Economy:
Key yield curve inverts to worst level since 2007, 30-year rate under 2%
Key yield curve inverts further as 30-year hits record low
Based on past history, the yield curve inversion is clearly signaling IMO that a recession will arrive within 12 months and that it will be worse than currently expected by most pessimists. The question is whether this signal still works given the extremely abnormal central bank monetary policies maintained for over a decade.
With negative nominal yield bonds moving closer to $17 trillion now, something is amiss in an extraordinary way, with no historical antecedents prior to 2008.
Negative nominal yields suggests that lenders are willing to pay borrowers to just keep their money safe and return it when the bonds mature.
The same conclusion could be drawn about the bonds with nominal positive yields that are so low that inflation will likely devour the purchasing power of the interest payments before taxes.
Johnson to restrict parliament time before Brexit - Reuters This move is thought to make a hard Brexit more likely. Pound plunges as Boris Johnson’s bid to suspend Parliament raises no-deal Brexit fears - MarketWatch
Donald claimed on Monday that China had called his trade negotiator twice wanting to "restart" trade talks. G-7: Trump says China ready to negotiate on trade war; Trump claims serious trade negotiations with China to begin
Trump: “We’ve gotten two calls and very, very good calls. Very productive calls. They mean business. They want to be able to make a deal.”
China's foreign ministry spokesperson said that he was unaware of those calls; and Mnuchin refused to provide any specifics. Trump says trade negotiations with China to resume - The Washington Post
Chinese newspaper editor Hu Xijin: "China didn't change its position"
A Chinese delegation was already scheduled to meet with U.S. trade representatives next month so Donald misled investors by stating that China want to restart the negotiations.
Trump further claimed that the disagreements were overblown.
Trump: "This is the first time I've seen them where they really want to make a deal. And I think that's a very positive step." There is no doubt that China would like to make a deal on its terms.
Trump expressed his belief once again that China is desperate for a trade deal. He represented once again that turning the screws harder and tighter will cause China to cave.
Donald's comments worked last Monday on the ever malleable Stock Jocks who accepted his characterizations as gospel, no matter how many times they get burned relying on Donald's representations.
If similar representations are made in six months after obviously fruitless negotiations, the Stock Jocks will once again rely on Donald's positive spin.
The Bond Ghouls completely disregarded Trump's characterization about the current status of those negotiations, concluding that he was lying as judged by their bond pricing. I certainly would bet my money on Trump being honest about anything. Everyone else can draw their own conclusions.
Maybe there is reason for hope that the trade negotiations will soon end, but it would not be rational to believe Donald is telling the truth.
A more likely explanation for his comments is simply that he wanted investors to buy stocks. The most likely current status of the negotiations is no change from deadlock.
After all, Donald's optimistic and rosy comments last Monday were preceded by Donald calling Xi an enemy, his order for U.S. firms to leave China, and an order to raise tariffs an additional 5%.
Key yield curve inverts to worst level since 2007, 30-year rate under 2%
Key yield curve inverts further as 30-year hits record low
Based on past history, the yield curve inversion is clearly signaling IMO that a recession will arrive within 12 months and that it will be worse than currently expected by most pessimists. The question is whether this signal still works given the extremely abnormal central bank monetary policies maintained for over a decade.
With negative nominal yield bonds moving closer to $17 trillion now, something is amiss in an extraordinary way, with no historical antecedents prior to 2008.
Negative nominal yields suggests that lenders are willing to pay borrowers to just keep their money safe and return it when the bonds mature.
The same conclusion could be drawn about the bonds with nominal positive yields that are so low that inflation will likely devour the purchasing power of the interest payments before taxes.
Johnson to restrict parliament time before Brexit - Reuters This move is thought to make a hard Brexit more likely. Pound plunges as Boris Johnson’s bid to suspend Parliament raises no-deal Brexit fears - MarketWatch
Donald claimed on Monday that China had called his trade negotiator twice wanting to "restart" trade talks. G-7: Trump says China ready to negotiate on trade war; Trump claims serious trade negotiations with China to begin
Trump: “We’ve gotten two calls and very, very good calls. Very productive calls. They mean business. They want to be able to make a deal.”
China's foreign ministry spokesperson said that he was unaware of those calls; and Mnuchin refused to provide any specifics. Trump says trade negotiations with China to resume - The Washington Post
Chinese newspaper editor Hu Xijin: "China didn't change its position"
A Chinese delegation was already scheduled to meet with U.S. trade representatives next month so Donald misled investors by stating that China want to restart the negotiations.
Trump further claimed that the disagreements were overblown.
Trump: "This is the first time I've seen them where they really want to make a deal. And I think that's a very positive step." There is no doubt that China would like to make a deal on its terms.
Trump expressed his belief once again that China is desperate for a trade deal. He represented once again that turning the screws harder and tighter will cause China to cave.
Donald's comments worked last Monday on the ever malleable Stock Jocks who accepted his characterizations as gospel, no matter how many times they get burned relying on Donald's representations.
If similar representations are made in six months after obviously fruitless negotiations, the Stock Jocks will once again rely on Donald's positive spin.
The Bond Ghouls completely disregarded Trump's characterization about the current status of those negotiations, concluding that he was lying as judged by their bond pricing. I certainly would bet my money on Trump being honest about anything. Everyone else can draw their own conclusions.
Maybe there is reason for hope that the trade negotiations will soon end, but it would not be rational to believe Donald is telling the truth.
A more likely explanation for his comments is simply that he wanted investors to buy stocks. The most likely current status of the negotiations is no change from deadlock.
After all, Donald's optimistic and rosy comments last Monday were preceded by Donald calling Xi an enemy, his order for U.S. firms to leave China, and an order to raise tariffs an additional 5%.
Donald was not joking when he ordered all U.S. firms out of China.
Donald believes that his power is absolute and he can do whatever he wants by simply declaring a national emergency.
When leaving for the G-7, Trump made the following statement: "I have the absolute right to do that, but we'll see how it goes." Trump says he has the 'absolute right' to order US companies to leave China
The TV personality Larry Kudlow, Trump's economic advisor and a pretend economist with no academic training in that field, agrees that Donald has this authority. Kudlow Claims Trump Has 'Emergency' Authority To Order Companies Back From China Kudlow routinely makes stuff up. Kudlow's Unsupported USMCA Jobs Claim - FactCheck.org
At least Donald is consistent in exposing his strong anti-democratic and authoritarian nature.
Since the Supreme Court has already been Trumpified, there is no telling how far Donald will be allowed to go as President.
I mentioned in a previous comment that the Stock Jocks would probably classify the foregoing threat as typical Trump bluster and a negotiating tactic in the trade negotiations. However, the fact that he made this threat doubled down, and claimed to have the power to implement it can not be ignored.
Fake News occurs, for example, when the mass media reports what Donald actually said which makes him look foolish and inconsistent. G7 Summit: Trump expresses regret about escalating China trade war, then reverses course and says he wishes he raised tariffs higher - The Washington Post
This latest escalation in the trade war will cause even more uncertainty for American businesses and will consequently contribute to stagnation due to indecision.
Global effort to tax Big Tech is moving forward, official says - MarketWatch
President Trump says US is close to a compromise on French digital tax
Donald claimed at the G-7 that a trade deal with Japan was reached only to be contradicted in that claim by Japan's PM. Trump says Japan trade deal reached, but Abe warns more work remains - The Washington Post
+++++++
Markets and Market Commentary:
I would emphasize that the end game for Brexit is near and Donald will increase tariffs on China's exports on 9/1/19.
Dudley encourages the Fed not 'to play along' with Trump's trade war Ex-Fed official Dudley’s call to block Trump draws criticism | Bond Buyer The FED rejected that suggestion. Fed rejects call to deny Trump rate cuts; Trump keeps up pressure - Reuters
Maybe some enterprising faux blonde TV personality from Fox will ask Donald why the economy needs so much new monetary stimulus, even with interest rates at Great Depression levels, so soon after the massive tax cut which, according to the republicans, would guarantee 3+% real GDP growth until the end of days.
