becomes one of desperation about the future course of the economy which tends to deflate consumer confidence.
As individuals become more concerned about their jobs and a possible recession, there is a tendency to pull back on spending which can contribute to a recession's onset. Talk about an immediate need for more stimulus, monetary and fiscal, will override the happy talk that the economy is doing well as consumers ask themselves why does the economy need massive stimulus if everything is just great now.
Calculated Risk: The Failed Promises of the 2017 Tax Cuts and Jobs Act (TCJA)
The real economy has benefited far less from these tax cuts than the stock market, a result easily predicted before the legislation was passed by the GOP controlled Congress and signed into law by a republican president.
Tax savings received by publicly traded corporations have mostly been redeployed into share buybacks, dividend increases and acquisitions that have or will result in job layoffs.
The increase in profits has been goosed by the share buybacks that have led to higher stock prices that benefit primarily the top 10%, with most of the gains concentrated in the top 1% who do not need more money and are unlikely to spend their windfalls to support the real economy.
These tax cuts will lead to larger federal budget deficits that will move forward by several years the Day of Reckoning for the U.S. government manifested by a series of failed treasury auctions where the FED has to buy the unsold bonds with newly created money.
The end result, which is probably a 2030s event, will be a crash in the USD and a worldwide depression assuming climate change does not kill us all before then. Maybe it will be timed on the 100th anniversary of 1929. The Stock Jocks have difficulty seeing beyond the near future when there is money to be made in the here and now.
Trump says he's considering payroll tax cut despite White House denial
Trump and others in his administration are sending inconsistent signals about the current economy. Donald in particular can say that the economy is the best ever and then say it needs more stimulus now, which are not consistent but the Duck could care less about consistency.
One problem with all of this talk coming from Donald and Kudlow about the need for more tax cuts, a major cut in the FF rate, and restarting QE, is that the dominant message becomes one of desperation about the future course of the economy which tends to deflate consumer confidence.
As individuals become more concerned about their jobs and a possible recession, there is a tendency to pull back on spending which can contribute to a recession's onset. Talk about an immediate need for more stimulus, monetary and fiscal, will override the happy talk that the economy is doing well as consumers ask themselves why does the economy need massive stimulus if everything is just great now.
Consumer debt is not a ticking time bomb that will kill the economy - MarketWatch A recession accompanied by a spike in unemployment may be sufficient to trigger another wave of consumer defaults.
Consumer confidence index August 2019: Consumer confidence drops to lowest point since January - CBS News
The St Louis Fed chart for this survey shows that consumer confidence generally cascades down when a recession is already ongoing and is within weeks of starting.
University of Michigan: Consumer Sentiment-St. Louis Fed (last reading of 92.1 was not reflected in this chart when I took the snapshot)
White House advisor Kudlow on economic concerns: 'I don't see a recession at all' Kudlow says the U.S. is in no danger of falling into a recession. Notwithstanding the consumer confidence survey released last Friday, Kudlow maintained that consumers are unfazed by the trade war.
Consumer confidence index August 2019: Consumer confidence drops to lowest point since January - CBS News
The St Louis Fed chart for this survey shows that consumer confidence generally cascades down when a recession is already ongoing and is within weeks of starting.
White House advisor Kudlow on economic concerns: 'I don't see a recession at all' Kudlow says the U.S. is in no danger of falling into a recession. Notwithstanding the consumer confidence survey released last Friday, Kudlow maintained that consumers are unfazed by the trade war.
United States Consumer Sentiment | 2019 Data and Chart
Japan exports drop for 8th straight month in July - MarketWatch
Japan exports drop for 8th straight month in July - MarketWatch
++++++
Markets and Market Commentary:
Investors should look to dividend stocks, Goldman says - AT&T Inc. (NYSE:T) | Seeking Alpha
Oil prices climb as U.S. inventory report shows supply drop - MarketWatch
UPDATE 2-Home Depot beats quarterly profit estimates, warns of tariff impact
I am not sure what HD and other firms are talking about when claiming that the tariff wars are in fact hurting their businesses. Didn't they listen to Peter Navarro last Sunday who assured us that the tariff war was having zero impact. White House trade adviser Peter Navarro: Tariffs aren't hurting anybody here - CNN Video
TJMaxx parent TJX stock slips after sales miss, weak guidance - MarketWatch
Target reports fiscal 2019 q2 earnings beat expectations
JP Morgan: Don't buy the dip until September
The tide may be turning for energy stocks this year (referring to energy stocks)
Investors should look to dividend stocks, Goldman says - AT&T Inc. (NYSE:T) | Seeking Alpha
Oil prices climb as U.S. inventory report shows supply drop - MarketWatch
UPDATE 2-Home Depot beats quarterly profit estimates, warns of tariff impact
I am not sure what HD and other firms are talking about when claiming that the tariff wars are in fact hurting their businesses. Didn't they listen to Peter Navarro last Sunday who assured us that the tariff war was having zero impact. White House trade adviser Peter Navarro: Tariffs aren't hurting anybody here - CNN Video
TJMaxx parent TJX stock slips after sales miss, weak guidance - MarketWatch
Target reports fiscal 2019 q2 earnings beat expectations
JP Morgan: Don't buy the dip until September
The tide may be turning for energy stocks this year (referring to energy stocks)
Deere misses earnings, says farmers delaying purchases amid trade war
Briggs & Stratton stock falls to 44-year low after surprise loss, dividend cut and plant closure - MarketWatch
I have no doubt that the Trump economy is being driven in large part by excessive monetary and fiscal policies that can not be sustained long term. Fiscal stimulus consists of tax cuts and deficit spending.
Fed’s Rosengren says cutting interest rates now would make next recession worse - MarketWatch He will probably vote against a FF rate decrease which will occur in September.
Last Monday, Donald demanded that the FED cut 100 basis points:
+++++
Briggs & Stratton stock falls to 44-year low after surprise loss, dividend cut and plant closure - MarketWatch
I have no doubt that the Trump economy is being driven in large part by excessive monetary and fiscal policies that can not be sustained long term. Fiscal stimulus consists of tax cuts and deficit spending.
Fed’s Rosengren says cutting interest rates now would make next recession worse - MarketWatch He will probably vote against a FF rate decrease which will occur in September.
Last Monday, Donald demanded that the FED cut 100 basis points:
Trump:
Donald believes that the Fake News Media is responsible for his consistently low approval ratings, a claim that he has made repeatedly in various ways since his inauguration. The following tweet is just one example:
Examples from August 15th:
In Economic Warning Signals, Trump Sees Signs of a Conspiracy - The New York Times; Economists see a recession looming while Trump sees a conspiracy-The Guardian
Half of voters say they would not consider reelecting Trump | TheHill; How Popular Is Donald Trump? | FiveThirtyEight
In TrumpWorld, the "liberal" media is simply withholding information about the economy which, if known to voters, would cause his approval rating to skyrocket to the heavens. The voters know about the economy from news sources of course.
It is just inconceivable to Donald that he is responsible for his low approval numbers.
There are millions of people who are just extremely turned off by Donald as a human being. I view his as a disgusting person with no or immaterial positive personal attributes. And, that opinion has absolutely nothing to do with my opinions about his policies.
Trump is still blaming his 2016 New Hampshire loss on voter fraud — with zero proof Authoritarians like Donald will do whatever they can to undermine voter confidence in the election process and the institutions necessary for a properly functioning democracy. Donald believes in democracy only to the limited extent that the process results in his election and reelection. Even then he will do whatever he can to undermine the legitimacy of the vote count.
The Federal Election Commission requested that Donald furnish it with proof of voter fraud in New Hampshire. To date, Donald has not responded to that request. 'Facts matter': FEC chairwoman challenges Trump's voter fraud claims - POLITICO; FEC chair on Trump claim: 'No evidence of rampant voter fraud in 2016'
Donald claimed in a Monday tweet that Google manipulated 3M to 16M voters for Hillary in 2016. Donald based his claim on what a psychologist Robert Epstein told a Fox interviewer. Google responded that Mr. Epstein's speculation was “nothing more than a poorly constructed conspiracy theory.”
