Economy:
Isn't it nice to have a calm and rational President, who delves deeply into real facts everyday, before reaching a non-emotional and fact-based decision on major matters impacting the country. Trump wanted to double China trade tariffs after latest retaliation China's retaliation was very mild. What really incensed the Duck is that China was not bending to his will.
The ISM manufacturing PMI went into contraction territory last month. New orders, a leading indicator, declined 3.6 points to 47.2%. ISM Report - August 2019 Manufacturing The Stock Jocks barely reacted to this negative report. Yesterday's SPX decline of -.69% could easily have occurred on a no news day.
Fed’s Rosengren: ‘Headline grabbing’ market swings this summer obscure fact that economy remains ‘relatively benign’ - MarketWatch If you took a snapshot of the economy today, "relatively benign" would be a fair summary, but that does not mean the economy will stay that way for long.
The key remains consumer spending.
Isn't it nice to have a calm and rational President, who delves deeply into real facts everyday, before reaching a non-emotional and fact-based decision on major matters impacting the country. Trump wanted to double China trade tariffs after latest retaliation China's retaliation was very mild. What really incensed the Duck is that China was not bending to his will.
The ISM manufacturing PMI went into contraction territory last month. New orders, a leading indicator, declined 3.6 points to 47.2%. ISM Report - August 2019 Manufacturing The Stock Jocks barely reacted to this negative report. Yesterday's SPX decline of -.69% could easily have occurred on a no news day.
Fed’s Rosengren: ‘Headline grabbing’ market swings this summer obscure fact that economy remains ‘relatively benign’ - MarketWatch If you took a snapshot of the economy today, "relatively benign" would be a fair summary, but that does not mean the economy will stay that way for long.
The key remains consumer spending.
China trade war drags consumer sentiment down to the lowest level in four years - MarketWatch
Table: United States Consumer Sentiment | 2019
The onset of a recession requires more than consumers expressing caution about the future when answering survey questions, even if the survey roughly captures the actual consumer sentiment nationwide based on a sampling.
A downturn in consumer confidence still has to translate into a significant decline in consumer spending which has not occurred-yet.
Another factor that may impact consumer spending in the aggregate is simply that a long period of increased spending reaches a satiation level.
The new car, appliances and other products have already been bought due to the longevity of an economic expansion. In those circumstances, which are now present, a reversal in a positive consumer confidence trend could then contribute to a decline in consumer spending that results in a significant slowdown in the U.S. economy.
Other events can contribute now to the onset of a recession including a significant decline in the stock market (20+%) that does not bounce back within 12 months or so, a persistent trade war that raises prices and curtails U.S. exports, a hard Brexit, a recession in Europe (possibly developing now), and new trade wars launched by Trump against Europe, Mexico and/or Canada. Many of those events would negatively impact consumer confidence which could easily lead to less spending.
The GOP's tariff taxes on consumer products and significant decreases in interest income will eat into disposable personal income.
Table: United States Consumer Sentiment | 2019
The onset of a recession requires more than consumers expressing caution about the future when answering survey questions, even if the survey roughly captures the actual consumer sentiment nationwide based on a sampling.
A downturn in consumer confidence still has to translate into a significant decline in consumer spending which has not occurred-yet.
Another factor that may impact consumer spending in the aggregate is simply that a long period of increased spending reaches a satiation level.
The new car, appliances and other products have already been bought due to the longevity of an economic expansion. In those circumstances, which are now present, a reversal in a positive consumer confidence trend could then contribute to a decline in consumer spending that results in a significant slowdown in the U.S. economy.
Other events can contribute now to the onset of a recession including a significant decline in the stock market (20+%) that does not bounce back within 12 months or so, a persistent trade war that raises prices and curtails U.S. exports, a hard Brexit, a recession in Europe (possibly developing now), and new trade wars launched by Trump against Europe, Mexico and/or Canada. Many of those events would negatively impact consumer confidence which could easily lead to less spending.
The GOP's tariff taxes on consumer products and significant decreases in interest income will eat into disposable personal income.
Here's a list of recession signals that are flashing red Among those signals are the the downturn in manufacturing, the yield curve inversions, and the rapid decline in interest rates to Great Depression levels.
This article also refers to the Cass Shipment Index which declined 5.8% in July; 5.3% in June and 6% in May. “We repeat our message from last two months: the shipments index has gone from ‘warning of a potential slowdown’ to ‘signaling an economic contraction,’” according to the July report.
I would not say yet that the Cass Freight Index is flashing a recession warning, but it is starting to move in that direction:
Cass Freight Index: Shipments-St. Louis Fed (peaked in May 2018) I would call this index more of a coincident rather than a leading indicator.
Other signals include the downtrends in cooper's price, business spending, real GDP, and corporate profits and the uptrends in gold's price and the monthly global economic policy uncertainty index.
It's up to Trump to resolve US-China trade war, says Beijing advisor The question is who will blink first. To secure a deal before the election, I view it as probable that Donald will have to cave first on some key demands. Accelerating the tariff war again on 12/15 will simply cause China to resist more. China has been sending that message to the Duck.
This article also refers to the Cass Shipment Index which declined 5.8% in July; 5.3% in June and 6% in May. “We repeat our message from last two months: the shipments index has gone from ‘warning of a potential slowdown’ to ‘signaling an economic contraction,’” according to the July report.
