Observations and Sample of Recent Trades: BIF, ECON, FFHPRG, HUSKF, IBB, NMFC, OFS

Economy: 

Calculated Risk: AAR: October Rail Carloads down 8.4% YoY, Intermodal Down 7.8% YoY

Japan surpasses China as largest foreign holder of U.S. Treasurys; Foreign Holders of U.S. Debt: U.S. Treasury Data Series (last data is through August 2019)

Trump expected to delay European auto tariffs for 6 months, report says I seriously doubt Donald will levy those tariffs before the election. 

What is RCEP? Asia-Pacific trade deal slated to be world's largest FTA

Donald claimed yesterday that the Phase 1 trade deal with China was "close" to completion. Trump calls U.S.-China deal ‘close’ in speech 

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Markets and Market Commentary: 

‘Fear of missing out’ triggers huge fund manager shift from cash to stocks, Bank of America Merrill Lynch says - MarketWatch This kind of reallocation is not based on valuation and can be quickly reversed when the worm starts to turn creating a bull rush for the exit door.  

Don’t let the headlines scare you into cash, says UBS portfolio manager - MarketWatch

Do NOT show these ominous charts to stock-market bulls, says strategist who sees a correction forming - MarketWatch

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Trump:

Bill Moyers commented that he fears for America for the first time in his life. Bill Moyers says he fears for America for 'first time' - CNN Video I would agree with his statement that a "democracy can die of too many lies" and "we're getting close to the terminal moment". 

Trump's Tax Returns: 

Which Trump Will Take the Fall for Years of Tax Fraud? | Vanity Fair; Never-Before-Seen Trump Tax Documents Show Major Inconsistencies — ProPublica

Donald is pulling out all of the stops to prevent investigators from examining his tax returns. Judge sides with NY officials in Trump tax return lawsuit | TheHill

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Impeachment-Ukraine:

The live testimony will start soon. Many will watch the witnesses through partisan lenses or simply have their approved commentators like Sean Hannity spin the testimony for them. Facts do not matter to the Trumpsters. 

A few minds may be changed but most voters have already formed an opinion that is unlikely to change.

I admittedly have formed an opinion based on a review of the evidence so far, but my mind can always be changed by reliable information. 

When watching or reading the testimony, a judgement needs to be rendered on whether Donald has been straight with the voters or has lied and mislead them.

Donald has repeatedly claimed there was no quid pro quo, no linkage whatsoever between his decision to withhold military aid and his request that Ukraine investigate both the Bidens and the baseless conspiracy that it was the Ukraine who interfered in the 2016 U.S. election against him by stealing the DNC emails and blaming it on the Russians. Republican conspiracy theories do not need factual support, nor is it even necessary for them to make any sense. 

Republican House members generated a memo outlining how to defend Trump: (1) attack the witnesses against him and (2) steadfastly maintain that Donald did nothing wrong. Republicans, Planning Impeachment Defense, Argue Trump Did Nothing Wrong - The New York Times

Some of Demagogue Don's rants from Monday:

Sondland’s Lawyer Shoots Down Trump’s Baseless Claim of Transcript Alternation There were some redactions to protect classified information and the  which was done in cooperation with officials from the Trump Administration. The name of the whistleblower disclosed by republicans was also redacted. Whistleblower name redacted from Alexander Vindman transcript; Committees Release Ambassador Bill Taylor’s Deposition Transcript as Part of Impeachment Inquiry | Permanent Select Committee on Intelligence Witnesses are allowed to view the transcripts before they are released. 

Republicans will be allowed to call some witnesses, three have already been scheduled, contrary to the statement made by the Duck.  

2 White House officials say Mulvaney helped coordinate Ukraine pressure campaign

Pentagon official testifies Trump directed freeze on aid to Ukraine

Trump’s demands of Ukraine came down to three words: ‘investigations, Biden and Clinton,’: Deputy Secretary of State George Kent sworn testimony

Trump wanted Barr to hold news conference saying the president broke no laws in call with Ukrainian leader

Republicans attempt to move impeachment inquiry away from Trump The strategy of the House republicans will be to focus on their conspiracy theories rather than Trump's conduct. 

In Louisiana, Trump Attacks ‘Deranged’ Impeachment Inquiry and ‘Radical’ Governor The "radical" democrat governor is pro-gun, anti-abortion and a former Army officer.  