Authoritarian demagogues like Trump will demonize a free press who reports facts contradicting their reality creations.
Trump's claim that the NYT is losing a fortune is of course a lie and one of Donald's countless reality creations. Trump Hit With Fact-Check After Claiming New York Times Is ‘Losing A Fortune’; 10-Q for the Q/E 6/30/19 (net income of $25.171M); 2018 Annual Report (profit of $125.684M) Facts do not matter to Donald and his cult members and never will. Their reality creations are the only truth. .
The motive for Donald's repetitive attacks on the free press is to cause voters to turn away from independent news sources altogether and to distrust whatever originates from those sources. The goal is to trap millions in an Alternate Reality universe where only the demagogues false narratives are accepted by a majority of the population.
When this effort is successful and this 6+ decade old strategy by republicans is already the most successful one in U.S. political history IMO, the end result is millions view the republican stories as true no matter how many facts contradict the story line. The true believers are simply not reachable with accurate information.
Donald is the first U.S. President to have strong anti-democratic and authoritarian tendencies supported with demonstrably false messaging.
Donald frequently calls reporters and political opponents evil human beings. The "mainstream" press, meaning any news organization that does not slavishly praise him and never contradicts his reality creations and lies, is characterized frequently by him as the "enemy of the people". The more appropriate question IMO is whether Donald is evil which everyone can answer for themselves.
Another tactic used by Don the Demagogue is to brow beat anyone, particularly a commentator or anchor at Fox, when the person criticizes Donald, no matter how mildly, or rebuts one of his lies with facts. The following tweets are just two examples from August 19th:
When Donald directs his venom at someone employed at Fox who is not slavishly subservient to him, the goal is probably threefold: (1) to convince Fox viewers to avoid listening to them or dismissing their critical statements (reacting as if the person is trying to put worms in that head); (2) to create and expand a movement to get the person fired at Fox and (3) to intimidate everyone else at Fox so that no one presents facts to Fox viewers and merely act as Donald's personal propaganda machine.
El Paso's GOP mayor says Trump insulted him after visiting mass shooting victims
Donald believes that the Fake News Media is responsible for his consistently low approval ratings, a claim that he has made repeatedly in various ways since his inauguration. The following tweet is just one example:
Examples from August 15th:
In Economic Warning Signals, Trump Sees Signs of a Conspiracy - The New York Times; Economists see a recession looming while Trump sees a conspiracy-The Guardian
Half of voters say they would not consider reelecting Trump | TheHill; How Popular Is Donald Trump? | FiveThirtyEight
In TrumpWorld, the "liberal" media is simply withholding information about the economy which, if known to voters, would cause his approval rating to skyrocket to the heavens. The voters know about the economy from news sources of course.
It is just inconceivable to Donald that he is responsible for his low approval numbers.
There are millions of people who are just extremely turned off by Donald as a human being. I view his as a disgusting person with no or immaterial positive personal attributes. And, that opinion has absolutely nothing to do with my opinions about his policies.
Trump is still blaming his 2016 New Hampshire loss on voter fraud — with zero proof Authoritarians like Donald will do whatever they can to undermine voter confidence in the election process and the institutions necessary for a properly functioning democracy. Donald believes in democracy only to the limited extent that the process results in his election and reelection. Even then he will do whatever he can to undermine the legitimacy of the vote count.
The Federal Election Commission requested that Donald furnish it with proof of voter fraud in New Hampshire. To date, Donald has not responded to that request. 'Facts matter': FEC chairwoman challenges Trump's voter fraud claims - POLITICO; FEC chair on Trump claim: 'No evidence of rampant voter fraud in 2016'
Donald claimed in a Monday tweet that Google manipulated 3M to 16M voters for Hillary in 2016. Donald based his claim on what a psychologist Robert Epstein told a Fox interviewer. Google responded that Mr. Epstein's speculation was “nothing more than a poorly constructed conspiracy theory.”
Authoritarian demagogues like Trump will demonize a free press who reports facts contradicting their reality creations.
Trump's claim that the NYT is losing a fortune is of course a lie and one of Donald's countless reality creations. Trump Hit With Fact-Check After Claiming New York Times Is ‘Losing A Fortune’; 10-Q for the Q/E 6/30/19 (net income of $25.171M); 2018 Annual Report (profit of $125.684M) Facts do not matter to Donald and his cult members and never will. Their reality creations are the only truth. .
The motive for Donald's repetitive attacks on the free press is to cause voters to turn away from independent news sources altogether and to distrust whatever originates from those sources. The goal is to trap millions in an Alternate Reality universe where only the demagogues false narratives are accepted by a majority of the population.
When this effort is successful and this 6+ decade old strategy by republicans is already the most successful one in U.S. political history IMO, the end result is millions view the republican stories as true no matter how many facts contradict the story line. The true believers are simply not reachable with accurate information.
Donald is the first U.S. President to have strong anti-democratic and authoritarian tendencies supported with demonstrably false messaging.
Donald frequently calls reporters and political opponents evil human beings. The "mainstream" press, meaning any news organization that does not slavishly praise him and never contradicts his reality creations and lies, is characterized frequently by him as the "enemy of the people". The more appropriate question IMO is whether Donald is evil which everyone can answer for themselves.
Another tactic used by Don the Demagogue is to brow beat anyone, particularly a commentator or anchor at Fox, when the person criticizes Donald, no matter how mildly, or rebuts one of his lies with facts. The following tweets are just two examples from August 19th:
When Donald directs his venom at someone employed at Fox who is not slavishly subservient to him, the goal is probably threefold: (1) to convince Fox viewers to avoid listening to them or dismissing their critical statements (reacting as if the person is trying to put worms in that head); (2) to create and expand a movement to get the person fired at Fox and (3) to intimidate everyone else at Fox so that no one presents facts to Fox viewers and merely act as Donald's personal propaganda machine.
El Paso's GOP mayor says Trump insulted him after visiting mass shooting victims
July 2019 was Earth's hottest month on record
Alaska records its warmest month ever; future records likely - MarketWatch
NBC News Climate Change Poll Report Shows Belief Is Partisan, Driven By Flawed Media Coverage (only 15% of republicans view global warming as requiring action) The pro-pollution party's idea is to build more coal plants to combat global warming and to eviscerate the EPA.
Alaska records its warmest month ever; future records likely - MarketWatch
NBC News Climate Change Poll Report Shows Belief Is Partisan, Driven By Flawed Media Coverage (only 15% of republicans view global warming as requiring action) The pro-pollution party's idea is to build more coal plants to combat global warming and to eviscerate the EPA.
+++++++
1. Bought 50 HUSKF at $6.9-Lottery Ticket Basket Strategy:
I bought the ordinary shares that are traded on the U.S. pink sheet exchange which are priced in USDs.
Website: Husky Energy
Closing Price Yesterday: HUSKF $6.96 +$0.04 +0.58%
My Classification: Lottery Ticket Basket Strategy
I have not talked about this strategy for several years even though I am continuing to use it.
The strategy now has a $1K per stock out-of-pocket exposure limit, up from $300 when I first started to implement it back in 2009. Periodically, I will wipe the slate clean by harvesting losses and profits and start over. That wipe last occurred in 2015: Lottery Ticket Basket Strategy: New Gateway Post
The general approach involves a selection process best described as dumpster diving.
A typical Lottery Ticket chart is appropriately described as a "failing knife".
Husky's chart reproduced below certainly falls into that classification
Risk of loss is generally high to extreme, but so are the potential rewards. In 2014, I sold HUSKF shares at US$29.39. The future forecast then was that high crude prices would continue which proved to be dead wrong starting in the summer of 2014.
The idea is that the Stock Jocks tend to project the present into the indefinite future as if nothing really changes. Favorable and unfavorable earnings results are projected into the distant future, resulting in both too high and too low valuations of businesses as going concerns longer term.
