Economy:
The Fed did lower the FF rate by .25% last Wednesday. Federal Reserve Board - Federal Reserve issues FOMC statement
The FF range is 1.5% to 1.75%. Powell made it clear that there will sit tight for awhile and will not lower this rate again unless there is a material adverse change in the economy. Fed Decision: Interest rates cut by a quarter point; Powell press conference: future rate cuts are unlikely
Powell Quotes:
“We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the state of the economy remains broadly consistent with our outlook.”
“Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course.”
“Overall, we continue to see sustained expansion of economic activity, a strong labor market and inflation near our 2% objective as most likely,”
And, the FED is not likely to hike anytime soon either.
Powell says the Fed would need to see a 'really significant' rise in inflation before hiking rates
U.S. adds 128,000 new jobs in October in stronger-than-expected employment report-MarketWatch This was a favorable jobs report. The forecast was for +75,000. The number of jobs added in October jobs report was negatively impacted by the GM strike. Average hourly earnings rose 6 cents. The Y-O-Y increase in wages was 3% which is healthy. The average work week was unchanged. The job additions for August and September were revised up 95K. Employment Situation Summary The U-6 number increased to 7% from 6.9%: Table A-15. Alternative measures of labor underutilization
The ISM manufacturing number, however, remains in contraction territory: ISM manufacturing index October 2019
U.S. adds 128,000 new jobs in October in stronger-than-expected employment report-MarketWatch This was a favorable jobs report. The forecast was for +75,000. The number of jobs added in October jobs report was negatively impacted by the GM strike. Average hourly earnings rose 6 cents. The Y-O-Y increase in wages was 3% which is healthy. The average work week was unchanged. The job additions for August and September were revised up 95K. Employment Situation Summary The U-6 number increased to 7% from 6.9%: Table A-15. Alternative measures of labor underutilization
The ISM manufacturing number, however, remains in contraction territory: ISM manufacturing index October 2019
De-dollarization: Russia, China, EU are motivated to shift from using USD The USD is likely to remain the reserve currency for years to come, and may even remain so for the remainder of my life. Its days are numbered in years rather than decades IMO.
Trump is accelerating the trend away by bringing together disparate countries, authoritarian regimes and democracies, who do not appreciate his foreign and trade policies.
Another factor that is in its end game involves the future parabolic increases in U.S. debt and the eventual monetization of the debt (which some argue has already started to occur) through Federal Reserve purchases of debt with newly created money for that purpose, turning the USD into so much confetti.
China's factory activity hits 8-month low at 49.3- MarketWatch; China's manufacturing activity shrank for the sixth straight month in October Any number below 50 indicates contraction.
Bloomberg reported that China is skeptical that a long term trade deal with Donald is possible. Donald is 100% untrustworthy, an obvious point based on five decades or so of his conduct.
Hong Kong's economy slips into recession - MarketWatch
South Korea's exports fall for 11th straight month - MarketWatch
Eurostat reported that the Euro area GDP rose .2%, in the third quarter compared to the second quarter and was up 1.1% Y-O-Y. This is the first estimate by that European statistical agency. GDP.pdf
Separately, Eurostat estimated that the annual Euro area inflation was +.7% through October, down from .8% through September 2019. Is the ECB's extremely abnormal monetary policies working or are they contributing to those anemic numbers? The later is not even considered by central bankers as a possibility even though the evidence is mounting that those policies are disinflationary.
Bloomberg reported that China is skeptical that a long term trade deal with Donald is possible. Donald is 100% untrustworthy, an obvious point based on five decades or so of his conduct.
Hong Kong's economy slips into recession - MarketWatch
South Korea's exports fall for 11th straight month - MarketWatch
Eurostat reported that the Euro area GDP rose .2%, in the third quarter compared to the second quarter and was up 1.1% Y-O-Y. This is the first estimate by that European statistical agency. GDP.pdf
Separately, Eurostat estimated that the annual Euro area inflation was +.7% through October, down from .8% through September 2019. Is the ECB's extremely abnormal monetary policies working or are they contributing to those anemic numbers? The later is not even considered by central bankers as a possibility even though the evidence is mounting that those policies are disinflationary.
++++++
Markets and Market Commentary:
Here’s how the stock market tends to perform after the Fed cuts interest rates 3 times in a row - MarketWatch (SPX average +10%).
A bear-market catalyst is lying in wait for stocks, warns UBS - MarketWatch The thrust of this warning is that every bear market has been preceded by an actual decline in SPX's estimate forward earnings. Forward earnings growth was estimated at 23% in September 2018 and a 1% in September 2019.
Why one Fed watcher says the central bank needs to keep chopping interest rates - MarketWatch
Why a strong dollar could be a warning sign - MarketWatch
Starbucks revenue climbs 7% to top Street view as same-store sales increase - MarketWatch
Facebook shares pop after revenue jumps 29% - MarketWatch
US wind energy capacity now over 100 gigawatts, says new report
Alibaba (BABA) shares gain after big earnings beat - MarketWatch
++++
Portfolio Management:
Last week, I went from net adds to my stock allocation to net sells. If the stock rally continues, I will continue to be a net seller.