I would not say yet that the Cass Freight Index is flashing a recession warning, but it is starting to move in that direction:
Cass Freight Index: Shipments-St. Louis Fed (peaked in May 2018) I would call this index more of a coincident rather than a leading indicator.
Other signals include the downtrends in cooper's price, business spending, real GDP, and corporate profits and the uptrends in gold's price and the monthly global economic policy uncertainty index.
It's up to Trump to resolve US-China trade war, says Beijing advisor The question is who will blink first. To secure a deal before the election, I view it as probable that Donald will have to cave first on some key demands. Accelerating the tariff war again on 12/15 will simply cause China to resist more. China has been sending that message to the Duck.
++++++
Markets and Market Commentary:
Treasury Yield Curve Rates 9/3/19:
2019 Daily Treasury Yield Curve Rates The 1, 2 and 3 month treasury bills have higher yields than the 30 year treasury bond. I will probably participate in the 56 day T Bill auction tomorrow. Auction
While the Stock Jocks downplayed negative news about the U.S. economy yesterday, the 3.9% gains in the Hang Seng Index, resulting from the government's withdrawal of the extradition bill that triggered protests, is viewed so positively for the U.S. economy that yesterday's insignificant loss is being mostly wiped out in pre-market trading this morning.
It's a 'great time' to buy risk assets: Bank of America Merrill Lynch strategist
What bond bubble? Economist says ‘uncomfortable truth’ is that rally in fixed-income market is justified - MarketWatch
Treasury Yield Curve Rates 9/3/19:
2019 Daily Treasury Yield Curve Rates The 1, 2 and 3 month treasury bills have higher yields than the 30 year treasury bond. I will probably participate in the 56 day T Bill auction tomorrow. Auction
While the Stock Jocks downplayed negative news about the U.S. economy yesterday, the 3.9% gains in the Hang Seng Index, resulting from the government's withdrawal of the extradition bill that triggered protests, is viewed so positively for the U.S. economy that yesterday's insignificant loss is being mostly wiped out in pre-market trading this morning.
It's a 'great time' to buy risk assets: Bank of America Merrill Lynch strategist
What bond bubble? Economist says ‘uncomfortable truth’ is that rally in fixed-income market is justified - MarketWatch
Ray Dalio warns of 'serious problems' from a repeat of the late 1930s-The Three Big Issues and the 1930s Analogue
++++++++
Trump:
I was thinking about Donald labelling any business complaining about the GOP's tariffs as suffering from bad management.
The Duck is an expert on bad management, having bankrupted six businesses that he tried to run, and consequently ought to know about really bad business executives.
But then, that would assume Donald was capable of honest self-reflection or that a serial loser like himself could even recognize competence in business leaders.
Donald does win my century award for having the most chutzpah in claiming business acumen and success in his self promotion book "Art of the Deal" published during the period when he lost a billion or so dollars. NYT Trump taxes report reveals $1 billion in losses over 10 years - Vox; Trump: The Art of the Deal: Donald J. Trump, Tony Schwartz (first edition published on 11/12/1987). Trump is someone deserving of being mocked for his narcissism, bluster, lies, demagoguery, ignorance, constant spewing of bile and venom, and shameless self-promotion.
At least Donald learned from his many failures by constant self promotion that created a brand based on his tremendous success outlined above; where he could license his name and let others take the risks. Donald Trump's Real Secret To Riches: Create A Brand And License It; Donald Trump's Success Story; How Trump has made millions by selling his name - Washington Post; Is Fraud Part of the Trump Organization’s Business Model? | The New Yorker
How a Trump Tax Break to Help Poor Communities Became a Bonanza for the Rich - The New York Times Among the beneficiaries of this GOP tax loophole are several rich associates of Donald. The Trump Associates Benefiting From a Tax Break for Poor Communities - The New York Times
So, when is Donald going to start draining the D.C. swamp? Trump's 2,000 Conflicts of Interest (and Counting) - CREW
AP FACT CHECK: Trump's bluster on hurricanes, guns, economy - ABC News Donald has never heard of category 5 hurricane, even though there have been 4 since he became President including Irma, Maria and Michael. Fortunately for the coastal U.S., Donald is on the job, preparing the U.S. response to Dorian, as he played a few rounds of golf. Trump went golfing as Hurricane Dorian threatens US; What is Trump doing on Labor Day? Monitoring Dorian from golf course And, if Obama had done the same, I wonder what Donald and his cult members would say about that.
Trump Insists His Hurricane Warning Was Right Even After National Weather Service Corrected Him Donald call reports that the NWS corrected him Fake News.
I was thinking about Donald labelling any business complaining about the GOP's tariffs as suffering from bad management.
The Duck is an expert on bad management, having bankrupted six businesses that he tried to run, and consequently ought to know about really bad business executives.
But then, that would assume Donald was capable of honest self-reflection or that a serial loser like himself could even recognize competence in business leaders.