Quotes:
USD Priced Shares (pink sheets): HUSKF Quote (U.S.: OTC)
CAD Priced Shares (Toronto): HSE (Canada: Toronto)
5 Year Chart: Major Bear Trend (beyond mere ugliness)
Prior Discussions: I have sold Husky shares at much higher prices. This is a link to my last elimination discussion: Item # 1 Sold 100 HUSKF at $29.39 (2/10/14 Post)(profit snapshot = $280.88)-Item # 2 Bought 100 HUSKF at $26.42 (7/6/13 Post)
Sold 200 HSE:CA at $28.13 CADs October 2012-Bought 100 HUSKF at $23.81 January 2012 (converted by broker into Toronto listed shares) and Bought 100 HSE:CA at C$26.59 CADs July 2011; Sold HSE:CA @ 27.70 CAD February 2011-Bought 100 HSE:TO at C$26.25 CADs July 2010; Sold HSE:TO at $30.48 CADs April 2010-Bought 100 Husky at $28.99 Canadian January 2010
Fortunately, I have stayed away since 2014 which marked the start of Husky's move into the abyss.
Dividend: Unfavorable Trend
When I last owned Husky shares, the quarterly dividend was at C$.30 per share. The current rate is C$.125 per share or C$.50 annually. Dividend Payment History - Husky Energy
At least the C$.125 is an improvement over the C$.075 penny rate paid for two quarters after the slash from C$.30.
Dividend Yield: The current yield at US$6.9 will depend of course on the CAD/USD conversion rate and whether or not Canada's 15% withholding tax can be recovered through a foreign tax credit. Since Husky pays Canadian taxes at the corporate level, the dividend will not be taxed by Canada when the stock is owned in a U.S. citizens retirement account.
For illustrative purposes only, the yield would be about 5.43% using a constant CAD/USD exchange rate of .75 (C$.5 x. .75 = US$.375 ÷ $6.9, unadjusted for brokerage commission = 5.43%)
Next Ex Dividend: 8/30/19 (paid in Canadian dollars and then converted into USDs)
Husky Energy Announces Second Quarter 2019 Dividend
Brokerage Reports:
Morningstar (8/5/19): 4* with a FV of C$14 (calls selloff after second quarter earnings report release "an overreaction, but lowered FV target to C$14 from C$17 based on lower commodity prices and lower profits from Husky's downstream operations).
Credit Suisse (7/25/19): Neutral with a C$18 price target
S & P (7/29/19): 3* with a 12 month PT of C$12 (Cut by C$2 after earnings report).
Last Earnings Report: Correctly IMO viewed as unfavorable
Adjusted cash flow per share was reported at C$.8 per share vs. the consensus estimate of C$.96. Cash from operations was C$760M compared to C$858M spent on CapEx (negative free cash flow, which is a negative of course) Exploration and production profits ("upstream") were better than expected at C$150M.
Offshore production averaged 54,400 boe/day, compared to 65,000 boe/day in the second quarter of 2018
"Thermal bitumen production from Lloyd thermal projects, Tucker and Sunrise averaged about 120,000 bbls/day (Husky W.I.), compared to 123,200 bbls/day (Husky W.I.) in the second quarter of 2018.
Husky Energy Reports Second Quarter 2019 Results
More Information About Operations:
Retail - Husky Energy
Thermal - Husky Energy
Asia Pacific - Husky Energy
Atlantic - Husky Energy
Downstream - Husky Energy
Resource Plays - Husky Energy
Current and Maximum Position: 50 Shares as a Lottery Ticket
Dividend Reinvestment: No (probably not allowed by Schwab in any event)
1. Bought 50 HUSKF at $6.9-Lottery Ticket Basket Strategy:
I bought the ordinary shares that are traded on the U.S. pink sheet exchange which are priced in USDs.
Website: Husky Energy
Closing Price Yesterday: HUSKF $6.96 +$0.04 +0.58%
My Classification: Lottery Ticket Basket Strategy
I have not talked about this strategy for several years even though I am continuing to use it.
The strategy now has a $1K per stock out-of-pocket exposure limit, up from $300 when I first started to implement it back in 2009. Periodically, I will wipe the slate clean by harvesting losses and profits and start over. That wipe last occurred in 2015: Lottery Ticket Basket Strategy: New Gateway Post
The general approach involves a selection process best described as dumpster diving.
A typical Lottery Ticket chart is appropriately described as a "failing knife".
Husky's chart reproduced below certainly falls into that classification
Risk of loss is generally high to extreme, but so are the potential rewards. In 2014, I sold HUSKF shares at US$29.39. The future forecast then was that high crude prices would continue which proved to be dead wrong starting in the summer of 2014.
The idea is that the Stock Jocks tend to project the present into the indefinite future as if nothing really changes. Favorable and unfavorable earnings results are projected into the distant future, resulting in both too high and too low valuations of businesses as going concerns longer term.
Quotes:
USD Priced Shares (pink sheets): HUSKF Quote (U.S.: OTC)
CAD Priced Shares (Toronto): HSE (Canada: Toronto)
5 Year Chart: Major Bear Trend (beyond mere ugliness)
Prior Discussions: I have sold Husky shares at much higher prices. This is a link to my last elimination discussion: Item # 1 Sold 100 HUSKF at $29.39 (2/10/14 Post)(profit snapshot = $280.88)-Item # 2 Bought 100 HUSKF at $26.42 (7/6/13 Post)
Sold 200 HSE:CA at $28.13 CADs October 2012-Bought 100 HUSKF at $23.81 January 2012 (converted by broker into Toronto listed shares) and Bought 100 HSE:CA at C$26.59 CADs July 2011; Sold HSE:CA @ 27.70 CAD February 2011-Bought 100 HSE:TO at C$26.25 CADs July 2010; Sold HSE:TO at $30.48 CADs April 2010-Bought 100 Husky at $28.99 Canadian January 2010
Fortunately, I have stayed away since 2014 which marked the start of Husky's move into the abyss.
Dividend: Unfavorable Trend
When I last owned Husky shares, the quarterly dividend was at C$.30 per share. The current rate is C$.125 per share or C$.50 annually. Dividend Payment History - Husky Energy
At least the C$.125 is an improvement over the C$.075 penny rate paid for two quarters after the slash from C$.30.
Dividend Yield: The current yield at US$6.9 will depend of course on the CAD/USD conversion rate and whether or not Canada's 15% withholding tax can be recovered through a foreign tax credit. Since Husky pays Canadian taxes at the corporate level, the dividend will not be taxed by Canada when the stock is owned in a U.S. citizens retirement account.
For illustrative purposes only, the yield would be about 5.43% using a constant CAD/USD exchange rate of .75 (C$.5 x. .75 = US$.375 ÷ $6.9, unadjusted for brokerage commission = 5.43%)
Next Ex Dividend: 8/30/19 (paid in Canadian dollars and then converted into USDs)
Husky Energy Announces Second Quarter 2019 Dividend
Brokerage Reports:
Morningstar (8/5/19): 4* with a FV of C$14 (calls selloff after second quarter earnings report release "an overreaction, but lowered FV target to C$14 from C$17 based on lower commodity prices and lower profits from Husky's downstream operations).
Credit Suisse (7/25/19): Neutral with a C$18 price target
S & P (7/29/19): 3* with a 12 month PT of C$12 (Cut by C$2 after earnings report).
Last Earnings Report: Correctly IMO viewed as unfavorable
Offshore production averaged 54,400 boe/day, compared to 65,000 boe/day in the second quarter of 2018
"Thermal bitumen production from Lloyd thermal projects, Tucker and Sunrise averaged about 120,000 bbls/day (Husky W.I.), compared to 123,200 bbls/day (Husky W.I.) in the second quarter of 2018.
Total Downstream throughput was 340,000 bbls/day, compared to 355,000 bbls/day in the second quarter of 2018.