Bolton suggests Trump foreign policy guided by personal interest

Adam Schiff Signals ‘Bribery’ Charge for Trump’s Impeachment: Founders Understood It as ‘Breach of the Public Trust’ I previously discussed that the authors of the Constitution had a broader definition of bribery than the criminal charge codified in a U.S. statute today. Bribery is specifically listed in the Constitution as grounds for impeachment. 

Trump Has Considered Firing Intelligence Community Inspector General  The Duck, in full authoritarian mode, wanted to fire the Inspector General of the intelligence community for finding the whistleblower's complaint credible after conducting an investigation and reporting the existence of the complaint to Congress after Donald tried to keep it from Congress.  



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Roger Stone and Trump: 

It is not surprising that Roger Stone, a former "political operative" for Richard Nixon, found a kindred spirit in Trump. 'Prepare to die' Trump adviser Stone texted witness, trial jury hears; Roger Stone: Donald Trump ally faces trial as part of Russia probe 

Stone was used by Donald to gain access to information from Wikileaks about hacked emails relating to Hillary. The Dirty Trickster | The New Yorker  Stone was an associate of Roy Cohn, another person who reflects Donald's inner self. How Donald Trump and Roy Cohn’s Ruthless Symbiosis Changed America | Vanity Fair 

The Roger Stone Trial: What’s Left of the Mueller Investigation - Lawfare

Donald Trump Apparently Thought Roger Stone Had Inside Information On WikiLeaks 

I have reviewed summaries of the evidence presented during Stone's criminal trial and view it more likely than not that the jury will return a not guilty verdict. That does not mean that Stone is innocent of the criminal charges but only that the proof was insufficient to convict using the guilt beyond a reasonable doubt proof standard. 

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Trump Organization ordered to pay $290,000 after losing battle against Scottish wind farm - The Washington Post Donald hates wind farms since in his opinion they cause cancer. Donald Trump's ridiculous link between cancer, wind turbines | PolitiFact That has to be true since Doofus Don is the smartest person who has lived on this planet or anywhere in the universe for that matter. Just ask him and he will confirm. 

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All trades are commission free except as otherwise noted: 

1. Canadian Reset Equity Preferred Stocks: 

A. Bought 50 FFHPRG at C$14.54 (C$1 IB Commission): 

Quote: FFH.PRG | Fairfax Financial Holdings Ltd. Pfd. Series G Overview 

Closing Price Yesterday: FFH-PG.TO C$14.90 -C$0.05 -0.33% 

My current approach for Canadian reset equity preferred stocks is to buy 50 shares and then consider averaging down with another 50 share lot. 

Owning several reset equity preferred stocks from the same issuer allows me to mix quarterly resets over the 3 month Canadian T Bill and five year resets at spreads over the 5 year Canadian bond. I can also have a mix of reset dates that permit some planning for potential interest rate scenarios. 

Current Positions in Fairfax Financial Preferred Stocks: 

Issuer: FFH Stock Price | Fairfax Financial Holdings Ltd. Stock Quote (Canada: Toronto) 

FFHPRG is an equity reset preferred stock that pays cumulative dividends at a 2.56% spread to the five year Canadian government bond. The coupon resets every five year with the next reset scheduled in September 2020. 

The next reset is likely to result in a dividend increase. Canada 5 Year Government Bond Overview | MarketWatch

The 2015 reset resulted in a 3.318% coupon, which indicates that the 5 year Canadian government bond was then at .758%. 

The 5 year Canadian government bond closed at a 1.58% yield yesterday. 

Current Penny Rate at 3.318% =  C$.207375 per share

Current Dividend Yield at C$14.24 = 5.78%

Prospectus Excerpt: 

If the 5 year Canadian government bond had a 1.6% yield on the next reset date calculation date, the coupon for the next five year period would become 4.16% and the dividend yield would rise to 7.25% at C$14.34. 

2. Bought 50 NMFC at $13.42:

Quote: New Mountain Finance Corp.   (NMFC)
Website: New Mountain Finance Corporation

Closing Price Yesterday: NMFC $13.47 +$0.09 +0.67% 

SEC Filings

10-Q for the Q/E 9/30/19 List of investments starts at page 8.