Donald does win my century award for having the most chutzpah in claiming business acumen and success in his self promotion book "Art of the Deal" published during the period when he lost a billion or so dollars. NYT Trump taxes report reveals $1 billion in losses over 10 years - Vox; Trump: The Art of the Deal: Donald J. Trump, Tony Schwartz (first edition published on 11/12/1987). Trump is someone deserving of being mocked for his narcissism, bluster, lies, demagoguery, ignorance, constant spewing of bile and venom, and shameless self-promotion.
At least Donald learned from his many failures by constant self promotion that created a brand based on his tremendous success outlined above; where he could license his name and let others take the risks. Donald Trump's Real Secret To Riches: Create A Brand And License It; Donald Trump's Success Story; How Trump has made millions by selling his name - Washington Post; Is Fraud Part of the Trump Organization’s Business Model? | The New Yorker
How a Trump Tax Break to Help Poor Communities Became a Bonanza for the Rich - The New York Times Among the beneficiaries of this GOP tax loophole are several rich associates of Donald. The Trump Associates Benefiting From a Tax Break for Poor Communities - The New York Times
So, when is Donald going to start draining the D.C. swamp? Trump's 2,000 Conflicts of Interest (and Counting) - CREW
AP FACT CHECK: Trump's bluster on hurricanes, guns, economy - ABC News Donald has never heard of category 5 hurricane, even though there have been 4 since he became President including Irma, Maria and Michael. Fortunately for the coastal U.S., Donald is on the job, preparing the U.S. response to Dorian, as he played a few rounds of golf. Trump went golfing as Hurricane Dorian threatens US; What is Trump doing on Labor Day? Monitoring Dorian from golf course And, if Obama had done the same, I wonder what Donald and his cult members would say about that.
Trump Insists His Hurricane Warning Was Right Even After National Weather Service Corrected Him Donald call reports that the NWS corrected him Fake News.
A 7 year girl from Guatemala, who was suffering from a rare and deadly genetic disease, came to the U.S. legally in order to participate in a drug trial for this disease. The doctors need more patients to test the drug, which was later approved by the FDA, that extended life by a decade for those afflicted. The 7 year old girl is now 24 and still living in the U.S. Her parents have paid for her medical treatments over the years with private health insurance. Disgusting Don has just ordered her deportation back to Guatemala. Sick Migrants Undergoing Lifesaving Care Can Now Be Deported - The New York Times
‘It’s Really Close’: How the Amazon Rainforest Could Self-Destruct - The New York Times
Some of the fires were set by farmers who wanted to clear land to grow soybeans which will be sold to Chinese purchases, replacing sales by U.S. farmers. China increased its tariff on U.S. soybean exports to 30% on 9/1. A 5% tariff is levied by China on Brazilian soybean exports.
Trump tweets image of Iran's launch failure, but was it classified? Some experts believe the image was classified for good reasons and Donald decided to include it a tweet for no good reason. Experts fear Trump revealed US secrets while tweeting an Iranian launch site photo - Vox; Trump: 'I have absolute right' to release Iran photo - CNN Video In Trump's America, he has the "absolute right" to do whatever he wants.
Perhaps more Americans need to question why the modern day GOP, who claims to be the party of individual freedom, so avidly supports a clearly authoritarian demagogue (90% approval rating among republicans). One lesson learned from Donald is to ignore what someone claims to be when the evidence points in the opposite direction.
Some of the fires were set by farmers who wanted to clear land to grow soybeans which will be sold to Chinese purchases, replacing sales by U.S. farmers. China increased its tariff on U.S. soybean exports to 30% on 9/1. A 5% tariff is levied by China on Brazilian soybean exports.
Trump tweets image of Iran's launch failure, but was it classified? Some experts believe the image was classified for good reasons and Donald decided to include it a tweet for no good reason. Experts fear Trump revealed US secrets while tweeting an Iranian launch site photo - Vox; Trump: 'I have absolute right' to release Iran photo - CNN Video In Trump's America, he has the "absolute right" to do whatever he wants.
Perhaps more Americans need to question why the modern day GOP, who claims to be the party of individual freedom, so avidly supports a clearly authoritarian demagogue (90% approval rating among republicans). One lesson learned from Donald is to ignore what someone claims to be when the evidence points in the opposite direction.
++++
1. Small Ball-Income Generation (All Commission Free Trades):
A. Added 3 XOM at $67.67:
Quote: Exxon Mobil Corp. (XOM)
XOM | Exxon Mobil Corp. Analyst Estimates | MarketWatch
SEC Filings
Closing Price Yesterday: XOM $68.56 +$0.08 +0.12%
XOM 5 Year Chart: Ugly Bear Market Trend
Using a long term chart, the current price has returned to July 2006 levels:
Dividend: Quarterly at $.87 per share or $3.48 annually (currently funded with borrowings since free cash flow is currently negative)
The dividend rate was raised from $.82 effective for the 2019 third quarter payment.
Dividend information | ExxonMobil
Last Ex Dividend Date: 8/12/19
Dividend Reinvestment: Yes
Last Discussed: Stocks, Bonds & Politics: Item # 3.A. Bought 5 XOM at $71.35 (8/19/19 Post) and Item # 4.A. (7/27/19 Post) Both of those purchases were made shortly before the quarterly ex dividend date.