Cramer: 'Be prepared for more pain' and 'be able to buy that pain'
I would emphasize that the end game for Brexit is near and Donald will increase tariffs on China's exports on 9/1/19.
Dudley encourages the Fed not 'to play along' with Trump's trade war Ex-Fed official Dudley’s call to block Trump draws criticism | Bond Buyer The FED rejected that suggestion. Fed rejects call to deny Trump rate cuts; Trump keeps up pressure - Reuters
Maybe some enterprising faux blonde TV personality from Fox will ask Donald why the economy needs so much new monetary stimulus, even with interest rates at Great Depression levels, so soon after the massive tax cut which, according to the republicans, would guarantee 3+% real GDP growth until the end of days.
Cramer: 'Be prepared for more pain' and 'be able to buy that pain'
Recession not on horizon, Fed’s Daly says - MarketWatch Daly claims that the recent .25% cut was not in response to an "impending downturn". The FED wants to call the interest rate cuts a "mid-cycle adjustment", suggesting that the 10 year expansion has another 10 years to run. The FED does not want consumers and businesses to interpret any rate cut as a response to an economic slowdown even if that is the only reason for them. If the FED admitted it was cutting in response to a possible recession or anemic growth, then that admission could contribute to the slowdown.
25 dividend stocks selected for value by an outperforming money manager - MarketWatch
Fund manager who beat 98% of peers so far in 2019 says stay calm and buy stocks The peer class is Asia funds ex Japan.
+++++
Trump:
Delusional Don claims that the G-7 leaders asked him why did the U.S. media hate America so much and why was the media rooting for the U.S. to fail:
Donald skipped the G-7 meeting on climate change and the Amazon fires. He did not want to waste America's energy resources on "dreams". Trump claims to be an 'environmentalist' despite skipping G-7 session on climate change
Trump’s company could save millions if interest rates fall as he demands
Trump's 2,000 Conflicts of Interest (and Counting) - CREW The Trumpsters still cheer Donald at his pep rallies when he claims to be draining the D.C. swamp.
Trump touts his struggling Doral club in Miami as site for 2020 G-7 summit - MarketWatch
Delusional Don blamed the radical left Democrats for a rumor that Donald's Doral club had bedbugs:
The conspiracy was hatched by a guest, Eric Linder, who filed a suit in 2016 complaining about bedbugs.Trump Doral resort settles with guest who sued over bedbug bites | Miami Herald; If the G7 Likes Bedbugs, They’re Gonna Love Trump Doral | Vanity Fair
Delusional Don claims that the G-7 leaders asked him why did the U.S. media hate America so much and why was the media rooting for the U.S. to fail:
Donald skipped the G-7 meeting on climate change and the Amazon fires. He did not want to waste America's energy resources on "dreams". Trump claims to be an 'environmentalist' despite skipping G-7 session on climate change
Trump’s company could save millions if interest rates fall as he demands
Trump's 2,000 Conflicts of Interest (and Counting) - CREW The Trumpsters still cheer Donald at his pep rallies when he claims to be draining the D.C. swamp.
Trump touts his struggling Doral club in Miami as site for 2020 G-7 summit - MarketWatch
Delusional Don blamed the radical left Democrats for a rumor that Donald's Doral club had bedbugs:
The conspiracy was hatched by a guest, Eric Linder, who filed a suit in 2016 complaining about bedbugs.Trump Doral resort settles with guest who sued over bedbug bites | Miami Herald; If the G7 Likes Bedbugs, They’re Gonna Love Trump Doral | Vanity Fair
The 14th Amendment to the Constitution clearly provides that all persons born in the U.S. are citizens. Don the Authoritarian wants to end that constitutional right by executive order. Trump says he is seriously looking at ending birthright citizenship - Reuters
At a raccoon farm in Iowa, 300 raccoons baked in metal cages as the heat went into the high 90s. The raccoons were under severe heat stress and were drooling and panting. The USDA veterinarians confiscated 10 raccoons and planned to seize the remainder for animal cruelty. In the interest of "animal welfare", the Trump administration intervened and had the USDA return the animals to their cages.
Trump (8/22/19): “The doctors were coming out of the operating rooms,” University Medical Center of El Paso says doctors didn’t leave operating room to greet Trump - The Washington Post
It must be nice to live in alternate reality where facts do not matter. Just make stuff up which is a lot easier. Tennessee Abortion Bill Claims a Fetus Can Survive Outside the Womb at Conception - VICE
Planned Parenthood threat: Tennessee man arrested for threatening to "shoot up" a Planned Parenthood in Washington D.C. - CBS News
The NYT published the results of its investigation of one Trumpster's website, WesternJournal.com, that spread disinformation to those who wish to be called "conservatives." In the Trump Era, a Family’s Fight With Google and Facebook Over Disinformation - The New York Times
This website receives an average of 4 million hits per month by publishing a variety of conspiracy theories. It is a very lucrative business for the website's owners.
This is the kind of website that spread the conspiracy theory that Obama was born in Kenya and claimed that he was going to ban criticism of Islam to “please his jihadist ‘masters.’” The former attorney general Eric Holder is covering up a murder. Other claims include such demonstrably false claims that Florida voters voted to impose sharia law and that California was going to ban the bible. Some Fake News Publishers Are Donald Trump's Cronies; Republican figures and clickbait websites have been promoting an anti-Islam fake news company on Facebook | Media Matters for America; The Western Journal - Wikipedia
See generally: Bloodlust-Report-formatted: Anti-Defamation League.pdf
Trump claimed that he was named Michigan's Man of the Year, but no one can find any evidence supporting that reality creation. Trump's Dubious Michigan 'Man of the Year' Boast - FactCheck.org
The evidence does not support this reality creation made by the Duck: U.S.-Japan Trade Deficit Not 'Changing Rapidly' - FactCheck.org
About all that can be said about Donald's honesty is that he lies all of the time about everything. A political leader who lies frequently every day has no reservoir of credibility left. The only rational response is to assume that Donald is lying, deliberately trying to mislead the voters for bad ulterior motives, until there is clear and convincing factual proof that a particular statement made by him is true.
Don the Authoritarian wishes to ban speech that he does no like: Trump challenges court ruling barring him from blocking Twitter users - Reuters
The Trumpster President of Brazil Jair Bolsonaro wants to see the Amazon burn. Brazil’s President Seems Fine With Letting the Amazon Burn | Vanity Fair Bolsonaro is a Trump clone and a fellow climate change denier.
Trump (8/22/19): “The doctors were coming out of the operating rooms,” University Medical Center of El Paso says doctors didn’t leave operating room to greet Trump - The Washington Post
It must be nice to live in alternate reality where facts do not matter. Just make stuff up which is a lot easier. Tennessee Abortion Bill Claims a Fetus Can Survive Outside the Womb at Conception - VICE
Planned Parenthood threat: Tennessee man arrested for threatening to "shoot up" a Planned Parenthood in Washington D.C. - CBS News
The NYT published the results of its investigation of one Trumpster's website, WesternJournal.com, that spread disinformation to those who wish to be called "conservatives." In the Trump Era, a Family’s Fight With Google and Facebook Over Disinformation - The New York Times
This website receives an average of 4 million hits per month by publishing a variety of conspiracy theories. It is a very lucrative business for the website's owners.