While I understand the blue skies scenario painted by the Stock Jocks last week, and particularly the spin around Friday's jobs report, I view the spin as too enthusiastic and as unjustifiably dismissive of negative economic reports.
From my perspective, bonds and risk free savings instruments have even become more unattractive from a total return perspective due to the decline in interest rates across the entire maturity spectrum.
Yields provided by risk free securities like savings accounts and CDs insured by the FDIC or short term treasury bills are extremely risky for most households that need to grow their savings to meet future expense obligations including retirement expenses. The 3 month treasury bill closed last Friday at a 1.52% yield. At that rate it will take 45.85 years for money to double before adjusting for inflation and taxes. The Rule of 72 (with calculator) - Estimate Compound Interest The real yield would be negative and would likely remain negative.
Dividend stocks are the only game left for yield investors and many bond like stock sectors are excessively valued in my opinion.
The hunt for real yield, however, has caused and may continue to contribute to a rise in dividend paying stock prices.
There are yield sectors that have not participated in the stock bull market, with the most prominent being major energy stocks like Exxon which I discuss below. XOM's price was much higher than now late in 2007!
The problem is that those stocks are in a bear market, further price declines could easily wipe out a year or more of dividends, and there is nothing that I can point to now that would indicate the bear cycle is nearing an end.
Why one Fed watcher says the central bank needs to keep chopping interest rates - MarketWatch
Why a strong dollar could be a warning sign - MarketWatch
Starbucks revenue climbs 7% to top Street view as same-store sales increase - MarketWatch
Facebook shares pop after revenue jumps 29% - MarketWatch
US wind energy capacity now over 100 gigawatts, says new report
Alibaba (BABA) shares gain after big earnings beat - MarketWatch
++++
Portfolio Management:
Last week, I went from net adds to my stock allocation to net sells. If the stock rally continues, I will continue to be a net seller.
While I understand the blue skies scenario painted by the Stock Jocks last week, and particularly the spin around Friday's jobs report, I view the spin as too enthusiastic and as unjustifiably dismissive of negative economic reports.
From my perspective, bonds and risk free savings instruments have even become more unattractive from a total return perspective due to the decline in interest rates across the entire maturity spectrum.
Yields provided by risk free securities like savings accounts and CDs insured by the FDIC or short term treasury bills are extremely risky for most households that need to grow their savings to meet future expense obligations including retirement expenses. The 3 month treasury bill closed last Friday at a 1.52% yield. At that rate it will take 45.85 years for money to double before adjusting for inflation and taxes. The Rule of 72 (with calculator) - Estimate Compound Interest The real yield would be negative and would likely remain negative.
Dividend stocks are the only game left for yield investors and many bond like stock sectors are excessively valued in my opinion.
The hunt for real yield, however, has caused and may continue to contribute to a rise in dividend paying stock prices.
There are yield sectors that have not participated in the stock bull market, with the most prominent being major energy stocks like Exxon which I discuss below. XOM's price was much higher than now late in 2007!
The problem is that those stocks are in a bear market, further price declines could easily wipe out a year or more of dividends, and there is nothing that I can point to now that would indicate the bear cycle is nearing an end.
+++++
Trump:
Summer Zervos shared allegations of Trump's sexual assault with lawyers in 2011, court filing states
Donald Trump And The Making Of A Predatory President (authors of new book titled "All the President's Women" claim that 43 new women have come forward claiming that Donald sexually assaulted them); Barry Levine and Monique El-Faizy All the President's Woman Interview - A Portrait of Donald Trump's Misconduct; Book review of All the President's Women: Donald Trump and the Making of a Predator by Barry Levine and Monique El-Faizy - The Washington Post
Amazon.com: All the President's Women: Donald Trump and the Making of a Predator eBook: Barry Levine, Monique El-Faizy: Kindle Store
Donald thinks that the U.S. should be allowed to keep Syria's oil. ‘Keep the Oil’: Trump Revives Charged Slogan for New Syria Troop Mission
Trump ‘dead wrong’ about the change in murders in Chicago | PolitiFact Illinois Trump's claim about the Chicago murder rate was rated Pants on Fire. Trump is just lying again. Trump is really insulting the Trumpsters with the sheer number of demonstrably false representations that he makes to them.
+++
Trump and Ukraine:
Impeachment testimony details lobbyist bid to get U.S. Ambassador to Ukraine fired The lobbyist identified in the testimony of Catherine Croft, who was a member of the NSC staff, was the former congressman Robert Livingston.
Bob Livingston (R-LA) was chosen as New Gingrich's successor as Speaker of the House of Representatives. He was highly critical of Bill Clinton's tryst with Monica, but then resigned after it was disclosed that he was having an extra marital affair. SPEAKER-ELECT ADMITS ILLICIT SEXUAL AFFAIRS - Chicago Tribune
State Dept. officials offer new details about Trump’s shadow diplomacy with Ukraine - POLITICO
Unravelling Rudolph Giuliani’s labyrinthine ties to Ukraine-The Guardian
When the investigation is complete, I believe their will be proof that wealthy Ukrainian businessmen, who opposed Ambassador Yovanovitch's anti-corruption efforts, funded the fact free attack on her through republican lobbyists.