U.S. refinery throughput averaged 237,300 bbls/day, including 179,800 bbls/day at the Lima Refinery. The Toledo Refinery averaged 115,000 bbls/day (57,500 bbls/day Husky W.I.), reflecting impacts from the extended planned maintenance turnaround
Natural gas sales from the two producing fields at Liwan averaged 330 million cubic feet per day (mmcf/day), with associated liquids averaging 14,200 bbls/day (162 mmcf/day and 7,100 bbls/day Husky W.I.) (the Liwan field is in the South China Sea)
Natural gas sales at the BD Project in the Madura Strait averaged 87 mmcf/day, with liquids production of 6,500 bbls/day (34 mmcf/day and 2,500 bbls/day, Husky W.I.) Realized gas pricing at BD was $9.94 per mcf, with liquids pricing of $101.07 per barrel. Operating costs were $9.52 per boe, with an operating netback of $53.77 per boe. (Offshore Indonesia)
Overall average net production in the Atlantic region was approximately 12,200 bbls/day, which included two new infill production wells that were brought onstream in May 2019.
Realized gas pricing at Liwan was $14.05 per mcf, with liquids pricing of $69.77 per barrel. Operating costs were $5.25 per boe, with an operating netback of $71.66 per boe.
A strategic review continues of the potential sale of the Canadian retail and commercial fuels business and the Prince George Refinery."
Husky Energy Reports Second Quarter 2019 Results
More Information About Operations:
Retail - Husky Energy
Thermal - Husky Energy
Asia Pacific - Husky Energy
Atlantic - Husky Energy
Downstream - Husky Energy
Resource Plays - Husky Energy
Current and Maximum Position: 50 Shares as a Lottery Ticket
Dividend Reinvestment: No (probably not allowed by Schwab in any event)
2. Small Ball Adds:
A. Bought 10 MFC at $16.56-Used Commission Free Trade:
Quote: Manulife Financial Corp. (MFC)
MFC Website
Manulife Investor Relations
Closing Price Yesterday: MFC $16.39 -$0.21 -1.27%
Manulife Financial Corp (MFC.TO) Key Developments | Reuters.com
Manulife Announces Intention to Amend Normal Course Issuer Bid to Repurchase for Cancellation up to an Additional 59 Million of its Common Shares
Dividend: Quarterly at C$.25 per share
Manulife Financial Corporation Declares Common Share Dividend
Dividend Yield: The yield will depend on the CAD/USD conversion rate.
If I assumed a constant .75 CAD/USD conversion rate, the C$1 current annual rate per share would result in a US$.75 annual dividend which would result in a 4.53% dividend yield. The actual yield will fluctuate depending on the CAD penny rate and the CAD/USD conversion number.
Generally, the dividend yield will go up when the CAD's value increases above the number prevailing when this stock was purchases, but will go down with a decline in value against the USD. Both results assume no change in the CAD dividend penny rate.
Manulife's stock fits my profile of an out-of-favor contrarian value play that yields over 4%.
MFC 5 Year Chart: Bear Market Chop Action. The share price was close to $20 five years ago.
A meaningful part of the decline over the past 5 years was attributable to the CAD losing value against the USD. XE: CAD / USD Currency Chart. Canadian Dollar to US Dollar Rates (use five year chart)
On August 14, 2014, the CAD/USD was at .91+ and was at .75+ five years thereafter.
5 Year Annual Average Total Return Through 8/6/19: -.29%
DRIP Returns Calculator | Dividend Channel
SPY, a S & P 500 ETF, had an average total return of 10.6% over the same period.
Last Ex Dividend Date: 8/19/19 (after purchase)
Dividend Reinvestment: Yes since the stock is viewed as undervalued at its current price based on what I know now
Last Discussed: Item # 4.C. Bought 10 MFC at $17.64 (9/30/18 Post)
Last Substantive Discussion: Item 2.A. (4/12/2018 Post)
Last Elimination: I sold 100 shares at $18.28:
Last Earnings Report (Q/E 6/30/19): Manulife reports 2Q19 net income and core earnings of C$1.5 billion
Manulife Financial Corp (MFC) CEO Rocco Gori on Q2 2019 Results - Earnings Call Transcript | Seeking Alpha
Discussed at Manulife profit beats on strength in Asia unit - Reuters
Current Position: 51+ Shares
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule (each purchase, other than through dividend reinvestment, has to be at the lowest price in the chain)
B. Bought 50 RMT at $7.91-Used Commission Free Trade:
Quote: Royce Micro-Cap Trust Inc. (RMT)
Sponsor's website: Royce Micro-Cap Trust (RMT)
Closing Price Yesterday: RMT $7.82 -$0.04 -0.51%
RMT SEC Filings
Last SEC Filed Shareholder Report: 2018 Annual Report
Last Discussed: Item # 1 Bought 50 RMT at $8.03-Used Commission Free Trade. (6/15/19 Post)
Data Date of Trade (8/7/19)
Net Asset Value Per Share: $8.94
Closing Market Price: $7.89
Discount: -11.74%
RMT Royce Micro Cap Trust-CEF Connect
Last Ex Dividend Date: 6/12/19 (managed distribution)
Dividend Reinvestment: Yes for as long as likely reinvestment is at a 10%+ discount to the last reported net asset value per share.
Historical Dividends:
The 2019 dividend tax classifications are estimates and will likely change based on full year results. (e.g. harvesting capital gains could eliminate the current small ROC classifications)
Current Position: 205+ Shares
Maximum Position: 1000 shares
Buying Restriction: None
Last Liquidations (2017): Item # 3.A. Sold 274+ RMT at $8.9 (8/3/17 Post); Item 3.A. Sold 276+ RMT at $8.4 (5/17/17 Post)
Royce Micro Cap Trust (RMT) Page at Morningstar
Micro Cap Stocks: Performance
Royce Micro Cap Trust (RMT) Total Returns | Morningstar
RMT's annual total return numbers are highly erratic and present trading opportunities:
Micro and Small Cap stocks are underperforming the market this year.
Compare iShares Micro-Cap ETF (IWC) Total Returns with SPDR® S&P 500 ETF (SPY) Total Returns
The Ishares Micro-Cap ETF (IWC) is probably the closest ETF to RMT.
IWC vs RMT Annual Average Total Returns (through 8/21):
3 years
IWC 5.98%
RMT 8.27%
5 Years
IWC 4.98%
RMT 3.91%
10 Years
IWC 10.26%
RMT 11.62%
RMT Net Realized Gains to Date = $2,561.36
The largest gain was from 2014 at $2,269.61 (see snapshot at Item # 1.A.) I have been trading this CEF for more than 10 years.
3. Short Term Bond Ladder Basket Strategy:
A. Sold 2 Norfolk Southern 3% SU Maturing on 4/1/22-In a Roth IRA Account:
Profit Snapshot: +$34.58
Item # 3.C. Bought 2 NSC 3% 2022 SU at a TC of 99.77 (4/23/18 Post)
FINRA Page: Bond Detail
Issuer: Norfolk Southern Corp (NSC)
NSC Analyst Estimates
Sold at 101.699
YTM at 101.699 = 2.285%
B. Early Optional Redemption- 4 Alexandria REIT 2.75% SU Maturing on 1/15/2020:
There was a small make whole payment of $6.81.
Profit Snapshot: +$14.81
Issuer: Alexandria Real Estate Equities Inc. (ARE)
C. Bought 10 Treasury Maturing on 9/17/19 at Auction (28 day bills):
2.077%IR
Auction Results:
4. Regional Bank Basket Strategy:
I decided to eliminate my Oritani Financial (ORIT) position.
ORIT will be acquired by Valley National (VLY) later this year. Valley National Bancorp to Acquire Oritani Financial Corp. in Capital Accretive Transaction
The yield curve inversion has soured me on waiting for this merger's culmination and then receiving VLY shares in exchange for my ORIT shares.
Since I owned VLY shares in my Fidelity account, I was initially inclined to make that exchange. I changed my mind as the yield curve inversions become worse coupled with my opinion that matters will not likely improve this year or in 2020. I no longer wanted more VLY shares and really did not even want the 102+ shares that I currently own in that account.