This is the kind of website that spread the conspiracy theory that Obama was born in Kenya and claimed that he was going to ban criticism of Islam to “please his jihadist ‘masters.’” The former attorney general Eric Holder is covering up a murder. Other claims include such demonstrably false claims that Florida voters voted to impose sharia law and that California was going to ban the bible. Some Fake News Publishers Are Donald Trump's Cronies; Republican figures and clickbait websites have been promoting an anti-Islam fake news company on Facebook | Media Matters for America; The Western Journal - Wikipedia
See generally: Bloodlust-Report-formatted: Anti-Defamation League.pdf
Trump claimed that he was named Michigan's Man of the Year, but no one can find any evidence supporting that reality creation. Trump's Dubious Michigan 'Man of the Year' Boast - FactCheck.org
The evidence does not support this reality creation made by the Duck: U.S.-Japan Trade Deficit Not 'Changing Rapidly' - FactCheck.org
About all that can be said about Donald's honesty is that he lies all of the time about everything. A political leader who lies frequently every day has no reservoir of credibility left. The only rational response is to assume that Donald is lying, deliberately trying to mislead the voters for bad ulterior motives, until there is clear and convincing factual proof that a particular statement made by him is true.
Don the Authoritarian wishes to ban speech that he does no like: Trump challenges court ruling barring him from blocking Twitter users - Reuters
The Trumpster President of Brazil Jair Bolsonaro wants to see the Amazon burn. Brazil’s President Seems Fine With Letting the Amazon Burn | Vanity Fair Bolsonaro is a Trump clone and a fellow climate change denier.
++++++++
1. SMALL BALL-Electric Utility Stocks:
A. Bought 20 CNP at $27.72 and 10 at $27.39-Used Commission Free Trades:
Quote: CenterPoint Energy Inc. (CNP)
CNP | CenterPoint Energy Inc. Analyst Estimates
SEC Filings
2018 Annual Report
Website: Investor Relations | CenterPoint Energy, Inc., ("CenterPoint Energy, Inc. is an energy delivery company with regulated utility businesses in eight states and a competitive energy businesses footprint in nearly 40 states. Through its electric transmission & distribution, power generation and natural gas distribution businesses, the company serves more than 7 million metered customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas. . . . The company also owns 53.8 percent of the common units representing limited partner interests in Enable Midstream Partners, LP, a publicly traded master limited partnership that owns, operates and develops strategically located natural gas and crude oil infrastructure assets."
On the day of my purchase, a 53.8% interest in Enable Midstream Partners LP (ENBL) was worth about $2.868B.
Enable Midstream Announces Second Quarter 2019 Financial and Operating Results, Increases Quarterly Common Unit Distribution
Texas power demand to hit record highs as heat bakes state- Reuters CNP owns Houston Electric that provides electricity to the Houston and Galveston areas (see page 4 10-K for map of retail service territory)
CNP | CenterPoint Energy Inc. Analyst Estimates (as of 8/9/19)
2019: $1.65
2020: $1.79
P/E at $27.72 price Using $1.79 E.P.S. = 15.49
CNP | CenterPoint Energy Inc. Advanced Charts | MarketWatch: The stock was down slightly at my purchase price compared to the $28.22 close on 8/13/18.
Dividend: Quarterly at $.2875 per share ($1.15 annually)
CenterPoint Energy declares regular common stock dividend of $0.2875
Dividend Yield at $27.61 = 4.17%
Last Ex Dividend Date: 8/14/19 (20 before and 10 after)
Dividend Reinvestment: Yes
Dividend Growth History: Positive but slow
The quarterly rate was at $.1825 ten years ago.
Dividend History | CenterPoint Energy, Inc.,
Recent News-Vectren Acquisition: The negative one year price action is probably mostly related to uncertainties created by CNP's acquisition of Vectren.
CenterPoint Energy and Vectren complete merger ("Under the terms of the merger agreement, which was announced on April 23, 2018, Vectren shareholders will receive $72.00, along with a prorated dividend of $0.41145, in cash for each share of Vectren common stock owned as of the close of business on Feb. 1, 2019.")
Vectren Investor Presentation November 2018
Vectren Earnings Release Q/E 9/30/18 ("Vectren Corporation (NYSE: VVC) is an energy holding company headquartered in Evansville, Ind. Vectren’s energy delivery subsidiaries provide gas and/or electricity to more than 1 million customers in adjoining service territories that cover nearly two-thirds of Indiana and about 20 percent of Ohio, primarily in the west-central area. Vectren’s nonutility subsidiaries and affiliates currently offer energy-related products and services to customers throughout the U.S. through Infrastructure Services and Energy Services.")
Brokerage Reports: PT = 12 month price target
Credit Suisse (8/8/19): Outperform with a $33 PT
Morningstar (8/7/19): 3 stars with a $30 FV
S & P (8/8/19): 5 stars with a $31 PT
Recent Earnings Report: (Q/E 6/30/19)
The company reaffirmed its five year annual EPS growth rate of 5% to 7%.
CenterPoint Energy Reports Second Quarter 2019 Earnings of $0.33 Per Diluted Share; $0.35 Earnings Per Diluted Share on a Guidance Basis, Excluding Certain Impacts Associated With the Vectren Merger
10-Q for the Q/E 6/30/19
2019 Guidance: "EPS range of $1.60 - $1.70, excluding certain impacts associated with the merger"
Current Position: 30 shares
Maximum Position: 100 shares
Purchase Restriction: Small Ball Rule (next purchase will be in the $26.9 to $27.1 range)
CNP First Mortgage Bonds: I own several Centerpoint Energy Houston Electric general mortgage bonds but may sell them due to their price appreciation and low yields.
I currently own the following:
1.85% due 8/1/21 GM
2.25% due 8/1/22 GM
2.4% 9/1/26 GM
B. Bought 10 Dominion (D) at $74.9-Used Commission Free Trade:
Quote: Dominion Energy Inc. (D)
Closing Price Yesterday: D $77.13 +$0.31 +0.40%
SEC Filings
2018 Annual Report SEC Form l 0-K
Dominion is one of the nation's largest producers and transporters of energy with more than $100 billion of assets providing electric generation, transmission and distribution, as well as natural gas storage, transmission, distribution and import/export services." The company has approximately 7.5M customers in 18 states.
Through its subsidiaries Virginia Electric Power and Dominion Energy Gas, it is the dominant power provider in Virginia.
Dominion recently completed its acquisition of SCANA, a larger power provider in South Carolina. Following that acquisition, Dominion's portfolio of assets included 32,000 MW of electric generating capacity, 10,200 miles of transmission lines, 84,800 miles of distribution lines, 15,900 of natural gas transmission, gathering and storage pipelines and 92,000 miles of natural gas transmission. 10-K at page 8
Investor Relations | Dominion Energy
D | Dominion Energy Inc. Analyst Estimates | MarketWatch
E.P.S. Consensus Estimates as of 8/9/19
2019 = $4.18
2020 = $4.39
PE at $74.9 and $4.39 E.P.S. = 17.06 (high IMO)
Projected 2019 to 2020 E.P.S. Growth Rate = 5.02%
10 Year Chart on Date of Purchase (8/9/19):
The price channel starting in late 2013 has mostly been between $65 to $80 with a lot of chop. This stock was a good total return vehicle starting in 2009 through 2014. Since January 2015, the annual average total return has been less than the dividend yield.
Total Annual Average Total Returns:
3/1/2009 to 12/31/14: +23.36%
1/1/2015 to 8/9/19: +3.31%
2/1/2009 to 8/9/19: 14.16%
DRIP Returns Calculator | Dividend Channel
Dividend: Quarterly at $.9175 per share ($3.67 annually)
Dominion Energy Declares Quarterly Dividend of 91.75 Cents ("This is the 366th consecutive dividend that Dominion Energy or its predecessor company has paid holders of common stock.")
Dividend Yield at $74.9 = 4.9%
Next Ex Dividend Date: 9/5/19
SCANA Acquisition: Dominion Energy Combines With SCANA Corporation - Jan 2, 2019
Broker Reports: PT= 12 Month Price Target; FV = Fair Value
Morningstar (8/1/19): 4* with a FV of $84
S & P (7/31/19): 4* with a $80 PT
Credit Suisse: (8/1/19): Raised to Outperform from neutral while lowering PT to $82 from $83
Argus (6/13/19): Buy with a $83 PT
The foregoing reports are available to Schwab brokerage customers.