After Vindman’s Testimony Went Public, Right-Wing Conspiracies Fired Up
Republican senators are in broad agreement that there was nothing wrong with what Trump did in holding up military aid and requesting an foreign country investigate a political opponent. Senator Rick Scott claimed that if you look and read the transcript there’s nothing wrong with that. ” Trump touts Ukraine call during meeting with Republican senators The call was "perfect" as the Duck has repeatedly claimed according to republican senators, though 1 or 2 are a tiny bit uneasy about what Trump did.
Trump made 96 false claims last week
+++
Barr and the Politicalization of the DOJ:
The New York Bar Association recently noted that Barr "“appears to view his primary obligation as loyalty to the president individually rather than to the nation.”
Barr deliberately misled the country about the conclusions reached by the Mueller investigation.
Barr refused to investigate the whistleblower's complaint after a criminal referral from the CIA's general counsel and then tried to prevent Congress from seeing it as required by law.
Barr is providing Trump with frivolous legal arguments designed to slow down and interfere with the House's impeachment investigation.
I have lost all confidence in the DOJ under Barr's leadership.
The DOJ will be used to protect Trump from his malfeasance and to punish his political opponents and career governmental employees performing their jobs. Justice Dept. Is Said to Open Criminal Inquiry Into Its Own Russia Investigation This escalation was announced after the impeachment inquiry turned up incriminating evidence.
William Barr is IMO a rogue Attorney General and I see no difference between Barr and John Mitchell who was Nixon's AG.
Barr and John Durham are running around the world trying to find what passes for evidence in "conservative" circles that Russia did not interfere in the U.S. election.
This particular conspiracy hatched by the Alt-Right claims that it was Obama conspiring with U.S. intelligence agencies, the Ukraine, and other foreign countries to make it look like the Russians interfered in the U.S. election.
Sounds like a conspiracy theory originating from Russian intelligence.
Barr and Durham are asking foreign countries for assistance in their crusade to discredit U.S. intelligence agencies and the Mueller investigation. 5 Points On The DOJ’s Fishing Expedition For Russia Probe Conspiracy Theories | Talking Points Memo; Barr personally asked foreign officials to aid inquiry into CIA, FBI activities in 2016 - The Washington Post; Intel veterans react to Barr trips to investigate Russia probe origins - Business Insider
The New York Bar Association recently noted that Barr "“appears to view his primary obligation as loyalty to the president individually rather than to the nation.”
Barr deliberately misled the country about the conclusions reached by the Mueller investigation.
Barr refused to investigate the whistleblower's complaint after a criminal referral from the CIA's general counsel and then tried to prevent Congress from seeing it as required by law.
Barr is providing Trump with frivolous legal arguments designed to slow down and interfere with the House's impeachment investigation.
I have lost all confidence in the DOJ under Barr's leadership.
The DOJ will be used to protect Trump from his malfeasance and to punish his political opponents and career governmental employees performing their jobs. Justice Dept. Is Said to Open Criminal Inquiry Into Its Own Russia Investigation This escalation was announced after the impeachment inquiry turned up incriminating evidence.
William Barr is IMO a rogue Attorney General and I see no difference between Barr and John Mitchell who was Nixon's AG.
Barr and John Durham are running around the world trying to find what passes for evidence in "conservative" circles that Russia did not interfere in the U.S. election.
This particular conspiracy hatched by the Alt-Right claims that it was Obama conspiring with U.S. intelligence agencies, the Ukraine, and other foreign countries to make it look like the Russians interfered in the U.S. election.
Sounds like a conspiracy theory originating from Russian intelligence.
Barr and Durham are asking foreign countries for assistance in their crusade to discredit U.S. intelligence agencies and the Mueller investigation. 5 Points On The DOJ’s Fishing Expedition For Russia Probe Conspiracy Theories | Talking Points Memo; Barr personally asked foreign officials to aid inquiry into CIA, FBI activities in 2016 - The Washington Post; Intel veterans react to Barr trips to investigate Russia probe origins - Business Insider
See generally for background on Barr's past: Who Is Bill Barr? - The New York Times
Trump and Syria:
McGurk right that Trump has sent 14,000 troops to Middle East since May | PunditFact Rated as true. Trump has in fact sent 14,000 troops to the Middle East since May 2019. Nonetheless, the Duck claims at his campaign rallies that pulling 1,000 troops out of Kurdish territory in Norther Syria kept his campaign pledge of ending American military involvement in the ME.
Trump’s Syria Troop Withdrawal Complicated Plans for al-Baghdadi Raid - The New York Times
Al-Baghdadi Raid Was a Victory Built on Factors Trump Derides - The New York Times Intelligence was gathered by the CIA in cooperation with the Kurds and U.S. special forces that have since been removed from the area.