A. Sold 57+ ORIT at $16.90-In A Roth IRA Account:
Quote: Oritani Financial Corp. (ORIT)
Closing Price Yesterday: ORIT $17.06 -$0.27 -1.56%
Profit Snapshot: +$61.98
Last Ex Dividend: 8/1/2019 (before sell)
The regular quarterly dividend rate was $.25 per share and I did receive a $.15 special dividend during my ownership period.
B. Sold 67+ ORIT at $17.2-Used Fidelity Commission Free Trade:
Profit Snapshot: $125.98
These trades will be my last ones for this stock.
Last ORIT Dividend Payments Two Accounts:
Before the merger announcement, I sold ORIT shares at higher prices than the prices prevailing now. The acquisition has proven to be a take under for ORIT shareholders.
Prior Sell Discussions: Item # 3.C. Sold 89+ ORIT at $17,49 (5/18/19): Item # 2.C. Pared ORIT-Sold 30 at $17.9-Used Commission Free Trade (3/13/19 Post); Item # 4.A. Sold 50 ORIT at $17.08 (2/17/19 Post); Item 1.E. Sold 20 ORIT at $16.91-Used Commission Free Trade (6/28/18 Post)
ORIT Trading Profits: $416.69 ($228.73 in prior trades)
5. Intermediate Term Bond Basket Strategy:
A. Sold 2 Duke Energy Carolinas 2.95% First Mortgage Bond Maturing on 12/1/2026-In a Roth IRA Account:
Profit Snapshot: $101.6
Item # 1.E. Bought Duke Carolinas 2.95% FM at a Total Cost of 98.857 (4/11/17 Post)
FINRA Page: Bond Detail (prospectus linked)
Sold at 104.137
YTM at 104.137 = 2.312%
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.
Quote: Manulife Financial Corp. (MFC)
MFC Website
Manulife Investor Relations
Closing Price Yesterday: MFC $16.39 -$0.21 -1.27%
Manulife Financial Corp (MFC.TO) Key Developments | Reuters.com
Manulife Announces Intention to Amend Normal Course Issuer Bid to Repurchase for Cancellation up to an Additional 59 Million of its Common Shares
Dividend: Quarterly at C$.25 per share
Manulife Financial Corporation Declares Common Share Dividend
Dividend Yield: The yield will depend on the CAD/USD conversion rate.
If I assumed a constant .75 CAD/USD conversion rate, the C$1 current annual rate per share would result in a US$.75 annual dividend which would result in a 4.53% dividend yield. The actual yield will fluctuate depending on the CAD penny rate and the CAD/USD conversion number.
Generally, the dividend yield will go up when the CAD's value increases above the number prevailing when this stock was purchases, but will go down with a decline in value against the USD. Both results assume no change in the CAD dividend penny rate.
Manulife's stock fits my profile of an out-of-favor contrarian value play that yields over 4%.
MFC 5 Year Chart: Bear Market Chop Action. The share price was close to $20 five years ago.
A meaningful part of the decline over the past 5 years was attributable to the CAD losing value against the USD. XE: CAD / USD Currency Chart. Canadian Dollar to US Dollar Rates (use five year chart)
On August 14, 2014, the CAD/USD was at .91+ and was at .75+ five years thereafter.
5 Year Annual Average Total Return Through 8/6/19: -.29%
DRIP Returns Calculator | Dividend Channel
SPY, a S & P 500 ETF, had an average total return of 10.6% over the same period.
Last Ex Dividend Date: 8/19/19 (after purchase)
Dividend Reinvestment: Yes since the stock is viewed as undervalued at its current price based on what I know now
Last Discussed: Item # 4.C. Bought 10 MFC at $17.64 (9/30/18 Post)
Last Substantive Discussion: Item 2.A. (4/12/2018 Post)
Last Elimination: I sold 100 shares at $18.28:
 |
| 2016 100 Shares MFC +$481.06 |
Manulife Financial Corp (MFC) CEO Rocco Gori on Q2 2019 Results - Earnings Call Transcript | Seeking Alpha
Discussed at Manulife profit beats on strength in Asia unit - Reuters
Current Position: 51+ Shares
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule (each purchase, other than through dividend reinvestment, has to be at the lowest price in the chain)
B. Bought 50 RMT at $7.91-Used Commission Free Trade:
Quote: Royce Micro-Cap Trust Inc. (RMT)
Sponsor's website: Royce Micro-Cap Trust (RMT)
Closing Price Yesterday: RMT $7.82 -$0.04 -0.51%
RMT SEC Filings
Last SEC Filed Shareholder Report: 2018 Annual Report
Last Discussed: Item # 1 Bought 50 RMT at $8.03-Used Commission Free Trade. (6/15/19 Post)
Data Date of Trade (8/7/19)
Net Asset Value Per Share: $8.94
Closing Market Price: $7.89
Discount: -11.74%
RMT Royce Micro Cap Trust-CEF Connect
Last Ex Dividend Date: 6/12/19 (managed distribution)
Dividend Reinvestment: Yes for as long as likely reinvestment is at a 10%+ discount to the last reported net asset value per share.
Historical Dividends:
The 2019 dividend tax classifications are estimates and will likely change based on full year results. (e.g. harvesting capital gains could eliminate the current small ROC classifications)
Current Position: 205+ Shares
Maximum Position: 1000 shares
Buying Restriction: None
Last Liquidations (2017): Item # 3.A. Sold 274+ RMT at $8.9 (8/3/17 Post); Item 3.A. Sold 276+ RMT at $8.4 (5/17/17 Post)
Royce Micro Cap Trust (RMT) Page at Morningstar
Micro Cap Stocks: Performance
Royce Micro Cap Trust (RMT) Total Returns | Morningstar
RMT's annual total return numbers are highly erratic and present trading opportunities:
Micro and Small Cap stocks are underperforming the market this year.
Compare iShares Micro-Cap ETF (IWC) Total Returns with SPDR® S&P 500 ETF (SPY) Total Returns
The Ishares Micro-Cap ETF (IWC) is probably the closest ETF to RMT.
IWC vs RMT Annual Average Total Returns (through 8/21):
3 years
IWC 5.98%
RMT 8.27%
5 Years
IWC 4.98%
RMT 3.91%
10 Years
IWC 10.26%
RMT 11.62%
RMT Net Realized Gains to Date = $2,561.36
The largest gain was from 2014 at $2,269.61 (see snapshot at Item # 1.A.) I have been trading this CEF for more than 10 years.
3. Short Term Bond Ladder Basket Strategy:
A. Sold 2 Norfolk Southern 3% SU Maturing on 4/1/22-In a Roth IRA Account:
Profit Snapshot: +$34.58
Item # 3.C. Bought 2 NSC 3% 2022 SU at a TC of 99.77 (4/23/18 Post)
FINRA Page: Bond Detail
Issuer: Norfolk Southern Corp (NSC)
NSC Analyst Estimates
Sold at 101.699
YTM at 101.699 = 2.285%
B. Early Optional Redemption- 4 Alexandria REIT 2.75% SU Maturing on 1/15/2020:
There was a small make whole payment of $6.81.
Profit Snapshot: +$14.81
Issuer: Alexandria Real Estate Equities Inc. (ARE)
C. Bought 10 Treasury Maturing on 9/17/19 at Auction (28 day bills):
2.077%IR
Auction Results:
4. Regional Bank Basket Strategy:
I decided to eliminate my Oritani Financial (ORIT) position.
ORIT will be acquired by Valley National (VLY) later this year. Valley National Bancorp to Acquire Oritani Financial Corp. in Capital Accretive Transaction
The yield curve inversion has soured me on waiting for this merger's culmination and then receiving VLY shares in exchange for my ORIT shares.
Since I owned VLY shares in my Fidelity account, I was initially inclined to make that exchange. I changed my mind as the yield curve inversions become worse coupled with my opinion that matters will not likely improve this year or in 2020. I no longer wanted more VLY shares and really did not even want the 102+ shares that I currently own in that account.
A. Sold 57+ ORIT at $16.90-In A Roth IRA Account:
Quote: Oritani Financial Corp. (ORIT)
Closing Price Yesterday: ORIT $17.06 -$0.27 -1.56%
Profit Snapshot: +$61.98
Last Ex Dividend: 8/1/2019 (before sell)
The regular quarterly dividend rate was $.25 per share and I did receive a $.15 special dividend during my ownership period.