Average Cost Per Share: +$72.66
Dividend Yield at Total Cost = 4.79%
Current Position: 18 Shares
Maximum Position: 30 Shares + shares purchased with dividends
Purchase Restriction: Small Ball Rule
A. Added 3 XOM at $67.67:
Quote: Exxon Mobil Corp. (XOM)
XOM | Exxon Mobil Corp. Analyst Estimates | MarketWatch
SEC Filings
Closing Price Yesterday: XOM $68.56 +$0.08 +0.12%
XOM 5 Year Chart: Ugly Bear Market Trend
Using a long term chart, the current price has returned to July 2006 levels:
Dividend: Quarterly at $.87 per share or $3.48 annually (currently funded with borrowings since free cash flow is currently negative)
The dividend rate was raised from $.82 effective for the 2019 third quarter payment.
Dividend information | ExxonMobil
Last Ex Dividend Date: 8/12/19
Dividend Reinvestment: Yes
Last Discussed: Stocks, Bonds & Politics: Item # 3.A. Bought 5 XOM at $71.35 (8/19/19 Post) and Item # 4.A. (7/27/19 Post) Both of those purchases were made shortly before the quarterly ex dividend date.
Average Cost Per Share: +$72.66
Dividend Yield at Total Cost = 4.79%
Current Position: 18 Shares
Maximum Position: 30 Shares + shares purchased with dividends
Purchase Restriction: Small Ball Rule
B. Bought 10 R at $46.25 and 5 at $45.18:
This starts a small ball "buying program" for this stock. Ryder is one of many stocks that I am buying now as "bond substitutes".
Closing Price Yesterday: R $47.40 -$0.77 -1.60%
Quote: Ryder System Inc. (R)
R | Ryder System Inc. Analyst Estimates (as of 8/16/19)
Current Year: $5.65
Next Year: $5.97
P/E (using $5.97 and $45.89 TC) = 7.68
10 Year Chart: Bear Trend Since Mid-2015
Ryder SEC Filings
2018 Annual Report (risk summary starts at page 13; debt discussed starting at page 105-viewed as heavy IMO and increasing significantly Y-O-Y)
Senior Unsecured Debt: I own several short term Ryder unsecured senior bonds. I owned 2 SU 2.45% bonds that matured yesterday.
Other owned SU bonds:
2.65% Maturing on 3/2/20
2.5% Maturing on 5/11/20
2.875% Maturing on 9/1/20
Fitch Affirms Ryder System at 'A-'/'F2'; Outlook Stable
5 Year Financial Data Through 2018:
The large E.P.S. number in 2017 was largely due to non-cash earnings resulting from a revaluation of deferred tax liabilities: 2017 4th quarter earnings release ("As a result of the Tax Cuts and Jobs Act signed into law in the fourth quarter, we recognized a significant tax benefit to reduce deferred tax liabilities that we no longer expect to incur under the new law. We also expect the new law to improve our earnings going forward due to a significant reduction in our effective income tax rate, allowing us to raise our dividend by 13%. . . In addition, we believe the new tax law further enhances Ryder's typical ChoiceLease advantage versus ownership.")
Dividend: Quarterly at $.56 per share ($2.24 annually)
The quarterly penny rate was raised from $.54 effective for the 2019 third quarter payment.
Ryder Increases Quarterly Cash Dividend
Last Ex Dividend Date: 8/16/19 (10 before ex date and 5 after)
Dividend Yield at Total Cost = 4.88%
Dividend Reinvestment: Yes
Current Position: 15 Shares
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule
Last Earnings Report (Q/E 6/30/19):
Non-GAAP E.P.S. was reported at $1.4 per share in line with earnings. Revenues increased 7.5% Y-O-Y.
The company did revise down its 2019 forecast which probably was the main reason for the market's negative response:
KeyBanc downgraded to market perform on 7/30/19.
Ryder -7% on light profit guidance - Ryder System, Inc. (NYSE:R) | Seeking Alpha (the down 7% pre market on 7/30/19 took the price to $55 per share. After falling another $9 or so, I initiated a small ball buying program)
Broker Report: I only have access to one substantive report on this stock.
S & P (7/30/19): 4* with a 12 month PT of $71 (over the ten year period ending in 2018, S & P notes that Ryder's compound annual growth rate (CAGR) was 5.6% for revenues, 12.5% for net income, 13% for E.P.S., and 8.3% for dividends per share.
Ryder System Inc (R.N) Key Developments | Reuters.com
C. Bought 10 NRZ at $13.95:
Quote: New Residential Investment Corp. (NRZ)
Website: New Residential Investment Corp.
SEC Filings
Closing Price Yesterday: NRZ $13.98 -$0.09 -0.64%
Excess MSRs | New Residential Investment Corp.
Servicer Advances | New Residential Investment Corp.
Non Agency RMBS & Associated Call Rights | New Residential Investment Corp.
Other Investments | New Residential Investment Corp.
2018 Annual Report (risk factor summary starts at page 13 and ends at page 56)
10-Q for the Q/E 6/30/19
Management: External by an affiliate of Fortress
General Opinion: High Risk, questionable compensation for high risk in current dividend yield. Risk of dividend cut present.