Last Earnings Report (Q/E 9/30/19):
Operating earnings of $.77 per share and reaffirmed 2019 guidance for operating earnings of $4.05 to $4.4 per share. GAAP earnings were negatively impacted by expenses related to the SCANA integration and a voluntary retirement program.
Third Quarter Guidance: "Dominion Energy expects third quarter operating earnings in the range of $1.00 to $1.20 per share, compared to third-quarter 2018 operating earnings of $1.15 per share. Positive drivers include growth from regulated investment across electric and gas utility programs, O&M control initiatives, and the contribution from the Southeast Energy Group. The company expects negative drivers for the quarter to include the impact of 2018 asset sales, share issuances, timing of farmouts, and a return to normal weather."
Dominion Energy Announces Second-Quarter Earnings - Jul 31, 2019
10-Q for the Q/E 6/30/19
Current Position: 10 Shares
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule
I have been buying and selling Dominion senior unsecured bonds. I am cutting back and will use the proceeds to buy the higher yielding common stock.
1. SMALL BALL-Electric Utility Stocks:
A. Bought 20 CNP at $27.72 and 10 at $27.39-Used Commission Free Trades:
Quote: CenterPoint Energy Inc. (CNP)
CNP | CenterPoint Energy Inc. Analyst Estimates
SEC Filings
2018 Annual Report
Website: Investor Relations | CenterPoint Energy, Inc., ("CenterPoint Energy, Inc. is an energy delivery company with regulated utility businesses in eight states and a competitive energy businesses footprint in nearly 40 states. Through its electric transmission & distribution, power generation and natural gas distribution businesses, the company serves more than 7 million metered customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas. . . . The company also owns 53.8 percent of the common units representing limited partner interests in Enable Midstream Partners, LP, a publicly traded master limited partnership that owns, operates and develops strategically located natural gas and crude oil infrastructure assets."
On the day of my purchase, a 53.8% interest in Enable Midstream Partners LP (ENBL) was worth about $2.868B.
Enable Midstream Announces Second Quarter 2019 Financial and Operating Results, Increases Quarterly Common Unit Distribution
Texas power demand to hit record highs as heat bakes state- Reuters CNP owns Houston Electric that provides electricity to the Houston and Galveston areas (see page 4 10-K for map of retail service territory)
CNP | CenterPoint Energy Inc. Analyst Estimates (as of 8/9/19)
2019: $1.65
2020: $1.79
P/E at $27.72 price Using $1.79 E.P.S. = 15.49
CNP | CenterPoint Energy Inc. Advanced Charts | MarketWatch: The stock was down slightly at my purchase price compared to the $28.22 close on 8/13/18.
Dividend: Quarterly at $.2875 per share ($1.15 annually)
CenterPoint Energy declares regular common stock dividend of $0.2875
Dividend Yield at $27.61 = 4.17%
Last Ex Dividend Date: 8/14/19 (20 before and 10 after)
Dividend Reinvestment: Yes
Dividend Growth History: Positive but slow
The quarterly rate was at $.1825 ten years ago.
Dividend History | CenterPoint Energy, Inc.,
Recent News-Vectren Acquisition: The negative one year price action is probably mostly related to uncertainties created by CNP's acquisition of Vectren.
CenterPoint Energy and Vectren complete merger ("Under the terms of the merger agreement, which was announced on April 23, 2018, Vectren shareholders will receive $72.00, along with a prorated dividend of $0.41145, in cash for each share of Vectren common stock owned as of the close of business on Feb. 1, 2019.")
Vectren Investor Presentation November 2018
Vectren Earnings Release Q/E 9/30/18 ("Vectren Corporation (NYSE: VVC) is an energy holding company headquartered in Evansville, Ind. Vectren’s energy delivery subsidiaries provide gas and/or electricity to more than 1 million customers in adjoining service territories that cover nearly two-thirds of Indiana and about 20 percent of Ohio, primarily in the west-central area. Vectren’s nonutility subsidiaries and affiliates currently offer energy-related products and services to customers throughout the U.S. through Infrastructure Services and Energy Services.")
Brokerage Reports: PT = 12 month price target
Credit Suisse (8/8/19): Outperform with a $33 PT
Morningstar (8/7/19): 3 stars with a $30 FV
S & P (8/8/19): 5 stars with a $31 PT
Recent Earnings Report: (Q/E 6/30/19)
The company reaffirmed its five year annual EPS growth rate of 5% to 7%.
CenterPoint Energy Reports Second Quarter 2019 Earnings of $0.33 Per Diluted Share; $0.35 Earnings Per Diluted Share on a Guidance Basis, Excluding Certain Impacts Associated With the Vectren Merger
10-Q for the Q/E 6/30/19
2019 Guidance: "EPS range of $1.60 - $1.70, excluding certain impacts associated with the merger"
Current Position: 30 shares
Maximum Position: 100 shares
Purchase Restriction: Small Ball Rule (next purchase will be in the $26.9 to $27.1 range)
CNP First Mortgage Bonds: I own several Centerpoint Energy Houston Electric general mortgage bonds but may sell them due to their price appreciation and low yields.
I currently own the following:
1.85% due 8/1/21 GM
2.25% due 8/1/22 GM
2.4% 9/1/26 GM
I did recently sell a CNP 2.5% SU bond. Item # 3.A. (7/31/19 Post)
The CNP common shares give me a higher current yield plus dividend growth. I am gradually replacing some bonds that I have sold with higher yield common stocks from the same issuers.
The CNP common shares give me a higher current yield plus dividend growth. I am gradually replacing some bonds that I have sold with higher yield common stocks from the same issuers.
B. Bought 10 Dominion (D) at $74.9-Used Commission Free Trade:
Quote: Dominion Energy Inc. (D)
Closing Price Yesterday: D $77.13 +$0.31 +0.40%
SEC Filings
2018 Annual Report SEC Form l 0-K
Dominion is one of the nation's largest producers and transporters of energy with more than $100 billion of assets providing electric generation, transmission and distribution, as well as natural gas storage, transmission, distribution and import/export services." The company has approximately 7.5M customers in 18 states.
Through its subsidiaries Virginia Electric Power and Dominion Energy Gas, it is the dominant power provider in Virginia.
Dominion recently completed its acquisition of SCANA, a larger power provider in South Carolina. Following that acquisition, Dominion's portfolio of assets included 32,000 MW of electric generating capacity, 10,200 miles of transmission lines, 84,800 miles of distribution lines, 15,900 of natural gas transmission, gathering and storage pipelines and 92,000 miles of natural gas transmission. 10-K at page 8
Investor Relations | Dominion Energy
D | Dominion Energy Inc. Analyst Estimates | MarketWatch
E.P.S. Consensus Estimates as of 8/9/19
2019 = $4.18
2020 = $4.39
PE at $74.9 and $4.39 E.P.S. = 17.06 (high IMO)
Projected 2019 to 2020 E.P.S. Growth Rate = 5.02%
10 Year Chart on Date of Purchase (8/9/19):
The price channel starting in late 2013 has mostly been between $65 to $80 with a lot of chop. This stock was a good total return vehicle starting in 2009 through 2014. Since January 2015, the annual average total return has been less than the dividend yield.
Total Annual Average Total Returns:
3/1/2009 to 12/31/14: +23.36%
1/1/2015 to 8/9/19: +3.31%
2/1/2009 to 8/9/19: 14.16%
DRIP Returns Calculator | Dividend Channel
Dividend: Quarterly at $.9175 per share ($3.67 annually)
Dominion Energy Declares Quarterly Dividend of 91.75 Cents ("This is the 366th consecutive dividend that Dominion Energy or its predecessor company has paid holders of common stock.")
Dividend Yield at $74.9 = 4.9%
Next Ex Dividend Date: 9/5/19
SCANA Acquisition: Dominion Energy Combines With SCANA Corporation - Jan 2, 2019
Broker Reports: PT= 12 Month Price Target; FV = Fair Value
Morningstar (8/1/19): 4* with a FV of $84
S & P (7/31/19): 4* with a $80 PT
Credit Suisse: (8/1/19): Raised to Outperform from neutral while lowering PT to $82 from $83
Argus (6/13/19): Buy with a $83 PT
The foregoing reports are available to Schwab brokerage customers.