B. Sold 67+ ORIT at $17.2-Used Fidelity Commission Free Trade:
These trades will be my last ones for this stock.
Last ORIT Dividend Payments Two Accounts:
 |
| Fidelity |
 |
| Vanguard Roth |
Prior Sell Discussions: Item # 3.C. Sold 89+ ORIT at $17,49 (5/18/19): Item # 2.C. Pared ORIT-Sold 30 at $17.9-Used Commission Free Trade (3/13/19 Post); Item # 4.A. Sold 50 ORIT at $17.08 (2/17/19 Post); Item 1.E. Sold 20 ORIT at $16.91-Used Commission Free Trade (6/28/18 Post)
ORIT Trading Profits: $416.69 ($228.73 in prior trades)
5. Intermediate Term Bond Basket Strategy:
A. Sold 2 Duke Energy Carolinas 2.95% First Mortgage Bond Maturing on 12/1/2026-In a Roth IRA Account:
Profit Snapshot: $101.6
Item # 1.E. Bought Duke Carolinas 2.95% FM at a Total Cost of 98.857 (4/11/17 Post)
FINRA Page: Bond Detail (prospectus linked)
Sold at 104.137
YTM at 104.137 = 2.312%
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.
South Gent,
ReplyDeleteI took an initial position in HT today. I worry about a potential recession but I can wait it out with HT's 7.7% dividend.
Y: I was just looking at HT but decided to pass today. The Hotel REITs are really weak. HT seems to have some motivated sellers after the last earnings report. I currently own 50 shares and probably would not go over 100.
DeleteI still own 100 HTPRD which is holding up well.
Y: I bought 30 HT rather than 50 today at $13.92. I will increase my maximum position to 110 shares from 100 and will consider buying the last 30 share lot between $12 and $13. This is a risk mitigation move given the unfavorable chart pattern that shows no sign yet of a bottom.
DeleteI looked at the long chart and noted that the stock bottomed at around the current price level during the almost 20% SPX decline in the 2011 summer. The primary catalyst for the stock swoon then were the problems in Europe particularly Greece. Then the stock went from $27+ (Feb. 2011) to about $13.8 in Sept. 2011. The stock then worked its way gradually to over $29 in December 2014 and then slid again. Looking at a five year chart, the stock has recently broken its support line going back to Jan. 2016 in the $16.9 to $17 range with some vigor.
South Gent,
DeleteHT could stay range bound or even lower for another month or two. Let's see if the macro environment will improve then. I am looking for $13.5 as my next buy.
Re: HT, that's not a pretty chart. But it's paying nicely to hold and wait a while for the recovery. That 2011 support makes it interesting that a recovery may start up...
DeleteAre it's stats positive? It's fundamentals?
Land: I focus on really ugly charts.
DeleteThe question is whether the downside risk has largely been squeezed out by the decline.
Hotel REITs have been anticipating a recession for over a year now. The downside price action is more related to that fear than to actual operating results.
While HT did suffer a decline in AFFO Y-O-Y in the second quarter, the decline was due to hurricane related insurance settlements received in the 2018 second quarter. The overall AFFO increased excluding that one time payment. Hersha had hotels impacted by the hurricanes last year which had to close for repairs. The insurance was for "business interruption".
I would note that the majority of HT's borrowings are pursuant to unsecured bank loans whose interest payments are tied to a small spread to the 1 month libor rate which is coming down and likely to continue moving down for as long as the FED keeps cutting the FF rate.
see page 27 10- Q for the Q/E 6/30/19
https://www.sec.gov/ix?doc=/Archives/edgar/data/1063344/000106334419000068/ht630201910-q.htm
Due to massive yield inversion, the 1 month Libor is higher now than the other short term rates but has been moving down since peaking in January 2019:
https://www.macrotrends.net/2518/1-month-libor-rate-historical-chart
Hersha 2nd quarter results:
https://www.sec.gov/Archives/edgar/data/1063344/000106334419000061/exhibit991-q22019earni.htm
I may have missed Donald's tweet trumpeting the BLS annual revision to its job reports.
ReplyDeleteIn "preliminary" annual revision, the BLS estimates that there were 501,000 fewer jobs as of March 2019 than previously reported by it.
https://www.bls.gov/web/empsit/cesprelbmk.htm
Target (TGT) had a good day in response to a better than expected earnings report:
Target Corp.
$103.00 +$17.47 +20.43%
https://www.marketwatch.com/investing/stock/tgt
It is rare to see such a one day surge from a large box retailer.
Lowe's also enjoyed a good gain after its earnings release:
Lowe's Cos.
$108.00 +$ 10.13 +10.35%
https://www.marketwatch.com/investing/stock/low
Nordstrom Inc. (JWN) is popping up after hours based on a less bad than expected earnings report released after the close:
$30.12 $3.58 +$13.49%
After Hours Volume: 2.4M
Last Updated: Aug 21, 2019 4:53 p.m. EDT
https://www.marketwatch.com/story/nordstrom-stock-rallies-after-companys-q2-sales-eps-beat-2019-08-21?mod=mw_quote_news
This article on BLS adjustment says it's the largest since 2009.
Deletehttps://thehill.com/policy/finance/458354-federal-analysis-economy-created-half-a-million-fewer-jobs-than-was-reported
Land: The end result is that the average monthly job gains for 2018 were actually less than 200K vs. the 223K previously reported by the BLS. The average monthly gain in 2017 was 179K.
DeleteObama Last 3 Years:
2014 +251K
2015 +227K
2016 +193
Average Monthly 223.67K
The average per month will be less than 200K for Trump's first 3 years or less than Obama's last three.
Yet, the average voter and all Trumpsters would probably say Donald had far larger job gains in 2017-2019 than Obama in 2014-2016.
Donald repeatedly trumpets any positive economic number as the best ever while Obama was almost silent.
And, that lack of constant self promotion contributes to the misconception that the Trump economy was somehow superior to the one that he inherited when actually the results were mostly more of the same and merely part of the momentum in existence before his election.
A comparison of the real GDP numbers for Obama's second term with Trump's first will be close, possibly in Donald's favor some provided the U.S. avoids a recession next year or < 1% growth in which case Obama will win on that measure too. I am assuming that the FED's 2.1% estimate for 2019 will turn out to be accurate. That may be too high. Obama's average annual real GDP growth in his second term was 2.2%.
Business investment will probably be higher during Obama's second term than for Trump's first even with the huge corporate tax cuts. The last quarterly growth was a negative .6%
Yep for a while it looks possible we'd break out of slowness and move to 3% or more GDP ongoingly.
DeleteThat hope didn't live long...
One guess is that the problem is contraction from technology. A smart economic planner would have worked on factors that's effected, like better school programs that doesn't require a 4 year college degree.
So that is Trump's economy compared to Obama's. I'm not surprised to see this. It matches how the economy "feels."
I discussed taking a Lotto position in Husky in this post. This article about this beaten down energy company was just published at oilprice.com:
ReplyDeletehttps://oilprice.com/Energy/Energy-General/Hong-Kong-Billionaire-Loses-20-Billion-In-Canadian-Oil-Sands.html
Markit released its U.S. August PMI data which is partly responsible for the stock market giving back early morning gains.
ReplyDeleteThe manufacturing PMI number was reported at 49.4, which is in contraction territory, and a 114 month low. Services PMI was barely over 50 at 50.9 vs. 53 in July.
Europe's manufacturing PMI is slightly worse at 47.
Markit press releases can be found at this link:
https://www.markiteconomics.com/Public/Release/PressReleases
Two of the FED voting members who voted against the last FF cut have made it clear that there are currently no votes on a second cut.
A non-voting member of the FED's Board of Governors this year, the Philly FED President, announced today that he would not support a rate increase at the September meeting.
https://www.cnbc.com/2019/08/22/feds-harker-doesnt-see-need-for-another-rate-cut-says-central-bank-should-stay-here-for-a-while.html
This is the first dip below 50 for USA PMI manufacturing with Services so borderline since the crisis? That's a signficiant change?