Last Discussed: Item # 1.A. Bought 10 NRZ at $15.81, 10 at $15 and 10 at $14.2-Used Commission Free Trades (1/13/19 Post)
NRZ Interactive Chart: Bear Trend
Dividend: Quarterly at $.5 per share
Last Ex Dividend: 6/28/19 (before this last purchase)
Current Position: 58+ shares
Average Total Cost Per Share: $15.15
Dividend Yield at Total Cost Per Share: 13.2%
Dividend Reinvestment: Started with the 2019 first quarter payment
This starts a small ball "buying program" for this stock. Ryder is one of many stocks that I am buying now as "bond substitutes".
Closing Price Yesterday: R $47.40 -$0.77 -1.60%
Quote: Ryder System Inc. (R)
R | Ryder System Inc. Analyst Estimates (as of 8/16/19)
Current Year: $5.65
Next Year: $5.97
P/E (using $5.97 and $45.89 TC) = 7.68
10 Year Chart: Bear Trend Since Mid-2015
Ryder SEC Filings
2018 Annual Report (risk summary starts at page 13; debt discussed starting at page 105-viewed as heavy IMO and increasing significantly Y-O-Y)
Senior Unsecured Debt: I own several short term Ryder unsecured senior bonds. I owned 2 SU 2.45% bonds that matured yesterday.
Other owned SU bonds:
2.65% Maturing on 3/2/20
2.5% Maturing on 5/11/20
2.875% Maturing on 9/1/20
5 Year Financial Data Through 2018:
The large E.P.S. number in 2017 was largely due to non-cash earnings resulting from a revaluation of deferred tax liabilities: 2017 4th quarter earnings release ("As a result of the Tax Cuts and Jobs Act signed into law in the fourth quarter, we recognized a significant tax benefit to reduce deferred tax liabilities that we no longer expect to incur under the new law. We also expect the new law to improve our earnings going forward due to a significant reduction in our effective income tax rate, allowing us to raise our dividend by 13%. . . In addition, we believe the new tax law further enhances Ryder's typical ChoiceLease advantage versus ownership.")
Dividend: Quarterly at $.56 per share ($2.24 annually)
The quarterly penny rate was raised from $.54 effective for the 2019 third quarter payment.
Ryder Increases Quarterly Cash Dividend
Last Ex Dividend Date: 8/16/19 (10 before ex date and 5 after)
Dividend Yield at Total Cost = 4.88%
Dividend Reinvestment: Yes
Current Position: 15 Shares
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule
Last Earnings Report (Q/E 6/30/19):
Non-GAAP E.P.S. was reported at $1.4 per share in line with earnings. Revenues increased 7.5% Y-O-Y.
The company did revise down its 2019 forecast which probably was the main reason for the market's negative response:
2019 GAAP E.P.S. revised from $5.28 to $5.58 down to $4.8 to $5.1
2019 Non-GAAP E.P.S. revised from $6.05 to $6.35 down to $5.5 to $5.8
The "primary" reason given for the lowered guidance was weaker than expected conditions for used vehicle sales.
Broker Response: Generally Negative
KeyBanc downgraded to market perform on 7/30/19.
Ryder -7% on light profit guidance - Ryder System, Inc. (NYSE:R) | Seeking Alpha (the down 7% pre market on 7/30/19 took the price to $55 per share. After falling another $9 or so, I initiated a small ball buying program)
Broker Report: I only have access to one substantive report on this stock.
S & P (7/30/19): 4* with a 12 month PT of $71 (over the ten year period ending in 2018, S & P notes that Ryder's compound annual growth rate (CAGR) was 5.6% for revenues, 12.5% for net income, 13% for E.P.S., and 8.3% for dividends per share.
Ryder System Inc (R.N) Key Developments | Reuters.com
C. Bought 10 NRZ at $13.95:
Quote: New Residential Investment Corp. (NRZ)
Website: New Residential Investment Corp.
SEC Filings
Closing Price Yesterday: NRZ $13.98 -$0.09 -0.64%
Excess MSRs | New Residential Investment Corp.
Servicer Advances | New Residential Investment Corp.
Non Agency RMBS & Associated Call Rights | New Residential Investment Corp.
Other Investments | New Residential Investment Corp.
2018 Annual Report (risk factor summary starts at page 13 and ends at page 56)
10-Q for the Q/E 6/30/19
Management: External by an affiliate of Fortress
General Opinion: High Risk, questionable compensation for high risk in current dividend yield. Risk of dividend cut present.
Last Discussed: Item # 1.A. Bought 10 NRZ at $15.81, 10 at $15 and 10 at $14.2-Used Commission Free Trades (1/13/19 Post)
NRZ Interactive Chart: Bear Trend
Dividend: Quarterly at $.5 per share
Last Ex Dividend: 6/28/19 (before this last purchase)
Current Position: 58+ shares
Average Total Cost Per Share: $15.15
Dividend Yield at Total Cost Per Share: 13.2%
Dividend Reinvestment: Started with the 2019 first quarter payment
Maximum Position: 100 Shares + Shares purchased with dividends (Viewed as Risky which is one reason why the orders are being chopped up into 10 share lots)
Purchase Restriction: Small Ball Rule
Highest Cost Lot in Chain: $16.38 (2/28/18) When and if this lot and the one bought at $16.18 can be sold profitably, and assuming I have commission free trades left, the lots will be sold.