Trump's Impeachment-Ukraine:
White House told in May of Ukraine President Zelenskiy's concerns about Giuliani, Sondland
White House official corroborates diplomat’s account that Trump appeared to seek quid pro quo; White House Aide Confirms He Saw Signs of a Quid Pro Quo on Ukraine - The New York Times
The official referred to in the previous link is Tim Morrison who is a partisan republican having in the past served as a staff member for House republicans. Morrison did offer his opinion that Trump did nothing illegal during his phone call with Zelensky. He had two minor fact disagreements with two prior witnesses that do not go to the substance. Tim Morrison testimony: Read the full text of White House official's opening statement to impeachment committees today - CBS News
The House Democrats passed a measure that sets out the rules for the public hearings on impeachment.
No republican voted for those rules after complaining endlessly about the closed door depositions.
Republican House members attended those depositions along with their staff members and were permitted to ask the witnesses questions. I read that the republicans and democrats had equal amounts of time to ask questions. That was viewed as unfair by all House republicans.
The House republican votes on the rules for public hearings will probably predict their votes on Articles of Impeachment when and if they are voted out of the Judiciary Committee.
Democrat voters overwhelmingly approve of impeachment while republican overwhelming approve of Donald Trump.
The end result will likely be a vote to pass articles of impeachment with no republican voting in favor.
There is no evidence that will change a republican vote unless and until republican voters turn on Donald in a major way and that looks highly unlikely. Donald is the republican party and he represents their core values and policies.
++++++
1. Canadian Reset Equity Preferred Stocks:
A. Bought 50 TRPPRD at C$16.09:
Issuer: TC Energy Corp. (TRP)
I have the common shares under a "small ball buying program": Item # 1.C. Bought 10 TRP at $49.78 (9/25/19 Post)
I have the common shares under a "small ball buying program": Item # 1.C. Bought 10 TRP at $49.78 (9/25/19 Post)
Prospectus Excerpt:
Security: Equity Preferred Floating Rate
Current Coupon: 3.903% (through 4/30/24)
Par Value: C$25
Current Yield at C$16.09 = 6.064%
Last Ex Dividend: 9/27
Last Ex Dividend: 9/27
Next Coupon Reset Year: 2024
Resets at a 2.38% spread to the 5 year Canadian bond
Dividends: Cumulative
Stopper Clause: Yes (see following snapshot)
2. Pares-All Commission Free Trades:
A. Sold 20 MFC at $18.78:
Quotes:
USD Priced Shares: Manulife Financial Corp. (MFC)
CAD Priced Shares: Manulife Financial Corp (Canada: Toronto)
MFC Website
Manulife Investor Relations
Manulife Financial Corp (MFC.TO) Key Developments | Reuters.com
MFC Analyst Estimates
Profit Snapshot: +$7.69 (sold highest cost lots)
Item # 2.A. Bought 10 MFC at $18.52 and 10 at $18.28 (4/12/18 Post)
USD Priced Shares: Manulife Financial Corp. (MFC)
CAD Priced Shares: Manulife Financial Corp (Canada: Toronto)
MFC Website
Manulife Investor Relations
Manulife Financial Corp (MFC.TO) Key Developments | Reuters.com
MFC Analyst Estimates
Profit Snapshot: +$7.69 (sold highest cost lots)
Item # 2.A. Bought 10 MFC at $18.52 and 10 at $18.28 (4/12/18 Post)
Last Discussed: Item # 2.A. Bought 10 MFC at $16.56 (8/21/19 Post)
Average Cost Prior to Pare: $17,75
Average Cost After Pare: $17.34
 |
| Snapshot Taken During Trading Day on 10/21 |
Maximum Position: 100 Shares + shares bought with dividends
Trading Strategy: Small Ball Trading Rules
 |
| 2016 MFC 100 Shares +$481.06 |
B. Sold 125 TRST (highest cost lot) at $8.6:
Quote: Trustco Bank Corp.
Category: Regional Bank Basket Strategy
Total Net Realized Gains: (start date Spring 2009)
Closing Price Yesterday: TRST $8.66 $0.02 +0.29%
Profit Snapshot: +$13.5
Item # 1.A. Bought 100 TRST at $8.55 and 25 at $8.26 (10/7/18 Post)
Average Cost Prior to Pare: $8.21
Average Cost After Pare: $7.58
 |
| Snapshot During Trading Day 10/22/19 |
Dividend Yield at $7.58 = 3.6%
Last Ex Dividend: 9/5/19
Last Buy Discussion: Item # 3.A. Bought 25 TRST at $7.87 and 25 at $7.3-Used Commission Free Trades (10/28/2018 Post)
Last Sell Discussion: Item # 1.B. Sold 161+ TRST at $9.2+ (7/2/18 Post)
TRST Trading Profits: +$998.86 ($985.36 in prior trades)
Last Earnings Report (Q/E 9/30/19):
TRST reported "net income of $14.7 million or $0.152 diluted earnings per share compared to $15.2 million or $0.157 diluted earnings per share in the third quarter of 2018 despite an increase of $4.7 million in interest expense during the same time period."
I would emphasize the Y-O-Y decline in net interest margin:
TrustCo Announces Third Quarter 2019 Results; Net Income of $14.7 Million and 5.3% Average Residential Loan Growth Year over Year
The market responded favorably to this report, which gave me the opportunity to sell my highest cost lots profitably. I disagreed with that reaction.