DeleteNot surprised that they are calling for no cut. It doesn't really make sense to cut here - unless the economy really does slow down. At the moment it's only a threat. How low can you go? We're using up our recession buffer for tools long before we get there is there's a cut.
I take it from the market reaction, they don't believe these two voters will matter.
Land: Powell has the votes to cut by .25% basis points next month. The odds are still at 100%. The main change over the past several week is the odds of a .5% cut have dropped from 22.3% to just .4%.
Deletehttps://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
The yields of short term treasuries is consistent with a .25% cut next month as well.
The statements made this week by the two voting members who voted against the last .25% cut were reasonably anticipated by the market. Why vote for the next cut when they voted against the last one.
The manufacturing PMI survey from Markit did break below 50 to a 114 month low (9.5 years), but there is another manufacturing PMI survey conducted by ISM that had several and more recent readings below 50:
https://tradingeconomics.com/united-states/business-confidence
ISM has not release its August numbers yet. The last ISM manufacturing PMI was for July, released on 8/1/19, with the PMI at 51.2.
https://www.instituteforsupplymanagement.org/ismreport/mfgrob.cfm?SSO=1
There is an ongoing worldwide manufacturing slowdown that would be consistent with recessionary conditions about to develop. Part of the U.S. slowdown is tied to Boeing's problems.
However, this PMI index will bounce around a lot and can recover quickly. So a reading below 50 may either be the pause that refreshes or the start of something worse. I can not make a judgment with certainty now whether manufacturing is about to fall into a recession/contraction cycle or is merely in a temporary lull period.
If the trade war continues and accelerates some, the odds of a worldwide synchronized recession increase. IMO, the most reasonable prediction is that the trade war will continue.
I would note that this index has been in the past a leading indicator of the U.S. economy coming out of a recession.
The new order component will start to surge back toward expansion (50+) and then into expansion. I noted that type of movement in the early Spring of 2009 before the recession officially ended.
The stock market accelerated its decline in early morning trading after Doofus Don published this series of tweets:
ReplyDelete"Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far....
...better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..
....your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States."
The fear is that Authoritarian Don will try to interfere with corporate decision making through issuing executive orders.
S&P 500 Index
2,882.96 -39.99 -1.37%
Last Updated: Aug 23, 2019 at 11:27 a.m. EDT
DAY RANGE 2,873.92 - 2,927.01
https://www.marketwatch.com/investing/index/spx
I hope that the Stock Jocks are not surprised that China will respond to the additional U.S. tariffs that will go into effect on 9/1 and the additional tariffs now scheduled for 12/15.
Powell soothed the Stock Jock's jitters early this morning before Crazy Don spewed his crazy juice on everyone, preferring to stoke the kind of fears that can lead to a recession
ReplyDeleteThe Bond Ghouls are reacting as expected, taking high quality bond yields down in a flight to quality.
U.S. 10 Year Treasury Note
1.537% -0.08%
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
Gold is moving up nicely as well.
I do not recall longer term interest rates falling so fast on a percentage basis but my memory is not as good as it use to be. Early in November 2018, the 10 year treasury yield was close to 3.25%.
I am continuing to sell corporate bonds into the rally. I was confused this morning when I saw a 2.6% bond maturing on 5/1/26.
Normally, I keep snapshots of bond buys, arranging them chronologically by year in separate folders, but I did not have a copy of that one.
The information in my IB account only suggested that it was a bond somehow related to Berkshire Hathaway but the bond was not included in BRK's debt list.
After about 10 minutes of trying to find what the heck did I own, I discovered that it was a Sierra Pacific general mortgage bond that I bought in 2017, having zero memory of it now.
The name was apparently changed to NV Energy which was acquired by MidAmerica Energy Holdings that is now 90% owned by Berkshire Hathaway.
After figuring that out, I sold my 2 bonds at 102.19. The yield to maturity at that price is 2.232%.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?symbol=BRK4417679&ticker=FBRK4417679
I am mentioning this transaction to highlight how desparate investors are now for yield. That is 2.23% YTM on a bond rated A2 maturing in 2026. I bought this one at a TC of 97.14.
TC? It sold at a premium with 2.232% through 2026?
DeleteHum.
Land: TC = Total Cost per bond
DeleteI owned this bond in my Interactive Broker account and am charged a brokerage commission of $1 per bond.
So when I bought this general mortgage bond issued by Sierra Pacific, I actually paid 97.04 and the commission of $1 per bond raises the cost number by .1 to 97.04.
The par value of the bond is $1K, so selling 2 at 102.19 will net me the following:
$2,043.8 in principal amount
+ Accrued Interest Paid by the Buyer to me
- a $2 brokerage commission ($1 per bond)
The yield to maturity number for this bond takes the coupon yield and adjusts it down to reflect the premium to par value paid by the buyer to me. Basically the adjustment reflects a loss on the bond when and if held to maturity when the bond issuer would pay 100.
Pricing is at 1/10th of par value. So a price of 102.19 translates into $1,021.9 per bond.
The current yield would be higher at a TC of 102.19:
2.6% coupon ÷ 102.19 TC = 2.544%
It is possible that interest rates will continue to move down and the buyer of that bond will be able to sell it at a higher price. If interest rates turn up, and that opportunity does not come to fruition or is ignored if available, resulting in the bond being held to maturity by that buyer, then the actual total return of that bond would be 2.232% annually for that buyer.
Looking at my confirmation for the Sierra Power GM bond maturing in 2026, the principal amount was 2,043.8 and the accrued interest that the buyer will pay me will be $16.78. The cost was $1940.8 + a $2 commission. The annual interest payments for this bond are $26 per bond. The realized profit would be worth about two years of interest per bond.
DeleteSomeone asked many several months ago why I was buying bonds that did not pay that much more than a high yield savings account. Among the reasons that I gave was that the bonds were paying me more, they locked in a rate for a longer period that was higher which becomes important when rates decline, and I had a chance to trade the bonds for profit that would increase my effective yield. All of those reasons have come to pass. Interest yields on savings accounts, CDs and treasury bills have already come down and will be coming down more.
And, if interest rates rose, I dealt with that issue by having a constant flow of redemption proceeds that could be invested in higher yielding instruments. This is not rocket science and represents a recognition of my inability to know the future.
When buying a bond, it is possible to calculate precisely the total return when held to maturity (yield to maturity) provided of course the issuer pays all interest payments and the principal amount to maturity.
The YTM changes when I elect to sell the bond before maturity and at a price > than par value when the bond was bought at below par as this one. In this case, the actual total return would be the profit + the interest payments at the 2.6% coupon.
This is the kind of bond that I will consider buying back when and if there is ever a pop in the ten year treasury yield back over 3%, taking into account the then remaining life and YTM.
Is it that they fear interference... or they are realizing that in the short term there is no plan?
ReplyDeleteIf there is none short term, then they is none long term. But that's a topic for another day with wall street.
My buys at the bottom were doing fine. Now looks like we could see a nice dip here instead. No worries, plenty of cash that wishes it was in the market already.
I meant to mention the other day ... I caught the CNBC lunchtime show. Usually I like it. This time was different flavor, maybe slightly different crew? They were all so gungho on the tariffs. They see a need. Trust that there's a plan and it's working maybe not perfectly but "it's working and needed." There wasn't a single mention of tweets being out of control. Or China's not going to respond as needed.
It was 1-2 days after the endless "world is ending (eventually but worry right now) with the inversion" reports all day.
I watched and wondered, is this the main investing crowd, that's so pollyanna they can't see the banana peel as we're taking a non-soft landing? They have confidence in Trump as having a plan, making moves other presidents have been afraid to, sticking to it...
I don't know much about tariffs. But I know plenty on a few other topics. So I know on those that his plan is a lack of plan, and filled with chaos & poor negotiation skills. So I know that's happening here.
Still, such a window into a different way to think..........
Land: The other fear is that the trade war with China is about to get worse.