Item # 1 A. Bought 10 NRZ at $16.38 and 5 at $16.18 -Used commission free trades (3/15/18 Post)
Last Earnings Report (Q/E 6/30/19):
Book Value Per Share as of 3/31/19= $16.42
For businesses whose basic operation runs on spreads between short term borrowings and longer term investments, the yield curve inversion is a major negative.
The value of mortgage servicing rights ("MSRs") goes down with interest rates and probably needs to be written down more in value during or prior to the second quarter. If that is correct, then book value per share will continue to trend down. When the NRZ buys an MSR and and the mortgage is paid off, the MSR then has a zero value for the simple reason that there is no mortgage servicing left for that mortgage. I have no expertise in that area. See generally, With interest rate volatility, mortgage servicing assets suffer | National Mortgage News; Mortgage Excess Servicing
Part of the problem in assessing the risk is that the velocity of repayments will depend on the mortgage rates in an MSR pool owned by NRZ. While mortgage rates have fallen recently, there would be a large number of households, who have already refinanced their mortgages at low rates, who will not find it advantageous to refinance.
15-Year Fixed Rate Mortgage Average in the United States-St. Louis Fed
SEC Filed Earnings Press Release
10-Q for the Q/E 6/30/19
2019 Q2 - Results - Earnings Call Slides - New Residential Investment Corp. (NYSE:NRZ) | Seeking Alpha
Last Common Stock Offering (other than ATM): Prospectus dated 2/21/19; (ultimately sold $46M shares at a public offering price of $16.5 per share, see page 59)
Last Preferred Stock Offerings:
NRZ.PRB | New Residential Investment Corp. 7.125% Series B Fixed-to-Floating Rate Cum. Redeem. Pfd. Overview | MarketWatch
Prospectus (August 2019)("Holders of the Series B Preferred Stock will be entitled to receive cumulative cash dividends (i) from and including the original issue date to, but excluding, August 15, 2024 at a fixed rate equal to 7.125% per annum of the $25.00 per share liquidation preference (equivalent to $1.78125 per annum per share) and (ii) from and including August 15, 2024, at a floating rate per annum equal to three-month LIBOR plus a spread of 5.640% per annum")
NRZ.PRA | New Residential Investment Corp. 7.5% Fixed-to-Floating Pfd. Series A Overview
Prospectus (June 2019) Holders of the Series A Preferred Stock will be entitled to receive cumulative cash dividends (i) from and including the original issue date to, but excluding, August 15, 2024 at a fixed rate equal to 7.50% per annum of the $25.00 per share liquidation preference (equivalent to $1.875 per annum per share) and (ii) from and including August 15, 2024, at a floating rate per annum equal to three-month LIBOR plus a spread of 5.802% per annum.
I do not own the NRZ preferred stocks. I am just going to stick with my small ball purchase program of the much higher yielding common share.
D. Added 10 SKT at $14.6 and 10 at $14.29:
Quote: Tanger Factory Outlet Centers Inc. (SKT)
Closing Price Yesterday: SKT $14.34 +$0.20 +1.41%
Last Discussed: Item # 5.A. Bought 10 SKT at $15.31-Used Commission Free Trade (8/14/19 Post)
General Opinion: Negative long term
5 Year SKT Chart: Widow Maker
Dividend: Quarterly at $.3555 per share ($1.42 annually)
Last Ex Dividend Date: 7/30/19
Average Cost Per Share This Account: $ 14.73
Dividend yield at $14.73 = 9.64%
Current Position this Account: 30 shares
I own 50 shares in another account.
Maximum Position this Account: 50 Shares
Purchase Restriction: Small Ball Rule
Prospectus (August 2019)("Holders of the Series B Preferred Stock will be entitled to receive cumulative cash dividends (i) from and including the original issue date to, but excluding, August 15, 2024 at a fixed rate equal to 7.125% per annum of the $25.00 per share liquidation preference (equivalent to $1.78125 per annum per share) and (ii) from and including August 15, 2024, at a floating rate per annum equal to three-month LIBOR plus a spread of 5.640% per annum")
NRZ.PRA | New Residential Investment Corp. 7.5% Fixed-to-Floating Pfd. Series A Overview
Prospectus (June 2019) Holders of the Series A Preferred Stock will be entitled to receive cumulative cash dividends (i) from and including the original issue date to, but excluding, August 15, 2024 at a fixed rate equal to 7.50% per annum of the $25.00 per share liquidation preference (equivalent to $1.875 per annum per share) and (ii) from and including August 15, 2024, at a floating rate per annum equal to three-month LIBOR plus a spread of 5.802% per annum.
I do not own the NRZ preferred stocks. I am just going to stick with my small ball purchase program of the much higher yielding common share.
D. Added 10 SKT at $14.6 and 10 at $14.29:
Quote: Tanger Factory Outlet Centers Inc. (SKT)
Closing Price Yesterday: SKT $14.34 +$0.20 +1.41%
Last Discussed: Item # 5.A. Bought 10 SKT at $15.31-Used Commission Free Trade (8/14/19 Post)
General Opinion: Negative long term
5 Year SKT Chart: Widow Maker
Dividend: Quarterly at $.3555 per share ($1.42 annually)
Last Ex Dividend Date: 7/30/19
Average Cost Per Share This Account: $ 14.73
Dividend yield at $14.73 = 9.64%
Current Position this Account: 30 shares
I own 50 shares in another account.