Last Earnings Report (Q/E 9/30/19):
Operating earnings of $.77 per share and reaffirmed 2019 guidance for operating earnings of $4.05 to $4.4 per share. GAAP earnings were negatively impacted by expenses related to the SCANA integration and a voluntary retirement program.
Third Quarter Guidance: "Dominion Energy expects third quarter operating earnings in the range of $1.00 to $1.20 per share, compared to third-quarter 2018 operating earnings of $1.15 per share. Positive drivers include growth from regulated investment across electric and gas utility programs, O&M control initiatives, and the contribution from the Southeast Energy Group. The company expects negative drivers for the quarter to include the impact of 2018 asset sales, share issuances, timing of farmouts, and a return to normal weather."
10-Q for the Q/E 6/30/19
Current Position: 10 Shares
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule
I have been buying and selling Dominion senior unsecured bonds. I am cutting back and will use the proceeds to buy the higher yielding common stock.
2. Intermediate Term Bond Ladder Basket Strategy:
A. Sold 1 Federal Realty 2.75% SU Maturing on 6/1/23:
Profit Snapshot: $23.63
Item # 1.E. Bought 1 FRT 2023 at a TC of 96.845 (4/1/17 Post)
FINRA Page: Bond Detail
Issuer: Federal Realty Investment Trust (FRT)
Sold at 100.522
YTM at 100.522 = 2.598%
A. Sold 1 Federal Realty 2.75% SU Maturing on 6/1/23:
Profit Snapshot: $23.63
FINRA Page: Bond Detail
Issuer: Federal Realty Investment Trust (FRT)
Sold at 100.522
YTM at 100.522 = 2.598%
I currently own other FRT bonds, including the following owned in a Vanguard Roth IRA account:
B. Sold 2 Digital Realty LP 2.75% SU Maturing on 2/1/23:
Profit Snapshot: +$43.02
Item # 1.A. Bought 2 Digital Realty L.P. 2.75% SU Bonds Maturing 2/1/23 at a TC of 97.849 (4/14/19 Post) I mentioned in that post that I would consider selling this bond in the 99 to 100 range.
FINRA Page: Bond Detail
Issuer: Operating entity for Digital Realty Trust Inc. (DLR) who guarantees the notes
Sold at 100.1
YTM at 100.1 = 2.72%
Proceeds at 100 (after $2 brokerage commission)
3. Early Issuer Redemption:
A. Early Optional Redemption: 5 FEDEX 2.3% SU Maturing on 2/1/2020:
Profit Snapshots: $20.82
3 bonds were bought earlier this year: Item # 2.A. Bought 3 FDX 2.3% SU Maturing on 2/1/20 at a TC of 99.598 per bond (3/20/19 Post)
The 2 bond lot was bought in 2018: Item # 3.H. (2/8/18 Post)
There was a small make whole payment of $1.28 per bond. The short maturities will have small realized gains per bond since purchases are generally made near par value and will not go too far over par value when rates are plummeting due to the short maturity.
B. Sold 2 Digital Realty LP 2.75% SU Maturing on 2/1/23:
Profit Snapshot: +$43.02
Item # 1.A. Bought 2 Digital Realty L.P. 2.75% SU Bonds Maturing 2/1/23 at a TC of 97.849 (4/14/19 Post) I mentioned in that post that I would consider selling this bond in the 99 to 100 range.
FINRA Page: Bond Detail
Issuer: Operating entity for Digital Realty Trust Inc. (DLR) who guarantees the notes
Sold at 100.1
YTM at 100.1 = 2.72%
Proceeds at 100 (after $2 brokerage commission)
3. Early Issuer Redemption:
A. Early Optional Redemption: 5 FEDEX 2.3% SU Maturing on 2/1/2020:
Profit Snapshots: $20.82
3 bonds were bought earlier this year: Item # 2.A. Bought 3 FDX 2.3% SU Maturing on 2/1/20 at a TC of 99.598 per bond (3/20/19 Post)
The 2 bond lot was bought in 2018: Item # 3.H. (2/8/18 Post)
There was a small make whole payment of $1.28 per bond. The short maturities will have small realized gains per bond since purchases are generally made near par value and will not go too far over par value when rates are plummeting due to the short maturity.
4. Short Term Bond/CD Ladder Basket Strategy:
September 2019 Maturities:
SU = Senior Unsecured Bond ($1K par value per bond)
FM = First Mortgage Bond
CD = Certificate of Deposit ($1K par value per CD)-FDIC Insured
MI = Monthly Interest Payments
Treasury: U.S. Treasury Debt ($1K par value per bill, note or bond)
IR: Investment Rate for Treasury Bills Bought at Auction
RI: Roth IRA
Secondary Market: Treasuries Bought at less than par value
Corporate bonds are bought at less than par value.
RI: Roth IRA
Secondary Market: Treasuries Bought at less than par value
Corporate bonds are bought at less than par value.
2 Ryder Systems 2.45% SU 9/3 (bought 9/18 and 11/18)
5 Treasury 2.198% IR 56 Day 9/3 (bought at auction)
3 Treasury 6 MO Bills 2.532% 9/5 IR ( bought at auction)
5 Treasury 2.198% IR 56 Day 9/3 (bought at auction)
3 Treasury 6 MO Bills 2.532% 9/5 IR ( bought at auction)
2 Lake City BK 1.7% CDs MI 9/9 (1 Year CD)
2 Marsh & McClennan 2.35% SU (bought 12/18)
2 Marsh & McClennan 2.35% SU (bought 12/18)
1 BK of NY 2.3% SU 9/11 (bought 11/18)
1 Treasury 1 YR Bill 2.547% IR 9/11
1 Treasury .75% 9/15 (secondary Market)
1 Treasury .75% 9/15 (secondary Market)
3 Nextera 2.4% SU 9/15 (bought 2/18 and 11/18)
2 Nextera 2.7% SU 9/15 (bought 4/18 and 6/18)
2 Customer's BK 2.4% CDs 9/16 RI (3 month CDs)
2 Customer's BK 2.4% CDs 9/16 RI (3 month CDs)
2 Wells Fargo 2.45% CD MI 9/16 (13 month CD)
10 Treasury 28 Day Bill 2.077% IR 9/17 (bought at auction)
10 Treasury 28 Day Bill 2.077% IR 9/17 (bought at auction)
2 AstraZeneca 1.95% SU 9/18 (bought 12/17)
1 Treasury 2.441% YTM 9/19 (secondary market purchase)
2 Bank of China 2.4% CDs 9/19 (3 month CDs)
1 Treasury 2.441% YTM 9/19 (secondary market purchase)
2 Bank of China 2.4% CDs 9/19 (3 month CDs)
1 BP Capital 1.768% SU 9/19 (bought 12/17)
4 Discovery Com. 2.2% SU (bought 1/18 and 2/19)
2 Cornerstone BK 1.7% CDs MI 9/20 (2 year CDs)
3 Bank of East Asia 2.35% CDs 9/23 (3 month CDs)
10 Treasury 28 day Bills 2.098%IR 9/24 (bought at auction)
2 State Bank of India 2.4% CDs 9/26 (3 month CDs)
2 Santander Bank 2.35% CDs 9/26 (3 month CDs)
3 Bank of East Asia 2.35% CDs 9/23 (3 month CDs)
10 Treasury 28 day Bills 2.098%IR 9/24 (bought at auction)
2 State Bank of India 2.4% CDs 9/26 (3 month CDs)
2 Santander Bank 2.35% CDs 9/26 (3 month CDs)
2 NETAPP 2% SU 9/27 (bought 6/18)
2 Kroger 1.5% SU 9/30 (bought 3/17)
2 Wells Fargo 2.45% CDs MI 9/30 (13 month CDs)
6 Treasury 1.75% Coupon 9/30 (secondary market)
1 Treasury 1.375% Coupon 9/30 (secondary market)
1 Treasury 1% Coupon 9/30 (secondary market)
1 Treasury 1% Coupon 9/30 (secondary market)
$79K
A. Sold 2 Kraft Heinz 2.8% SU Maturing on 7/2/20:
Profit Snapshot: +$6.34
Stocks, Bonds & Politics:Item # 3.A. Bought 2 KHC 2020 at a TC of 99.833 (5/8/19 Post)
FINRA Page: Bond Detail
Issuer: Kraft Heinz Co. (KHC)
KHC Analyst Estimates
Sold at 100.3
Proceeds at 100.2
YTM at 100.2 = 2.545%
While I am not currently concerned about Kraft filing for bankruptcy anytime soon, I also do not see any good reason to hang around either. The common stock has become toxic.