This brings me up to 150 shares with the other 100 shares owned in my Fidelity account. Item # 2.A. Bought 100 NMFC at $13.37  (9/18/19 Post) I received the last quarterly dividend for that 100 share lot. 

Management: External 

Dividends: Quarterly at $.34 ($1.36 annually) The dividend has been at the same penny rate for 31 straight quarters.  

NMFC has on occasion paid a special dividend during that period. The last special dividend was $.12 per share paid in 2014. There were special dividends paid in 2012 and 2013 totalling $.49 per share. 

Next Ex Dividend: 12/12/19 

Reinvestment: No, since the stock is selling near its net asset value per share.  

Dividend Yield at a TC of $13.42 = 10.13%

Last Earnings Report (Q/E 9/30/19): Okay IMO 

Net investment income per share was $.36, or 2 cents higher than the quarterly dividend. 

"At September 30, 2019, net asset value (“NAV”) per share was $13.35, compared to 13.41 at June 30, 2019." 

Risk Ratings for Investments: 

Pages 99-100 SEC Form 10-Q for the Q/E 9/30/19

New Mountain Finance Corporation Announces Financial Results for the Quarter Ended September 30, 2019 

CEO Robert Hamwee on Q3 2019 Results - Earnings Call Transcript | Seeking Alpha

Goal: Total Return in excess of the total dividend amount. 

New Mountain Finance Corporation Announces Completion of Offering of 9,200,000 Shares of Common Stock (10/25/19 Post) Public stock offerings will occur periodically. The last one was absorbed well by the market.

5 Year Annual Average Total Return Through 11/8/19 = 8.43%

The total average annual return over the past 5 years is less than the dividend yield. This would indicate that the stock price was higher than now on the start date and/or dividend reinvestments occurred at higher prices than the current price. 

This is the daily numbers for NMFC between 11/7/14 through 11/20/14: 

The closing price on Friday 11/7/14 was at $14.53. 

A five year chart would reveal periods where the reinvestment of the quarterly dividend would be at a higher price than now. NMFC | New Mountain Finance Corp. Advanced Charts | MarketWatch (chart marks dividend payment dates)

3. Small Ball ETF and CEF Trading-Working to Lower Average Cost-Sell Rallies-Buy Dips (All Commission Free):

A. Sold 5 IBB at $109.7:

Quote: iShares Nasdaq Biotechnology ETF Overview
Sponsor's Website: Ishares Nasdaq Biotechnology ETF | IBB

Closing Price Yesterday: IBB $110.38 +$0.34 +0.31% 

Renewed confidence in Amgen is helping this ETF. AMGN 1 Year Chart 

History:

Profit Snapshot: +$3.49 

Item # 6.A. Bought 5 IBB at $109 (2/17/19 Post)

Last Buy Discussions: Item # 4.B. Bought 2 IBB at $99.18 and 1 at $96.86(10/11/19 Post); Item # 4.A. Bought 1 IBB at $103.86 (4/6/19 Post)

5 Year Chart: Up and down going nowhere (price spiked to over $132 in July 2015)

Morningstar Rating at 3 Stars (up from 2 stars when I last discussed this ETF) 

Maximum Position: 20 shares

Current Position: 5 shares

Average Cost Per Share = $99.87

Purchase Restriction and Trading Rules: Small Ball 

B. Sold 50 ECON at $22.96:

Quote: Columbia Emerging Markets Consumer ETF Overview

Closing Price Yesterday: ECON $22.77 -$0.13 -0.57% 

Sponsor's Website: ECON | Columbia Emerging Markets Consumer ETF

Expense Ratio: .59%

Profit Snapshot: $35.98 

Item # 4 Bought 50 ECON at $22.24 (4/3/19 Post)

Last Discussed Item # 3.A. Bought 10 ECON at $21.68 (9/7/19 Post); Item # 4.A. Bought 5 ECON at $21.96  (6/29/19 Post)

Current Position: 15 shares

Maximum Position: 100 shares

Purchase Restriction and Trading Rules: Small Ball

Lowest Price in Current Chain: $21.68

C. Sold 50 BIF at $11.28:

Quote: Boulder Growth & Income Fund Inc. (BIF)
Sponsor's Website: Boulder Funds - Home

BIF Boulder Growth & Income-CEF Connect

SEC Form N-Q: Portfolio Holdings as of 8/31/19 (cost $594+M, value at 1.334+B)

Largest Position as of 8/31/19:

Profit Snapshot: +$1.63

Item # 1 Bought 50 BIF at $11.25  (5/8/19 Post) I selected this lot for disposition rather than use FIFO since it was my highest cost lot.