Maximum Position this Account: 50 Shares
Purchase Restriction: Small Ball Rule
2. Intermediate Term Bond Basket Strategy:
A. Sold 2 Select Income REIT 4.5% SU Maturing on 2/1/25:
Profit Snapshot: +$83.88
FINRA Page: Bond Detail (prospectus linked)
Issuer: Select Income was acquired by Government Properties who thereafter changed its name to Office Properties Income Trust (OPI) I have an extremely low opinion of OPI's external managers
10-Q for the Q/E 3/31/19 (debt listed at page 33)
Sold at 102.452
YTM at 3.979%
The YTM is meaningfully higher than the average range for Baa3 rated bonds maturing in 2025, indicating that the Bond Ghouls view this issuer as more appropriately rated in junk territory.
This is my second round trip for this bond.
I still own the 3.6% Select Income SU maturing on 2/1/20 and the 4.25% Select Income SU maturing on 5/15/24.
3. Short Term Bond/CD Ladder Basket Strategy:
A. Sold 1 of 2 Consolidated Edison 2% SU Maturing on 5/15/21:
Profit Snapshot: $25.8
This bond was bought last January. Item # 2.C. Bought 1 ED 2021 SU at a Total Cost of 97.186 (1/27/19 Post)
The annual interest payment for 1 bond is $20.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Consolidated Edison Inc. (ED)
ED | Consolidated Edison Inc. Analyst Estimates | MarketWatch
SEC Filings; 10-Q for the Q/E 6/30/19
Sold at 99.866
YTM at 2.078%
I will keep the other bond, which is owned in a Roth IRA account, until maturity. :Item # 5.A. Bought ED 2021 SU at a TC of 97.461-In a Roth IRA Account(3/8/18 Post)
B. Bought at Auction 5 Treasury 3 Month Bills Maturing on 11/29/19:
1.992%IR
Auction Results:
C. Bought 10 Treasury 28 Day Bills at Auction:
2.098%IR
Auction Results:
For treasury bill purchases at auctions, the bill is sold at a discount to par value. Interest represents the difference between par value and the discounted price.
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.
3. Short Term Bond/CD Ladder Basket Strategy:
A. Sold 1 of 2 Consolidated Edison 2% SU Maturing on 5/15/21:
Profit Snapshot: $25.8
This bond was bought last January. Item # 2.C. Bought 1 ED 2021 SU at a Total Cost of 97.186 (1/27/19 Post)
The annual interest payment for 1 bond is $20.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Consolidated Edison Inc. (ED)
ED | Consolidated Edison Inc. Analyst Estimates | MarketWatch
SEC Filings; 10-Q for the Q/E 6/30/19
Sold at 99.866
YTM at 2.078%
I will keep the other bond, which is owned in a Roth IRA account, until maturity. :Item # 5.A. Bought ED 2021 SU at a TC of 97.461-In a Roth IRA Account(3/8/18 Post)
B. Bought at Auction 5 Treasury 3 Month Bills Maturing on 11/29/19:
1.992%IR
C. Bought 10 Treasury 28 Day Bills at Auction:
2.098%IR
Auction Results:
For treasury bill purchases at auctions, the bill is sold at a discount to par value. Interest represents the difference between par value and the discounted price.
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.
China and the U.S. agreed to hold "high-level" trade talks in early October which is causing elation among the Stock Jocks.
ReplyDeleteThis meeting, if it occurs, will be the 13th "high-level" meeting to discuss the trade dispute.
The U.S. is scheduled to increase its 25% tariff to 30% on October 1. The 25% tariff is already being collected on about $250B of China's exports.
I view it as material that the next meeting will occur after the additional 5% tariff goes into effect. China will probably request again that Donald delay this raise, as it did before the U.S. levied other tariffs on 9/1.
If Donald increases tariffs on 10/1, will the meeting occur? I viewed it as significant that the meeting was delayed from mid-September to early October. I view it as a signal sent by China that the Duck needs to stop with the new tariffs.
Even if the Chinese Vice Premier Liu He arrives in D.C. sometime next month, it could up being another perfunctory hello meeting, like his last visit in May to D.C., if Donald increases the 25% tariffs
Donald is a vessel of profound ignorance on all or almost all subjects that a U.S. President needs to know and much of what he think he knows is wrong.
He does know in his reptilian brain that an acceleration of the trade war with no resolution prior to the 2020 election could easily result in him losing.
He may be looking for a way out now, something that he could at least try to sell as a victory without everyone laughing at him, even if he has only caused more long term harm than good.
The DJIA is now trading up over 300 points shortly after the opening bell.
I will consider buying SDS again for the third time this year. The other two trades were successful so I am thinking of at least putting my realized gains at risk by restarting a position, selling when and if the unrealized loss exceeds the realized gain by $100. The question is when. The euphoria may continue into Friday or into next week.
The Brexit situation in the U.K. looks like Johnson is creating even a bigger mess as his actions have split the Tory party and resulted in the party expelling or causing the resignations of several prominent members from the party who were resisting Johnson's plan to suspend Parliament, a clearly anti-democratic maneuver which shows his kinship with his soulmate Donald.