B. Bought 5 Treasury Three Month Bills Maturing on 11/21/19 at Action:
1.941%IR
Auction Results:
Schwab's sweep account interest rate is currently at .18%.
C. Bought 10 Treasury 28 day Bills at Auction Maturing 9/24:
IR = 2.098%
Auction Results:
5. Small Ball Commission Free ETFs:
I would just refer anyone interested to my prior discussions of these ETFs.
The international ETFs discussed below have substantially underperformed the S & P 500 over the past 1, 3, 5 and 10 year periods.
E.G. Compare as of 8/2619
Vanguard FTSE All-Wld ex-US ETF (VEU)
with S&P 500 ETF (SPY)
Performance numbers after one year are annual average total returns.
The past may not be prologue but the overall poor performance of the international ETFs will cause me to be exceedingly cautious in buying them.
A. Bought 2 VEU at $48.75 and 2 at $48.34-Commission Free For Vanguard Customers:
Quote: Vanguard FTSE All-World ex-US ETF Overview
Sponsor's Website: VEU - Vanguard FTSE All-World ex-US ETF
Expense Ratio: .09% (3,117 stocks as of 6/30/19)
Last Buy Discussions: Item # 5.C. Bought 3 VEU at $49.62 (5/18/19 Post); Item # 4.C. Bought 10 VEU at $51.75 (5/5/19 Post)
Last Elimination: Eliminated VEU at 50.39 (4/15/19 Post)(profit snapshot = $52.73)
Other Eliminations = +$1,614.39 (snapshots in Item # 2) The largest single gain was a 100 share lot sold in 2010:
Item # 2 Sold 100 of the ETF VEU at 38.6 (6/10/2010 Post)
Total VEU Realized Gains to Date: $1,667.12
International stock ETFs have substantially underperformed the S & P 500 index since I sold VEU on 6/9/2010.
The annual average total return for VEU starting on 6/9/2010 through 8/12/19 was 5.9% compared to 13.95% for SPY.
DRIP Returns Calculator | Dividend Channel
Profit Snapshot: +$6.34
Stocks, Bonds & Politics:Item # 3.A. Bought 2 KHC 2020 at a TC of 99.833 (5/8/19 Post)
FINRA Page: Bond Detail
Issuer: Kraft Heinz Co. (KHC)
KHC Analyst Estimates
Sold at 100.3
Proceeds at 100.2
YTM at 100.2 = 2.545%
While I am not currently concerned about Kraft filing for bankruptcy anytime soon, I also do not see any good reason to hang around either. The common stock has become toxic.
B. Bought 5 Treasury Three Month Bills Maturing on 11/21/19 at Action:
1.941%IR
Schwab's sweep account interest rate is currently at .18%.
C. Bought 10 Treasury 28 day Bills at Auction Maturing 9/24:
IR = 2.098%
Auction Results:
5. Small Ball Commission Free ETFs:
I would just refer anyone interested to my prior discussions of these ETFs.
The international ETFs discussed below have substantially underperformed the S & P 500 over the past 1, 3, 5 and 10 year periods.
E.G. Compare as of 8/2619
Vanguard FTSE All-Wld ex-US ETF (VEU)
with S&P 500 ETF (SPY)
Performance numbers after one year are annual average total returns.
The past may not be prologue but the overall poor performance of the international ETFs will cause me to be exceedingly cautious in buying them.
A. Bought 2 VEU at $48.75 and 2 at $48.34-Commission Free For Vanguard Customers:
Sponsor's Website: VEU - Vanguard FTSE All-World ex-US ETF
Expense Ratio: .09% (3,117 stocks as of 6/30/19)
Last Buy Discussions: Item # 5.C. Bought 3 VEU at $49.62 (5/18/19 Post); Item # 4.C. Bought 10 VEU at $51.75 (5/5/19 Post)
Last Elimination: Eliminated VEU at 50.39 (4/15/19 Post)(profit snapshot = $52.73)
Other Eliminations = +$1,614.39 (snapshots in Item # 2) The largest single gain was a 100 share lot sold in 2010:
 |
| +$862.98 |
Total VEU Realized Gains to Date: $1,667.12
International stock ETFs have substantially underperformed the S & P 500 index since I sold VEU on 6/9/2010.
The annual average total return for VEU starting on 6/9/2010 through 8/12/19 was 5.9% compared to 13.95% for SPY.
DRIP Returns Calculator | Dividend Channel
Current Position: 17 shares
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule at a snail's pace
B. Bought 3 IEMG at $47.37-Commission Free for Fidelity Customers:
Quote: iShares Core MSCI Emerging Markets ETF
Quote: iShares Core MSCI Emerging Markets ETF
Last Discussions: Item # 4.B. (6/8/19 Post); Item # 3.A. (4/7/19 Post)
Expense Ratio: .14%
Sponsor's Website: iShares Core MSCI Emerging Markets ETF
Morningstar Page: iShares Core MSCI Emerging Markets ETF ETF (IEMG)
Current Position: 15 shares
Maximum Position: 50 Shares
Average Cost Per Share: $50.08
Purchase Restriction: Small Ball Rule at a snail's pace
Expense Ratio: .14%
Sponsor's Website: iShares Core MSCI Emerging Markets ETF
Morningstar Page: iShares Core MSCI Emerging Markets ETF ETF (IEMG)
Current Position: 15 shares
Maximum Position: 50 Shares
Average Cost Per Share: $50.08
Purchase Restriction: Small Ball Rule at a snail's pace
C. Bought 5 NORW at $10.84-Commission Free for Vanguard Customers:
Quote: Global X MSCI Norway ETF Overview
Last Discussions: Item # 3.A. (1/27/19 Post); Item # 5.A. (12/23/18 Post) (started small ball program too early in retrospect based on the price decline since my first purchases)
Sponsor's Website: MSCI Norway ETF
Expense Ratio: .5% (while I view that number as high, it is normal for foreign country specific ETFs)
Current Position: 110+ shares
Maximum Position: 200 shares
D. Bought 2 IEUR at $43.15-Commission Free for Fidelity Customers:
Quote: iShares Core MSCI Europe ETF Overview
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Last Discussions: Item # 1.B.(6/2/19 Post); Item # 5.A. (5/22/19 Post)
Last Discussions: Item # 3.A. (1/27/19 Post); Item # 5.A. (12/23/18 Post) (started small ball program too early in retrospect based on the price decline since my first purchases)
Sponsor's Website: MSCI Norway ETF
Expense Ratio: .5% (while I view that number as high, it is normal for foreign country specific ETFs)
Current Position: 110+ shares
Maximum Position: 200 shares
D. Bought 2 IEUR at $43.15-Commission Free for Fidelity Customers:
Quote: iShares Core MSCI Europe ETF Overview
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Last Discussions: Item # 1.B.(6/2/19 Post); Item # 5.A. (5/22/19 Post)
Current Position: 14 shares
Average Cost Per Share: $45.56
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule at a snail's pace
E. Sold 5 GLTR at $73.67 (Commission free for Vanguard brokerage customers):
Quote: Aberdeen Standard Physical Precious Metals Basket Shares ETF Overview
Profit Snapshot: $29.09
Item # 2.A. Bought 5 GLTR at $67.85 (7/10/19 Post)
Average Cost Per Share: $45.56
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule at a snail's pace
E. Sold 5 GLTR at $73.67 (Commission free for Vanguard brokerage customers):
Profit Snapshot: $29.09
Item # 2.A. Bought 5 GLTR at $67.85 (7/10/19 Post)
Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.