DeleteI seriously doubt that Donald has a feel for what he can realistically achieve with China.
China does not wish to appear weak and subservient to the U.S, while Donald does not want to be seen as backing down from the demands which are unacceptable to China.
Donald's China trade plan is to keep turning the screws tighter until China squeals and begs for mercy. That is probably not going to work IMO and will lead to more retaliatory measures by China designed to hurt the U.S. economy.
Perhaps the trade war would not result in a U.S. recession within 12 months or so provided U.S. consumers continue to borrow and spend and the labor market remains relatively strong. The problem however is that consumer confidence can take a dive based on fears about the future and those concerns can then tip the economy into a recession.
Even the constant talk of recession possibilities can lead to consumers being more judicious in their spending habits and then the recession becomes a self-fulfilling prophecy. Shiller talks about these psychological issues and how they impact markets and the economy.
https://www.cnbc.com/2019/08/22/robert-shiller-says-recession-fears-may-make-it-a-reality.html
The fact that Donald wants to disrupt U.S. company supply chains and to interfere with their decision making is unprecedented and is another manifestation of his ignorance. (besides being unlawful as an exercise of presidential power without congress passing supporting legislation). His tweets this morning also proves that his decision making processes are based on knee jerk emotional reactions to headlines rather than on informed and careful consideration of facts.
Tell me something new...
DeleteAnd not crazy...
Well, that does answer what today's events are about. His ordering will become the distraction that makes people feel like he's got control & confidence... while he's really reporting that he's failed. It's a clever ploy. That most of the media & many people will be influenced by.
The stock market did manage to rally into the close. It could have been worse:
ReplyDeleteS&P 500 2,847.11 -75.84 (-2.59%)
Day's Range 2,834.97 - 2,927.01
The low was hit about 5 minutes before the close.
The decline started immediately after Donald published his tweets, calling Powell and China's President enemies and demanding that U.S. firms move production out of China back to the U.S.
Among common stocks, it was hard to find winners. Bond like common stocks retreated along with the market but did not decline as much. The characteristic as a "common stock" overruled the "bond like" feature even when interest rates took dive down.
Energy Select Sector SPDR Fund (XLE)
$55.96 -$1.94 (-3.35%)
Technology Select Sector SPDR Fund (XLK)
$77.17 -$2.64 (-3.31%)
Utilities Select Sector SPDR Fund (XLU)
61.48-0.66 (-1.06%)
Fidelity MSCI Real Estate Index ETF (FREL)
$27.14 -$0.35 (-1.27%)
Energy and technology stocks were probably the worst performing sectors, both reacting to Donald's tweets that indicate that the trade war with China is likely to enter a new phase that will hurt tech stocks and contribute to an ongoing worldwide slowdown that will negatively impact energy demand.
I thought that Donald's tweets today are clear proof that he is mentally unstable which is not news to anyone paying attention.
High quality bonds are continuing to move higher in price and lower in yield.
A few months ago, I owned somewhere close 300 corporate bonds (never counted how many), and I am probably closer now to 150 now. I am selling into a bond price parabola, pacing the sells over time, which is invariably something that I do with any asset class that is in one.
I am hoping for a 20%+ decline in stocks that will provide me with better options for my cash that is building up rapidly.
I would be okay with a 50% plunge similar to 2008 or 2000-2002, but doubt that is in the cards anytime soon. I can not draw any conclusions what days like today other than to predict that up or down 1% days will be more common this year and the risk of a significant slide is present.
But that is what almost everybody was saying in 1999 and 2007.
There is nothing much the FED can do to prevent whatever is about to happen from happening.
This previous comment had a word missing in a sentence. I was saying that down days like last Friday do not cause me to draw any conclusions other than the market is susceptible to downside action and up and down 1%+ days will be more frequent this year.
DeleteThe second point is that the crowd is not likely to predict major declines or to prepare for it. That was the case in 1999 and 2007 when almost no one saw a 50%+ decline around the corner.
That is an understandable given the optimism that builds up after a long economic expansion and a robust bull market in stocks. If you had listened to the naysayers during the prior bull runs, substantial profits would have been left on the table by selling too soon.
Many investors have been buying the dips since March 2009 and are doing so now. That has worked in the past, but not work now. Just a word of caution.
The herd is still confident IMO that Trump will solve the trade and other economic problems, but that belief is not proof that everything will turn out as expected and is not supported by the weight of evidence available now.
Last Friday's action in stocks was in response to a change in perception, widely held, that Donald would reach a far reaching trade deal with China soon that would be highly advantageous to the U.S. long term.
It was virtually impossible to maintain that opinion with functioning brain cells and knowledge of what actually happened last week.
So now the forecast of those who believe Donald is capable of successfully concluding a deal has been pushed out to 2020. But what will change? Will Donald retreat or will China or neither as the most likely case?
Another belief is that China will submit to Donald even though Donald has made that an option that no Chinese leader could accept and remain in power.
Is it even rational now to expect China to take a knee before the Chosen One, flagellate itself while singing God Bless America?
The asset class currently in a price parabola is high quality bonds so I am reducing my position in that asset class gradually. That may continue which explains the go slow mo selling. Some are predicting that the 10 year treasury will fall below 1% or even below zero.
https://blog.pimco.com/en/2019/08/interest-rates-naturally-negative
https://www.cnbc.com/2019/08/20/kyle-bass-says-us-interest-rates-will-follow-the-rest-of-the-world-to-zero-this-is-insane.html
For stocks, I am mainly following small ball purchase programs that work better when the market tanks or goes down persistently before staging another comeback rally. Each purchase in the chain has to be made at the lowest price so downside action is actually appreciated. The program rules require me to consider the highest cost lots profitably as well when and if the bounce happens.
I'd like that 50% down. I still have plenty of cash.
DeleteThis isn't the bust time. The VIX model will flag that first step down - and likely recovery phase. I do believe that level of VIX reaction will happen this time too.
This is the exuberance phase. I can count on "this time is different" articles at a much faster rate than the past on known measures that matter.
For exuberance, it's not very exuberant yet. So may be a ways to go. But nothing seems to upset this market for very long.
High quality bonds are the parabola... that's where the parabola went. It isn't in any of the equity sectors right now.
I've seen your small ball method of buying next batches only when lower. I don't know the rest of the rules.
During an upswing that wouldnt' work well. But during downswing, it seems like a psychologically palatable way to buy on the way down.
Land: The small ball purchase restrict requires that every purchase (other than through dividend reinvestment) be at the lowest price in the chain.
DeleteThis restriction will not work well in a long term secular bull market but can still produce returns through dividend reinvestment and selection of securities. Most of the common stocks selected are in bear markets already notwithstanding the bull market move of the overall market. If the downward price trend reverses for the individual stock selection, then the strategy can work as shown by several recent examples (e.g. GIS)
That is the short answer.
Buying at higher prices is prohibited so further appreciation after the initial purchase will not be captured except through dividend reinvestment.
This strategy is designed for a market that is at risk of serious downside movement of unknown duration and depth. I am using mostly commission free trades that I have at Fidelity and commission free ETFs to implement the strategy.
This particular strategy is also intended to be primarily a risk mitigation trading strategy for an investor, such as myself, who does not have to take risks but nonetheless wants to participate in possible stock market returns, primarily dividends with some capital appreciation, as an alternative to bonds, CDs and low yielding risk free instruments that will not produce a real total return before taxes.
Inherent in this strategy is that I do not know whether the decline will be shallow or deep. I would settle for a decline similar to the one occurring during the 2018 4th quarter but would prefer a much deeper one. As I said, I would be okay with a 50% decline but that is not likely to happen anytime soon. But that was what people were saying in 1999 and 2007 too just before the stock market crashed by 50%+.
Donald was serious when he ordered all American companies out of China. He believes, and said so explicitly, that he has the "absolute" power to declare a national emergency and then do whatever he wants to do. The Stock Jocks will probably classify those statements as more Trump bluster that will not actually be implemented and more of a negotiating tactic than anything concrete.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/08/observations-and-sample-of-recent_24.html