Position Before Pare-Average Cost Per Share $10.76

Position After Pare-Average Cost Per Share $10.61

Snapshot Intra-Day 11/1/19

Last Discussed: Item # 3 Bought 20 BIF at $10.55 and 30 at $10.18-Used Commission Free Trades (1/5/19 Post); Item # 3 Bought 100 BIF at $10.73 (11/25/18 Post)

Last Elimination: Item # 3.B. Eliminated BIF: Sold 116+ (2/16/17 Post)(profit snapshot = $137.25) That post contains snapshots of prior trades. The first round trip ended in 2013.

Dividend: Quarterly at $.102 per share

Last Ex Dividend Date: 10/22/19

Dividend Reinvestment Yes when the likely reinvestment price is at a greater than 10% discount to net asset value per share

BIF Trading Profits to Date: +$423.07

Purchase Restriction: None

4. Eliminations and Pares:

A. Sold 50 HUSKY at US$7.64-Commission Free at Schwab:

Quote: Husky (HUSKF) - USD Priced Shares Pink Sheet Exchange

Closing Price Yesterday: HUSKF $7.74 -$0.04 -0.51% 

Website: Husky Energy

Profit Snapshot: +$31.89

Item # 1. Bought 50 HUSKF at $6.9 (8/21/19 Post)

Last Earnings Report: Unfavorable

Husky Energy Reports Third Quarter 2019 Results

I received one quarterly dividend.

Dividend Quarterly at C$.125 per share

Husky Energy Announces Third Quarter 2019 Dividend and Fourth Quarter 2019 Preferred Shares Dividend Payments

I will consider a re-entry at less than $6.5 per share.

B. Pared OFS in Fidelity Account-Sold Highest Cost lots at $12:

Quote: OFS Capital Corp.  (OFS)
Website: Homepage - OFS Capital
OFS SEC Filings
2018 Annual Report (risk summary starts at page 25 and ends at page 51)

Subsequent to the third quarter report, the analyst at Ladenburg Thalmann downgraded OFS to neutral from buy and removed the $13 price target. The reasons are summarized here: Ladenburg Thalmann downgrades OFS Capital to 'neutral' | S&P Global Market Intelligence (may require scrolling down to find) The main reasons appear to be the decline in net asset value per share, as I discuss below; and the increase in underperforming debt investments from 8% to 15%. Both are matters of legitimate concern. 

Management: External

Profit Snapshot: +$13.11

Item # 3.B. Bought 20 OFS at $11.7 (10/17/18 Post); Item # 1.C. Added 10 OFS at $11.3 (10/21/18 Post)

Average Cost Per Share Before Pare: $10.79

Average Cost After Pare: $10.4

Snapshot 11/8/19 During Trading Day 

Dividend: Quarterly at $.36 per share excluding special dividends (regular dividend at $1.36 annually)

Dividend yield at Total Average Cost (this account) =  13.08%

Next Ex Dividend Date: 12/23/19

Reinvestment: Yes, in this account when the likely reinvestment price is likely to be at a 5% or higher discount to the last reported net asset value per share)l   at greater

Goal: A realized total return in excess of the total dividend amount which is always the case for a BDC. 

Lowest Priced Lot in this Chain: 20 shares at $9.61 (12/18/18)

Ownership Other Account: I also own shares in my Schwab where I have worked the average cost per share down to $10.1. 

Chart Since IPO: Suggests Trading Strategy 

Net Asset Value Per Share History:

The recent trend starting in 2017 is worrisome. 

The decline in the third quarter precipitated the pare of my highest cost lots held in my Fidelity account. .  

9/30/19:   $12.74

6/30/19:   $12.95   Page 2 10-Q  

3/31/19     $13.04   10-Q

12/31/18    $13.10
6/30/18     $13.70
03/31/18   $13.67
12/31/17    $14.12
12/31/16   $14.82
12/31/15    $14.76
12/31/14    $14.24
12/31/13    $14.54

IPO Offering Price at $15 (November 2012) with proceeds after the underwriters' discount at $13.05 Final Prospectus Supplement

Last Earnings Report (Q/E 9/30/19: 

NII per share was reported at $.36 per share, which was in line with the consensus estimate. Net asset value per share sank 1.62% to $12.74 from $12.95 as of 6/30/19. 