Current Position: 56+ shares
I have soured on regional bank stocks for reasons previously discussed in this blog.
Maximum Position: 300 Shares
Purchase Restriction: Small Ball Rule
Small Ball Trading Rules
Lowest Cost Lot: $7.3 (next purchase has to be below that price)
C. Sold 31+ FNB at $12.17:
Quote: F.N.B. Corp.
F.N.B. Corp. Analyst Estimates | MarketWatch
Closing Price Yesterday: FNB $12.23 +$0.17 +1.41%
Profit Snapshot: +$78.97 (10/22/19 trade only)
Last Buy Discussion: Item # 1.A Bought 30 FNB at $10.49-Used Commission Free Trade (1/9/19 Post)
Last Sell Discussions: Item # 5.A (9/28/19 Post); Item # 3.A. Sold 30 FNB at $11.95-Used Fidelity Commission Free Trade (5/18/19 Post);Item # 1.A. Sold 50 FNB at $13.65-Used Commission Free Trade (9/5/18 Post); Item # 1.D. Sold 50 FNB at $13.9-Used Commission Free Trade (6/18/18 Post); Item 2.A. Sold 60 FNB at $14.59 (3/5/2018); Item # 4.A. Sold 100 FNB at $13.94-Satellite Taxable Account (10/23/17 Post)
Last Earnings Report (Q/E 9/30/19): Investors reacted favorably to this report.
Return on average equity is significantly below average.
Return on assets is slightly below average.
Return on Average Assets for all U.S. Banks-St. Louis Fed
Net Interest Margin declined significantly Y-O-Y due mostly to lower purchase accounting accretion on acquired loans and the sale of Regency that had contributed 10 basis point to NIM. The efficiency ratio is good at 54.11.
I ignore how purchase accounting accretion on acquired loans impacts NIM, viewing the NIM number without that accounting change as the relevant one.
F.N.B. Corporation Reports Record Net Income of $103 million and Earnings per Share of $0.31
Dividend: Quarterly at $.12 per share
Next Ex Dividend Date: 12/2/19
Dividend History: Pathetic
FNB cut its quarterly dividend by 50% in 2009 and has not raised it since that slash. FNB, Stock Quote, Dividend Data, Dates and History - FNB Corp
FNB 5 Year Chart: Roller coaster going nowhere
A one year chart does show the stock piercing to the upside its 50, 100 and 200 day SMA lines however, starting around 10/10/19. So the stock has some positive momentum at the moment.
I still own 104+ shares in my Schwab account where I am reinvesting the dividend. If the stock can move over $13, I am probably going to eliminate that position.
D. Sold 100 FNB at $12.17 (IB Account): See discussion above
Profit Snapshot: +$43.62
Item # 1.A. Bought 100 FNB at $11.72-IB Account (8/14/19 Post)
FNB Realized Gains to Date = +$1,341.65 ($1,219.06 in prior trades)
3. Small Ball Adds-All Commission Free Trades:
A. Bought 10 CVA at $15.62; 10 at $15.37; 5 at $15.08, 5 at $14.89; 5 at $14.68; 5 at $14.25:
Quote: Covanta Holding Corp. (CVA)
This one has been a falling knife since I started a small ball buying program.
Closing Price Yesterday: CVA $14.53 +$0.09 +0.62%
CVA was crushed on 10/22 after the Raymond James analyst reduced his recommendation from strong buy to neutral:
Closing Price 10/22/19: CVA $15.35 -$1.72 -10.08%
I do not have access to that report. In a news service summary, the downgrade was due in part "to softer commodity prices, specifically for scrap metal and electricity", and the analyst was "worried" about 2020 free cash hitting the consensus estimate.
Last Discussed: Item # 4.A. Started Small Ball Position in CVA: Bought 25 at $16.9, 5 and $16.66, 5 at 16.4 and 15 at $16.25 (10/16/19 Post
Last Earnings Report (Q/E 9/30/19):
The core business improved Y-O-Y:
2019 Q3 - Results - Earnings Call Presentation-Seeking Alpha
A relatively minor part of CVA's operations, selling recycled metals, did suffer due to low prices:
The company did note, however, that increased sales of separated heavy metals will improve realized non-ferrous pricing in the current quarter.
Electricity prices were "muted" and stable:
During the conference call, the analysts focused a lot of attention on the weakness in commodity prices: CEO Steve Jones on Q3 2019 Results - Earnings Call Transcript | Seeking Alpha The company will finish construction of its "first total ash processing system" this December at its Fairless Hills, Pennsylvania metal processing facility (Page 2).
Yes, commodity price for metals will go up and down. I did learn something a bit weird when reading the transcript. CVA recovers mutilated coins as part of its recycling operations and had until recently being selling those coins to the U.S. Mint. The Mint quit purchasing the recovered coins, so CVA is just stockpiling them now. (Page 3)
CEO stated at page 10 that CVA is "committed to the dividend" and does not "see a case where we’re not going to be able to support that dividend as we look out in time." To consider a dividend change, there would have to be "a persistent reduction in free cash ... and quite frankly we see free cash growing up to 250 over the next several years."
