Economy:
Trump says it might be better to wait until after 2020 election for a China deal I have repeatedly stated here that considerable investor skepticism is warranted when assessing Donald's representations about the progress of the China trade negotiations. Investors are continually having their chain jerked by this Administration's statements about the trade negotiations.
Donald has repeatedly claimed that the Phase 1 agreement was near completion and negotiations were going very well. If everything was as he previously claimed, why would there be a need to postpone negotiations until after the election?
IMO, the consensus opinion reflected in stock index levels is that a phase 1 agreement will soon be consummated without new tariffs being levied and some existing tariffs being rolled back.
Donald's bluster yesterday is consequently interpreted as a negotiating tactic. Jeremy Siegel expressed that belief yesterday. Jeremy Siegel: Without deal, he may not 'want to be around equities' (Siegel: “Honestly, in my personal opinion, this is just a negotiating tactic — be really tough right before you make a deal. I still think he will make a deal this year.”)
The underlying belief in this consensus opinion is that the U.S. economy will benefit primarily from the tariff rollback and the suspension of new tariffs. Another December sell-off is feared if Trump tariffs take effect Dec. 15; China December tariffs still on: sources | Fox Business Some other benefits would only restore conditions almost to where they were before Donald started the trade war.
Bloomberg reported earlier today, citing people familiar with the talks, that China and the U.S. were "moving closer" on the amount of tariffs that would be rolled back as part of a Phase 1 agreement. U.S., China Move Closer to Trade Deal Despite Heated Rhetoric - Bloomberg The unnamed sources basically said that Donald's comment yesterday needed to be ignored because he was speaking "off the cuff".
There is nothing in yesterday's stock decline that indicates that the Stock Jocks have any serious concerns however. The decline had no punch and stocks recovered late in the day from declines that barely crept over 1%: S & P 500: 3,093.20 -20.67 -0.66% (intra-day low at 3.070.33) And, stocks are rallying in pre-market trading today based on the Bloomberg report.
Trump says it might be better to wait until after 2020 election for a China deal I have repeatedly stated here that considerable investor skepticism is warranted when assessing Donald's representations about the progress of the China trade negotiations. Investors are continually having their chain jerked by this Administration's statements about the trade negotiations.
Donald has repeatedly claimed that the Phase 1 agreement was near completion and negotiations were going very well. If everything was as he previously claimed, why would there be a need to postpone negotiations until after the election?
IMO, the consensus opinion reflected in stock index levels is that a phase 1 agreement will soon be consummated without new tariffs being levied and some existing tariffs being rolled back.
Donald's bluster yesterday is consequently interpreted as a negotiating tactic. Jeremy Siegel expressed that belief yesterday. Jeremy Siegel: Without deal, he may not 'want to be around equities' (Siegel: “Honestly, in my personal opinion, this is just a negotiating tactic — be really tough right before you make a deal. I still think he will make a deal this year.”)
The underlying belief in this consensus opinion is that the U.S. economy will benefit primarily from the tariff rollback and the suspension of new tariffs. Another December sell-off is feared if Trump tariffs take effect Dec. 15; China December tariffs still on: sources | Fox Business Some other benefits would only restore conditions almost to where they were before Donald started the trade war.
Bloomberg reported earlier today, citing people familiar with the talks, that China and the U.S. were "moving closer" on the amount of tariffs that would be rolled back as part of a Phase 1 agreement. U.S., China Move Closer to Trade Deal Despite Heated Rhetoric - Bloomberg The unnamed sources basically said that Donald's comment yesterday needed to be ignored because he was speaking "off the cuff".
There is nothing in yesterday's stock decline that indicates that the Stock Jocks have any serious concerns however. The decline had no punch and stocks recovered late in the day from declines that barely crept over 1%: S & P 500: 3,093.20 -20.67 -0.66% (intra-day low at 3.070.33) And, stocks are rallying in pre-market trading today based on the Bloomberg report.
Black Friday shoppers spend record $7.4 billion; Black Friday shoppers stay away from stores, make $7 billion-plus splurge online - Reuters
Black Friday shopping at brick-and-mortar stores dropped by 6%
Black Friday shopping at brick-and-mortar stores dropped by 6%
China wants tariffs rollback in phase one trade deal with US, says Chinese media I do not believe China is bluffing on that demand.
Trump says he will restore tariffs on Brazil, Argentina metal imports
Donald has argued in the past that the Fed needs to cut the federal rate below zero. The Bond Ghouls currently believe there is a zero probability of another FF cut this year. Countdown to FOMC: CME FedWatch Tool
There was talk about green shoots arising in China after the Caixin-Markit survey of manufacturing purchasing managers rose to 51.8 from 51.7 in October. Caixin Markit manufacturing PMI for November
Small business confidence up on optimism about US-China trade deal
U.S. manufacturing sector weakens further in November-ISM- MarketWatch (48.1% vs. consensus at 49.2%; any number below 50 indicates an ongoing contraction).
Construction spending falls in October, missing forecasts- MarketWatch (consensus at +.4% with actual at -.8%)
US vows 100% tariffs on French Champagne, cheese over digital tax The 3% digital services tax does target U.S. giants like Amazon, Apple, Facebook and Google.