"As of September 30, 2019, floating rate loans as a percentage of fair value comprised 90% of OFS Capital’s debt investment portfolio, with the remaining 10% in fixed rate loans."

I would highlight two negatives. The first is the worrisome decline in net asset value per share. The second is that NII per share just covers the $.36 per share dividend.  

OFS Capital Corporation Announces Third Quarter 2019 Financial Results 

CEO Bilal Rashid on Q3 2019 Results-Seeking Alpha

Last Sell Discussion: Item # 3 Pared OFS-Sold Highest Cost Lots in Schwab Account: 50 Shares at $12.47 and 50 Shares at $12.27 (5/5/19 Post)

Last Buy Discussions: Item # 3B. Bought 10 OFS at $9.95 and 20 at $9.61 Using Fidelity Commission Free Trades (1/9/19 Post); Item # 4.B. Bought 10 OFS at $11.07 and 10 at $10.75 Used Fidelity Commission Free Trades (11/11/18 Post)

OFS Baby Bonds:

OFS has an exchange trade SU baby bond: OFS Capital Corp. 6.375% Notes due 2025 (OFSSL); Prospectus 

On 10/12/18, OFS sold $48.11+M (with the greenshoe) in principal amount of 6.5% senior unsecured notes maturing on 10/31/25. OFS Capital Corporation Prices Public Offering of $43,500,000 6.50% Notes Due 2025 

OFS recently issued another senior unsecured bond with a 5.95% coupon that matures in 2026: OFSSI | OFS Capital Corp. 5.95% Notes due 2026 Overview; Prospectus

Currently I am not interested in those baby bonds. When and if there is a substantial rise in intermediate term interest rates, provoking panic selling of those notes and accompanying significant price declines, I may take a look see.

With senior unsecured debt, it is important to evaluate how that debt may be subordinated in the capital structure:

Subordination Summary

C. Eliminated OFS IB Account-Sold 50 Shares at $11.93: See discussion above

Profit snapshot: $44.62

Item # 2 Bought 50 OFS at $11 (8/3/19 Post) I received one quarterly dividend and did not reinvest it. 

OFS Realized Gains to Date = $127.28  (selling highest cost lots)

While the realized gain is nominal, the trading activity so far is viewed as successful for the following reasons: (1) I have realized a profit after harvesting dividend payments so my total return exceeds the dividend amount which is how I define success for BDC positions; and (2) I have traded the position down to my lowest cost shares which increases my dividend yield and reduces my risk given the lower monetary exposure.    

Remaining OFS Positions: 

Fidelity: 58+ shares average cost per share at $10.4
Schwab:  60+ shares average cost per share at $10.1

5. Short Term Bond Ladder Basket Strategy-Tennessee Municipal Bonds: 

I am going to classify the following Tennessee municipal bond as a short term one, even though it matures in 2036. 

The issuer has the optional right to call on or after 6/1/21 at par plus accrued and unpaid interest. 

That call is highly likely to happen on 6/1/21. 

It would take a major move up in interest rates for the issuer to delay calling it. 

A. Bought 5 Johnson City Tennessee 3.25% GO Bonds Maturing on 6/1/2036 (price includes a $1 per bond Commission): 

Johnson City - Google Maps

I paid $73.13 to the seller in accrued interest. I will receive that sum back and a few more dollars when the issuer makes a semi-annual payment on 12/1/19. 

I will then receive 3 more semi-annual payments totaling $243.75 before the likely call on 6/1/21 whereupon I will lose $72.9 on the bond. Netting the interest payments out with the bond loss, I will be up about $177.  

The YTM on a yield to worst basis, which assumes a call on 6/1/21, is 2.287% at my total cost of 101.438. On the day of my purchase, the 2 year treasury closed at a 1.68% yield with the 1 year at 1.58%. Daily Treasury Yield Curve Rates

The current tax free yield would be higher at 3.2039%.    

This Johnson City bond purchase is another comparatively less bad buy compared to treasuries and CDs. 

Emma Page

Optional Call: At par value on or after 6/1/21. 

Credit Rating: Aa2 by Moody's 

Security and Optional Call Provision from Offering Statement: 

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.