Reaffirmed 2019 Guidance:
Average Cost Per Share: $15.85
Maximum Position: 100 Shares + shares purchased with dividends (5 share left)
Purchase Restriction: Small Ball Rule (5 share left)
Dividend: Quarterly at $.25
Last Ex Dividend: 9/26/19
Dividend Yield at Average Cost = 6.31%
Dividend Reinvestment: Yes
B. Added 2 XOM at $67.38:
Quote: Exxon Mobil Corp. (XOM)
Closing Price Yesterday: XOM $69.60 $2.03 +3.00%
The energy stock sector has been in a bear market since the 2014 summer.
The rally yesterday in energy stocks was broad based: FENY $15.72 +$0.37 $2.41%: Fidelity MSCI Energy Index ETF (own)
A rising tide lifts all boats which is one reason for Exxon's 3% rally yesterday.
The other reason IMO for the price spurt was renewed optimism about the economy. Thinking like a Stock Jock the equation looks like this: Better Economy = More Energy Demand.
Perhaps Exxon performed slightly better than FENY since its earnings report, released before the market opened yesterday, was not as bad as expected.
Exxon Mobil Corp. Analyst Estimates
SEC Filings
Current Position: 20+ Shares
Average Cost Per Share = $72.12
In retrospect, I started the small ball buying program at too high a price.
Maximum Position: 30 Shares
Dividend: Quarterly at $.87 per share ($3.48 annually)
Dividend information | ExxonMobil
NEXT Ex Dividend Date: 11/8/19
Dividend Reinvestment: Yes at below $75
Dividend Yield at $72.12 = 4.83%
Last Substantive Discussions: Item # 3.A. Bought 5 XOM at $71.35 (8/19/19 Post); Item # 4.A. (7/27/19 Post)
Last Discussion: Item # 1.A. Bought 3 XOM at $67.77 (9/4/19 Post)
XOM 5 Year Chart: Extremely Unfavorable
Last Earnings Report (Q/E 9/30/19): Awful as expected
ExxonMobil Earns $3.2 Billion in Third Quarter 2019
Exxon Mobil (XOM) Q3 2019 earnings beat estimates
Exxon mixed Q3 results-Seeking Alpha
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.
The forward earnings article...
ReplyDeleteI'm unclear whether they are saying a decline in forward estimates is needed as tne indicator. Or negative forward estimates (lower earnings, not lower growth.
In the chart it doesn't look like a leading indicator. It looks like it's down same time as market goes down. It also looks like it goes down at times when the market doesn't?
23>1% growth is a lot of slowing. Wonder if it will stay, or if CEOs are lowballing because they can right now.
Land: There are two separate arguments made in that article. The first involves a rapid deceleration of SPX’s forward earnings estimates as a leading indicator of a recession. The second is that negative forward earnings estimates indicate an ongoing recession even though one may not have officially declared yet.
ReplyDeleteWhile those two arguments make theoretical sense, there are some problems. The first problem is that forward estimates can be way off, as I noted in prior posts documenting 30%+ differentials in actual results and forward estimates made as of 12/31 of the preceding year. The second problem is that the article does not address false positives, that is, the times when there was a deceleration and no recession occurred before estimates reaccelerated again, nor is there a clear indication of how much deceleration is required before the signal becomes valid.
Ah, that explains that it's both - one's leading, one's while ongoing.
DeleteEstimates aren't negative yet. So that's not saying we're in a recession.
False positives means this is only useful as a heads up, to coordinate it with other indicators.
New Senior Investment (SNR):
ReplyDelete$8.01 +0.50 +6.66%
Last Updated: Nov 4, 2019 9:41 a.m. EST
https://www.marketwatch.com/investing/stock/snr
The rally which has already began to fade was apparently caused by an upgrade to outperform from equal weight by Capital One, with the PT raised to $8.5 from $7.5.
I eliminated my position shortly after the opening bell by selling 398+ shares at $8.05. The gain will be about $250 which is better than the unrealized loss that I had in the shares before the robust rally higher.
I mentioned in an earlier comment that SNR had sold its assisted living/memory care properties at a favorable price which triggered a strong rally in this out of favor REIT stock. The pop today was above my consider to sell range which was $7.5 to $8.
While it is positive longer term that SNR will use the proceeds to reduce its debt, the rental loss from those properties will reduce FAD and FFO and may trigger another dividend cut.
A SA contributor makes this point in an article published today.
https://seekingalpha.com/article/4302118-deterioration-dividend-coverage-post-asset-sales-new-senior
I would make the following comment about this statement made in that article:
" In fact over the last 7 quarters New Senior has spent almost 3X in capital expenditures as it has identified as "Routine." Where exactly do the other capital expenditures go? We know that New Senior does not build its own properties unlike some other players like Omega Healthcare Investors, Inc. (OHI). So we are lost as to why New Senior refuses to deduct the whole amount from its FAD calculations."
REITs that are required to make routine maintenance expenditures will divide capital expenditures into two buckets.