Johnson has now lost his working majority in Parliament which has resulted in three legislative defeats related to Brexit.
One of the defeats was Parliament's vote to block the hard Brexit by requiring Boris to seek a 3 month extension unless he manages to perform a miracle and secure passage of a deal by 10/19/19, unless Parliament agrees to a no deal Brexit.
https://www.vox.com/2019/9/4/20849436/brexit-news-parliament-no-deal-boris-johnson-elections
Will the EU give Johnson a better deal or extend the deadline, which is 10/31/19 for the third time?
Hard to say, but I doubt that Johnson will be able to improve on the plan previously voted down by the U.K. parliament.
The E.U. may agree to an extension but that would just creating more uncertainty that is counterproductive economically. It is time to end this fiasco with the U.K parliament accepting the plan last voted down or the EU cutting the cord by refusing to extend the deadline.
I doubt that anyone in power in continental Europe trusts Boris, blaming him for the Brexit vote based on a stream of misrepresentations and lies made by him, or have any inclination to grant him what he wants.
And there is something to be said for teaching a lesson to other EU members about the real consequences of leaving the EU.
Maybe the only way for the EU to secure a plan, palatable to EU members, is to force the U.S. parliament to either accept the plan previously negotiated, or leave on 10/31 with no deal.
The "bond like" stock sectors, which have been working for weeks as interest rates spike down, went into reverse today even with the SPX decent gain.
ReplyDeleteS&P 500 Index 2,976.00 +38.22 +1.30%
Utilities Select Sector SPDR ETF
$63.06 -$0.69 -1.08%
https://www.marketwatch.com/investing/fund/xlu
Vanguard Real Estate ETF
$93.24 -$0.68 -0.72%
https://www.marketwatch.com/investing/fund/vnq
Consumer Staples Select Sector SPDR ETF
$61.24 -$0.38 -0.62%
https://www.marketwatch.com/investing/fund/xlp
Gold which had been running with high quality bonds to the upside continued running with bonds as they declined in price today.
I would attribute about half of the gain today, which faded into the close, to the happy talk on the China trade negotiations. Yes, maybe there will be a 13th high level meeting to discuss the problems.
The other half of the gain was attributable IMO to two better than expected reports: ADP private employment and ISM Services.
I would note that the ISM number was far higher than the one released by Markit but the Stock Jocks only pay attention to better numbers and discard or ignore the unfavorable economic news as noise.
There is a large 7+ point divide between the ISM manufacturing and services reports for August. I will discuss in the next post what this has signified in the past. The signal has been manufacturing leading the economy into a recession or a slowdown, with services bringing up the rear. This like many historical signals may be skewed by current abnormalities including the trade war, but may prove prescient when and if the trade war accelerates and extends well into 2020.
Looking around in bond land for corporate bonds to sell today, I noticed something worth mentioning. I had been selling mid-to-late 2020 maturities at prices that resulted in yields to maturity of less than 2%. Today, those buyers wanted higher yields and lower prices than yesterday. That may reflect, perhaps temporarily, a consensus opinion that the FED may not be as aggressive in cutting the FF rate as previously believed.
Kellogg Co.
ReplyDelete$64.20 +1.36 +2.16%
Last Updated: Sep 6, 2019 at 9:53 a.m. EDT
https://www.marketwatch.com/investing/stock/k
The pop is due to Goldman Sachs raising its recommendation to buy from neutral and increasing its price target to $72 from $58.
I do not have access to that report.
I have sold 10 of my recently bought 60 shares.
Item # 1. Bought 50 Kellogg (K) at $55.44 and 10 at $54.68-Used Commission Free Trades
https://tennesseeindependent.blogspot.com/2019/07/observations-and-sample-of-recent_20.html
Item # 3.B. Sold 10 of 60 Kellogg (K) at $63.95-Used Commission Free Trade:
https://tennesseeindependent.blogspot.com/2019/08/observations-and-sample-of-recent_10.html
After my purchases, the stock went ex dividend for its quarterly distribution on 8/30/19 at $.57 per share.
CenterPoint Energy Inc
ReplyDelete$28.45 +$0.46 +1.64%
Last Updated: Sep 6, 2019 at 10:20 a.m. EDT
https://www.marketwatch.com/investing/stock/cnp
The pop today is due to a Suntrust Robinson Humphrey upgrade to buy from neutral. The PT was raised to $32 from $30.
I recently started a small ball buying program in CNP, primarily as an alternative to low yielding general mortgage bonds, issued by its wholly owned sub Houston Electric, that I own. I sold yesterday a 1.85% CNP Houston Electric GM bond maturing in 2021 which I have not discussed. "General Mortgage" bonds are generally not first mortgage bonds. There will be some debt, either a bank line of credit or a first mortgage bond, with more seniority. In the case of Houston Electric, there remains outstanding an old $102M 9.15% first mortgage bond that matures in 2021.
Page 146:
https://www.sec.gov/Archives/edgar/data/48732/000113031019000016/cnp_10kx12312018.htm
While I do not know for sure, I suspect that the general mortgage bonds will become FM bonds when that bond matures or is redeemed.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/09/observations-and-sample-of-recent_7.html