Personally I think if this country has humph, everyone would have blocked Trump when he first started using tweeter for official business. Only his followers would have been left. He would have been stopped flat from much of his chaos & misleading communication. He couldn't get away with doing the same thing via 280 char comments on the WH lawn every day.
ReplyDeleteI've tried to convince tweeter people, but it's not a popular fight. By now it doesn't matter.
Unlike HK, S.Korea, and other places, Americans are complacent... even when this upset with the government. Only the extremes make any noise and then it's a lot of irrational noise.
Why is the 3mo/10y so inverted for so long but the 2y/10y isn't very inverted? That said, it's in deeper than it was on the day of panic about it... and it's no longer news.
Trying to figure out if this signal still matters. Rates are low, so it's easy to invert. They are low because even with good earnings, and low unemployment, the economy still is so-so, isn't it? So any fall is starting closer to the ground to begin with. That should make it easier, not harder, to fall into a recession?
Don't think it matters too much if all individual twitter followers blocked trump. The media would still pickup his tweets and broadcast the insanity because it's ratings gold.
DeleteThe Trumpsters have been conditioned over the past five decades to ignore media outlets that provide accurate information.
DeleteThe purpose of this effort is purely political and related to acquiring and maintaining power.
The end result, which has already succeeded, is to create a very large base of GOP supporters who are not capable of being persuaded by facts.
Donald is clearly using his tweeter account to further his objectives as President; and his account is properly characterized as an "official" government account.
Consequently, as the Courts have held, his efforts to block comments is a violation of the free speech clause of the First Amendment.
https://www.theverge.com/2019/7/9/20687521/donald-trump-president-twitter-blocking-appeals-ruling
https://thehill.com/opinion/white-house/453134-trump-cant-block-twitter-users-but-he-can-still-use-it-for-divisive-rhetoric
The most salient point about his effort to block commenters who disagree with him is that he is even trying to control speech as President who swore an oath to uphold the constitution which includes the right to speak. This goes to Trump's strong authoritarian and anti-democratic core.
Donald's effort to control speech in his twitter account, is simply an extension of the overall GOP effort, starting with the Nixon-Agnew administration, to devalue accurate information and to cause their tribe members to turn away from all media outlets that contradict their reality creations with facts.
Some Trumpsters might even read some comments, many of which are informative, and then discover that facts are being cited with good references that contradict Trump's frequent demonstrably false statements.
Some may even start to doubt that Donald is honest, telling it"like it is" which is a delusional belief shared by Trumpsters in general, and is instead trying to take advantage of them and to manipulate them in obvious ways with knowingly false information.
I do not believe than most Trumpsters are reachable with accurate information, probably over 90%, though some of them, who studiously ignore mainstream media, may actually come into contact with facts in those comments that contradict Trump's assertions and start to doubt Trump's honesty and even whether he is a good role model for their children.
The Stock Jocks are still in buy the dip mode, no matter how small, and that strategy has worked for them over the past decade.
ReplyDeleteS&P 500 Index
2,885.04 +15.88 +0.55%
Last Updated: Aug 28, 2019 at 12:26 p.m. EDT
So they will probably need to have their stock passion drenched in ice cold water for weeks with someone slapping them before changing that approach.
Until there is incontrovertible evidence of a recession in progress, I doubt this approach will change much.
When buying the dip only results in more losses as unrealized gains turn into losses, then the stock herd may stampede in the other direction, contributing to panic selling rather than buying the dip. It will most likely IMO take major shocks to stock portfolios, which are persistent over time, to cool their ardor.
The fact that bond yields have become super unattractive for anyone interested in real returns after taxes is fueling stock buying for now.
I understand that dynamic since that is what I am doing: selling bonds and using some of the proceeds to buy dividend growth stocks with higher yields.
My buying is tepid at current stock market price levels and I am using my small ball purchase restriction.
I currently have 59 common stocks and 28 ETFs that I can buy commission free in my small ball "buying program".
About all that I can at the moment is that all of those securities could go to zero today and I would barely be nicked given the total amount invested in all of them so far as a percentage of my total at risk portfolio. With a major stock market decline, I will likely move from paper cut exposure to some material amount.
Why did you put recession as within a year now?
ReplyDeleteThe big "different" item is technology contraction.
Land: The FED uses the 3 month and 10 year treasuries since the inversion of those yields have been a better predictor of a recession than the 2 year/10 year.
Deletehttps://www.reuters.com/article/us-usa-economy-yieldcurve-explainer/explainer-countdown-to-recession-what-an-inverted-yield-curve-means-idUSKCN1V320S
The FED's model predicts probabilities within 12 months.
The 3 month/10 year started to invert last May (the first inversion occurred on 5/23 and has continued since then):
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2019
I am adding about 3 months to the FED's 12 month period given the current strength of the U.S. economy which will take IMO longer to dissipate given the huge amount of existing monetary and fiscal stimulus and the still favorable jobs market.
The problem with the yield curve models now as a reliable predictor is the extremely abnormal central bank policies in developed countries for 11 years with no end in sight.
The FED uses 3 month 10 year, but the market focuses on 2-year 10 year. So even though the one is better the second one makes sense to talk about in terms of market reacting... From what I can tell about how the market keeps bouncing based on that one.
DeleteSo it's been over a year since the first inversion. So all the articles that talk about it being a while from when inversion happens... Are ignoring that it's already been a while.
For that idea of range when recessions going to happen... I'm going to have to go back up and read... I can't see them while I'm writing in this box.
But you're adding three months for strength to the time frame. I think the exuberance is still quite high. this market is rallying on days when it's not as bad as we thought it was going to be... Rather than just on good news.
Land: The 3 month and 10 year yield started to invert in May 2019.
DeleteThe government's second revised GDP report for the second quarter, released earlier today, revised the first estimate of 2.1% down to 2%. I view that as okay but there were several weak spots in the report. Consumer spending surged in the quarter compared to the first which caused the real GDP growth rate to hold at 2%.
As to China, we will know more when and if the U.S. proceeds with the new tariffs on Sunday and whether or not China immediately responds or withholds its fire.
I would see no reason why China would delay its retaliation unless Donald backs down on some key demands.
If both China and the U.S. impose new tariffs on 9/1 and thereafter the D.C. high level meeting is called off, then today's euphoria will be completely undermined by those developments. So we are in a wait and see mode.
I will probably not buy any stocks or stock ETFs today, but continued selling corporate bonds earlier today. I am now about 6 weeks behind in discussing the bond sells.
"May 2019" for 3mo/10yr. I read "last May" and went to 2018. A bit off...
DeleteDid I wrote already -- I wonder if banks are paying for money to be held, because of security costs to hold it themselves?
Also aren't banks under law required to use their local Feds?
"Based on past history, the yield curve inversion is clearly signaling IMO that a recession will arrive within 12 months"
DeleteThat was the 12 months that I was unclear about. What is the past history that indicates a recession is arriving within 12 months with this inversion?
The articles talk about 22 months, not 12 months. That's where I got lost.
(However, my own backchecking on the last 3 showed first 2 were shorter & even pretty immediate once the 30mo spread got big & stayed that way.)
As you said, the unusual situation makes it harder to know what the signal means.
So what is the cause for so many lenders paying borrowers a fee to hold their money. Forget about interest payments on borrowed money.
ReplyDeleteThe Stock Jocks view the rapidly growing pile of negative nominal yield debt, measured in trillions of dollars, as a positive since it makes stocks the only game in town.