The first bucket is recurring routine capital expenditures which is supposed to be deducted from FFO to arrive at AFFO using NAREIT's definition of AFFO. When the AFFO calculation is done in accordance with that definition, AFFO will be identical or close to FAD (Funds Available for Distribution).
The second bucket are capital expenditures made on existing properties that enhance the value. Those expenditures occur all of the time for REITs and are not included as a deduction to FFO to arrive at AFFO/FAD.
There could be a good faith argument about whether a specific capital expenditure is classified as routine maintenance or one that increases the value of the property. The later can be substantial expenditures that do drain cash and the individual investor will never know with any reasonable whether those improvements generate higher rents and a higher valuation that pay for expenditures and then some.
So if the SA author knew what he was talking about IMO, he would not be at a loss to explain why some capital expenditures are not deducted from FFO.
S & P downgraded the utility stock sector to underweight, noting that the sector is trading at a 37% premium to its average P/E over the next 12 months:
ReplyDeletehttps://www.marketwatch.com/story/utility-stocks-fall-after-cfra-downgrades-sp-500-subsector-2019-11-04?mod=mw_latestnews
I made the same point about over valuation in a comment published yesterday:
https://tennesseeindependent.blogspot.com/2019/10/observations-and-sample-of-recent_30.html?showComment=1572787544661#c3277457472763704369
Right in time for our exchange about utilities being not a good deal right now.
DeleteIs there somewhere to see the historic P/E for a sector, or a stock? (Outside of articles at the time.)
Land: Off hand, I am only aware of the Yardeni charts that are updated weekly as I recall:
Deletehttps://www.yardeni.com/pub/mktbriefsppesecind.pdf
That looks useful!
DeleteThe Stock Jocks have reacted positively to third quarter earnings released by hotel REITs, one of the most disfavored REIT sectors over the past year.
ReplyDeleteApple Hospitality (owned) is up slightly so far today in response to its report but has come off its best level intra-day which was $16.88.
Apple Hospitality REIT Inc
$16.68 +$0.05 +0.30%
Last Updated: Nov 5, 2019 at 12:12 p.m. EST
https://www.marketwatch.com/investing/stock/aple
The report was in line with the consensus forecasts. bro
Press Release
https://www.businesswire.com/news/home/20191104005869/en/
SA Summary:
https://seekingalpha.com/news/3514080-apple-hospitality-q3-comp-revpar-occupancy-improve
I would characterize the report as adequate.
APLE pays a monthly dividend at $.1 per share which has been unchanged since its IPO in 2015. I do not anticipate anytime soon a change in that rate, up or down.
Last Ex Dividend: 11/1/19
In my Fidelity account, my average cost per share is at $16.66. At that total cost number, the dividend yield is about 7.2%.
There is a meaningful rise today in the ten year treasury yield:
ReplyDeleteU.S. 10 Year Treasury Note
1.861% + 0.082%
Last Updated: Nov 5, 2019 at 2:24 p.m. EST
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
The most bond like common stock sectors are responding negatively:
Vanguard Real Estate ETF
$ 92.06 -$1.565 -1.67%
Last Updated: Nov 5, 2019 at 2:25 p.m. EST
https://www.marketwatch.com/investing/fund/vnq
Utilities Select Sector SPDR ETF
$62.80 -$0.4742 -0.75%
Last Updated: Nov 5, 2019 at 2:26 p.m. EST
https://www.marketwatch.com/investing/fund/xlu
https://www.benzinga.com/analyst-ratings/analyst-color/19/11/14727850/utilities-investors-may-need-to-ponder-how-much-theyre-willing-to-pay-for-yield
This time a post disappeared for real. I know I wrote something with the queston of why would bond folks pick yesterday to raise rates. Especially when Fed just lowered short end ones.
DeleteAfter a few days thought, they decided the Fed cut would stimulate economy and result in a long term raise?
Land: There have been periods lasting for several months when the FED was raising short term rates and longer term rates declined. That was the case initially in 2004 when the Fed started to increase the FF rate from 1%, eventually stopping at 5.25% in 2006. The Bond Ghouls responded by taking the 10 year treasury down in yield and then the yield leveled off.
DeleteYou can see that happening by comparing the 10 year treasury chart with the FF chart, starting in June 2004 through July 2006.
Effective Federal Funds Rate
https://fred.stlouisfed.org/series/FEDFUNDS
https://fred.stlouisfed.org/series/DGS10
In mid June 2004, the ten year was around 4.9% and had fallen to 4% by September and was near 4% as late as June 2005 as the FED kept cutting the FF rate.
It is best to compress the time frame to include only that period in order to avoid monthly numbers.
Longer term rates went down as short term rates rose during that period because the Bond Ghouls believed the FED was snuffing out incipient inflation.
When the FED cuts rates as a stimulus measure, the market may react by taking longer term rates up.
The problem now, as I see it, is the Bond Ghouls are not sure whether the FED will stimulate the economy with the latest rate cuts. Some days, they may lean in that direction and then reverse the next day.
The ten year yield went down in yield today. It is up in yield since bottoming at 1.47% in late August.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2019
The close today was at 1.81%.
While that change in direction has caused me to reallocate some, I do not view it yet as a decisive move up in rates, nor does it confirm yet a trend that has staying power.
My youngest nephew, who is almost a medical doctor, called me earlier today and wanted to know what was happening to Jernigan Capital (JCAP). He is in his second year at Northwestern Medical School and apparently took a break from dissecting frogs or whatever they do to call.
ReplyDeleteI do not see anything fundamentally wrong that would justify the selling. I would consequently view the recent downdraft as based more on market dynamics than fundamental issues.
The Chart is showing a series of lower highs and lower lows since the stock hit $22 on 2/4/19.
A bad chart does not stop me from buying but it will have some impact on how I structure and implement purchases after categorizing the decline as mostly or entirely due to market dynamics rather than fundamentals.
The JCAP screams at me to avoid taking what I would define as a full position in one trade.
JCAP is a mini cap with a market capitalization near $401M. The price can consequently be jerked around based on temporary supply and demand imbalances.
The recent increase in volume indicates one or more motivated sellers with buyers demanding lower prices to take shares off their hands.
The average volume is about 196K. The volume yesterday was 577.4K and that may be exceeded today.
There is uncertainty, as I have discussed, about the buyout of the external manager's contract, which will result initially in the $.35 per share quarterly dividend being "right sized" as management characterized the issue in the recent earnings call.
Today, there was a sign that the demand/supply imbalance in favor of supply may have been resolved, at least for now, with the shares hitting intra-day $17.71.
I did add a few shares near the 52 week low level this morning.
Jernigan Capital, Inc. (JCAP)
$18.03 -$0.33 (-1.77%)
Day's Range 17.71 - 18.35
52 Week Range 17.71 - 22.20
As of 2:38PM EST
https://finance.yahoo.com/quote/JCAP/history?p=JCAP
Among the top holders are several hedge funds.
Hersha Hospitality released its third quarter report after the close.
ReplyDeletehttp://www.globenewswire.com/news-release/2019/11/05/1941661/0/en/Hersha-Hospitality-Trust-Announces-Third-Quarter-2019-Results.html
I will be monitoring how the Stock Jocks react to this report.
AFFO per share was reported at $.53.
SA claims that HT missed the consensus FFO estimate by 7 cents:
https://seekingalpha.com/news/3514850-hersha-hospitality-ffo-misses-0_07-misses-revenue
Yahoo Finance does not provide a consensus FFO estimate but only the consensus GAAP number.
SA appears to be correct in using $.61 as the consensus estimate based on the data at SNL (not Saturday Night Live).
https://www.snl.com/irweblinkx/analystcoverage.aspx?iid=4019891
HT has already been beaten down a lot but that want stop the Stock Jocks from knocking it down further as they did in a negative reaction to the second quarter report.
I checked the blog to see where I pegged the next possible purchase point, which was in the $12 to $13 range.
See Comment at
https://tennesseeindependent.blogspot.com/2019/08/observations-and-sample-of-recent_21.html?showComment=1566509208454#c879948560700381413
I do not believe that the stock will get down into that range so I am raising it to $13 to $13.5.
Last Discussed:
Item # 2.A. Added 30 HT at $13.92
https://tennesseeindependent.blogspot.com/2019/09/observations-and-sample-of-recent_11.html
My reaction to the report is that it was within my expectations. This hotel REIT owns properties along the Florida coast and experienced cancellations due to the expected path of hurricane Dorian as discussed in the release. I doubt that analysts made the adjustment.
HT had a 1.2% RevPAR growth, "outperforming our market average by 240 basis points." HT was also upbeat about 2020 noting that the Super Bowl was going to be held in Miami and the convention business bookings looked good so far.
One analyst who recently downgraded the stock expressed concern about the NYC market which is soft now.
HT "Manhattan portfolio reported a 2.3% RevPAR loss to $244.07, driven by a 2.0% ADR loss while occupancy remained very strong at 96.1%. Our Manhattan portfolio outperformed the Manhattan market by 40 basis points in the third quarter as our cluster of hotels was able to capture more market share during the softer quarter."
The "Washington, DC portfolio was our best performing cluster in the third quarter, growing RevPAR by 9.1% and outperforming the market by 460 basis points. At the newest hotel in our portfolio, the Annapolis Waterfront Hotel, a shift in sales strategy resulted in 19.4% RevPAR growth with 1,240 basis points of occupancy growth. In Dupont Circle, the St. Gregory continued to benefit from its renovation in 2018 with ADR-driven RevPAR growth of 15.5% while in Georgetown, our Ritz-Carlton grew RevPAR by 12.4%. "
The Boston cluster has REVPAR growth of 4.2%.
So I would not focus on an underperforming area and ignore the better areas.
HT is continuing to buy back shares:
" In the third quarter 2019, the Company repurchased 659,898 common shares for an aggregate repurchase price of approximately $9.6 million at a weighted average price of $14.50 per share. Since January 1, 2014, the Company has repurchased $255.3 million in common shares, representing 24.7% of the January 1, 2014 float. For the nine months ended September 30, 2019, our diluted weighted average common shares and partnership units outstanding was 43,386,630."
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/11/observations-and-sample-of-recent_6.html