The only rational explanation is that there are a large number of investors who are really worried about another disaster scenario where trillions of dollars are incinerated into worthless ashes.
https://www.cnbc.com/2019/08/28/bond-yields-still-heading-lower-as-market-fears-disaster-scenario.html
We do know that there is no pre-2008 parallel for what is happening with interest rates throughout the developed world. It is just far beyond weird that lenders are paying borrowers.
The 10 year government bonds issued by Austria, Denmark, Finland, Germany, Japan, Netherlands, Sweden, and Switzerland are in negative yield territory. Spain's 10 year bond is at .05% (the 9 year is in negative yield territory).
https://www.investing.com/rates-bonds/world-government-bonds
S&P 500 Index 2,917.65 +29.71 +1.03%
ReplyDeleteLast Updated: Aug 29, 2019 at 10:36 a.m. EDT
https://www.marketwatch.com/investing/index/spx
I suspect that the Stock Jocks are overreacting to the comments made earlier today by Gao Feng, spokesman for China’s Ministry of Commerce.
Feng reiterated what China's Vice Chairman said last Monday that China hopes for a "calm attitude". When I read that statement, I do not interpret it as a softening of China's position, as Donald claimed today, but as a direct criticism of Trump's harsh rhetoric and escalation of the tariff war.
Feng would not even confirm that the high level talks in D.C. would proceed but only that the matter was being discussed.
FENG did not explicitly say that China would not retaliate when the U.S. imposed higher tariffs next Sunday. I interpret what he said, in context, as being a request that Donald refrain from that escalation. If the additional tariffs go into effect on 9/1, it should surprise no one that the D.C. meeting will not happen and China retaliates.
This is interesting.
DeleteThe market's not going high enough for me to justify selling what I bought at the bottom of the current trading range.
But your description of what was actually said versus how it's being interpreted today... Would mean that there's likely another slide coming without a chance for much more climbing first.
In December there was also a three-time trading range followed by a large slide.
I think trading rages usually break out to the upside... When I get a chance I want to look at that. From what I've read it can go either way. There's no technical indicators that I'll go one way or the other as a trading range ends.
Twitter Jack should be incredibly rich. All he needs is a program that in the split second between when Trump tweets and when it posts, he buy some stock based on the tweets keywords.
I did participate in today's 28 and 56 day treasury bill auctions.
ReplyDelete28 day at 2.098% IR 10K
56 day at 2.029% IR 3K
Those yields are higher than my sweep account rates at Fidelity and Schwab and the interest is free of state income taxes.
While I make everyday small wagers about future outcomes, and it remains to be seen how many will pay off, I thought that I would explain the rationale for selling some short term bonds into the bond rally.
Earlier this morning, I sold 2 EBAY 2.875% SU bonds maturing on 8/1/21 at 101.4 ($2,028 in principal amount -$2 commission = $2,026 in proceeds plus accrued interest paid by the buyer)
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C614651&symbol=EBAY4147288
The YTM at that price is 2.054% or less than the investment rate of the 28 day treasury bill auctioned today.
I received a $26 payment in excess of par value after the brokerage commission plus accrued interest of $5.11 paid by the buyer.
If I held that bond to maturity, I would lose the $26 since the bond would be redeemed at par value.
Currently, I am not giving up some current interest compared to what I would receive by buying short term treasury bills. The current yield of the EBAY 2021 SU is 2.835% at 101.4.
I used the proceeds to buy 100 DPG at $15.29, using a commission free trade, which was unchanged from yesterday's close in spite of today's advance in major indexes.
That stock CEF last traded at $15.25 as of 12:43PM EDT.:
Duff & Phelps Global Utility Income Fund Inc.
https://finance.yahoo.com/quote/DPG?p=DPG
CEFConnect Page:
https://www.cefconnect.com/fund/DPG
The quarterly dividend, which has been significantly supported by ROC, is $.35 per share or $1.4 annually. The yield at a TC of $15.29 is about 9.15% with the next ex dividend date next month.
I last discussed a purchase at $12.87.
Item # 5 Added 50 DPG at $12.87 in Roth IRA:
Wednesday, January 9, 2019
https://tennesseeindependent.blogspot.com/2019/01/observations-and-sample-of-recent_9.html
The fund has substantially underperformed SPX over the past several years for the reasons discussed in that post. The problem is not the electric and gas utilities or phone company stocks, but the large allocation to energy infrastructure stocks that have been in a major bear mode since the 2014 summer. Maybe that will change, maybe not.
Since the 2 EBAY bonds would pay $57.5 in annual interest payments, I will come out ahead owning 100 DPG paying $140 in dividends, assuming no cut, even with a slight loss in the shares.
Without DPG's dividend, a sell at $16 would net me $71 or $13.5 more than the annual EBAY interest payment.
And this exchange took off the table $1,497 in risk exposure, the difference between the principal amount received by selling the 2 EBAY 2021 bonds and the amount paid for 100 DPG. That 1,497 would then earn the Fidelity Government MM rate until redeployed.
While the amounts are small, this kind of rejiggering is occurring with a substantial number of bonds.
Last January, I bought the 2 EBAY 2021 SU bonds at a TC of 99.233. The YTM then was at 3.196%.
Saturday, February 9, 2019
Item # 2.B.
https://tennesseeindependent.blogspot.com/2019/02/observations-and-sample-of-recent_9.html
The risk in this kind of swamp is that the EBAY bond will make those interest payments at a sum certain and pay off the $2000 principal amount in 2021, while DPG may cut the dividend or lose so much in price that the EBAY bond proves to be better.
Correct Brain Malfunction Calculation: I took off the table $497 rather than $1,497.
DeleteI try to exercise my brain mush everyday by playing spider solitaire on my Microsoft computer, using ten decks, 8 cards in each deck and at the"Master" difficulty level. I figure that I am still compos mentis as long as 30% of the games can be completed in less than 5 minutes.
South Gent,
ReplyDeleteAEG hit 52-week low at $3.73 on 8/28/2019, yielding 8.9%.
Citigroup has a "Hold" rating, BOA "Neutral", and Morningstar a "5 Buy" rating.
AEG does not seem to be in any trouble, judging from its bond prices. Is it just the market? I took an initial position today.
Y: I successfully traded AEG until my last purchase which was discussed in a post here.
DeleteI do not believe AEG is in financial trouble.
However, as with any insurance company that has sold fixed income annuities at guaranteed rates, the current yields and yield inversion causes problems.
In the last quarter, AEG reported "fair value losses of EUR 394 million, driven by a strengthening of insurance provisions in the Netherlands as a result of adverse credit spread movements". That was partially offset "realized gains on investments of EUR 275 million, driven by the sale of bonds to optimize the investment portfolio in the Netherlands"
https://www.businesswire.com/news/home/20190814005816/en/
I do not recall whether the "fair value" adjustment is a cash or non-cash charge.
There were also net outflows of retirement plan assets and a 4% decline in life insurance sales.
The market reacted negatively to this report but the price has stabilized near $3.75 for now.
The USD priced ADR will reflect the conversion rate of the Euro priced ordinary shares into USDs. Over the past three months, the USD/EURO rate has moved from around .88 to .91. That rise in the USDs value will cause the ADR to underperform the Euro priced ordinary shares which are also going down, creating the infamous Double Whammy for the ADR owners.
The stock just went ex dividend on 8/23 for its semi-annual dividend payment. Over the past year, AEG is down about 38% while the Amsterdam shares priced in Euros are down about 34%. The difference reflects the decline in the Euro against the USD.
Another issue inherent in life insurance companies is that premiums received from life insurance policies have to be invested in lower yielding investments. While the insurance company can sell vintage bonds for a profit, the lower yields will result in less investment income generated by bonds and other fixed income investments.
At the moment, I would call AEG's stock hated for the reasons mentioned above, particularly its total return over the past year.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/09/observations-and-sample-of-recent.html