Trump says he will restore tariffs on Brazil, Argentina metal imports
Donald has argued in the past that the Fed needs to cut the federal rate below zero. The Bond Ghouls currently believe there is a zero probability of another FF cut this year. Countdown to FOMC: CME FedWatch Tool
There was talk about green shoots arising in China after the Caixin-Markit survey of manufacturing purchasing managers rose to 51.8 from 51.7 in October. Caixin Markit manufacturing PMI for November
Small business confidence up on optimism about US-China trade deal
U.S. manufacturing sector weakens further in November-ISM- MarketWatch (48.1% vs. consensus at 49.2%; any number below 50 indicates an ongoing contraction).
Construction spending falls in October, missing forecasts- MarketWatch (consensus at +.4% with actual at -.8%)
US vows 100% tariffs on French Champagne, cheese over digital tax The 3% digital services tax does target U.S. giants like Amazon, Apple, Facebook and Google.
+++++
Markets and Market Commentary:
Don’t time the market, but if you do, here’s when the bear might come knocking - MarketWatch
International stocks to outperform U.S. in 2020: investors - Reuters
Jeff Saut: Recent market sell-off is an 'early Christmas gift' I don't know what this guy is smoking. The decline so far amounts to nothing significant, with the major indexes near their all time highs. Importantly, the risks that could cause a major slide are not reflected at all in current stock index levels A blue sky scenario for the U.S. economy, lasting for several more years, is forecasted as the only possible one with recession odds at near zero percent within the next two years.
International stocks to outperform U.S. in 2020: investors - Reuters
Jeff Saut: Recent market sell-off is an 'early Christmas gift' I don't know what this guy is smoking. The decline so far amounts to nothing significant, with the major indexes near their all time highs. Importantly, the risks that could cause a major slide are not reflected at all in current stock index levels A blue sky scenario for the U.S. economy, lasting for several more years, is forecasted as the only possible one with recession odds at near zero percent within the next two years.
The global economy is ‘bottoming out’ and that’s good news for stocks, says Deutsche Bank - MarketWatch I can not find the facts that support this bottoming out thesis. The forecast is based more on hope than facts.
How the market sell-off could get worse: 'Better put on your helmet'
IMO, the major tailwinds for stocks are low inflation, abnormally low interest rates and extremely excessive amounts of central bank created money that has no use in the real economy.
For me, the downside risk of stock ownership is more of a concern than missing out on further upside from current index levels.
How the market sell-off could get worse: 'Better put on your helmet'
IMO, the major tailwinds for stocks are low inflation, abnormally low interest rates and extremely excessive amounts of central bank created money that has no use in the real economy.
For me, the downside risk of stock ownership is more of a concern than missing out on further upside from current index levels.
+++++
Trump:
Ukraine Knew of Aid Freeze in July, Says Ex-Top Official in Kyiv Ukraine's Deputy Minister of Foreign Affairs confirmed that top officials in the Ukraine knew that Trump had frozen military aid in July.
Ukraine Knew of Aid Freeze in July, Says Ex-Top Official in Kyiv Ukraine's Deputy Minister of Foreign Affairs confirmed that top officials in the Ukraine knew that Trump had frozen military aid in July.
Republicans to mount aggressive campaign against impeachment as spotlight turns to Judiciary panel The argument being made now was that Donald's request for investigations into the Bidens was "apolitical".
Trump’s counsel says president won’t participate in House Judiciary’s first impeachment panel, calling it unfair
Trump's approval rating among business owners hits all-time high (60% from 57%)
Fact Checker: Not enough Pinocchios for Trump’s CrowdStrike obsession I can not recall another instance where a U.S. President formulated U.S. foreign policy based on an outlandish and fact free conspiracy theory.
One of Donald's favorite shticks among his cult members is acting out an orgasm when criticizing a woman. Trump's 'Demeaning Fake Orgasm' Prompts Ex-FBI Agent Lisa Page to Speak Out, Call President's Tweets About Her 'Sickening'
Trump's approval rating among business owners hits all-time high (60% from 57%)
Fact Checker: Not enough Pinocchios for Trump’s CrowdStrike obsession I can not recall another instance where a U.S. President formulated U.S. foreign policy based on an outlandish and fact free conspiracy theory.
One of Donald's favorite shticks among his cult members is acting out an orgasm when criticizing a woman. Trump's 'Demeaning Fake Orgasm' Prompts Ex-FBI Agent Lisa Page to Speak Out, Call President's Tweets About Her 'Sickening'
+++++
All trades are commission free except as otherwise noted.
1. Bought 100 PFXF at $20.06:
Quote: VanEck Vectors Preferred Securities ex Financials ETF
As the name indicates, this ETF does not own bank preferred stocks which are the largest single sector component of the U.S. "preferred" stock universe.
Sponsor's Website VanEck Vectors Preferred Securities ex Financials ETF
Expense Ratio .41% (after .05% fee waiver)
Holdings: 125
SEC Yield: 5.3% as of 11/22/19
Credit Quality as of 10/31/19:
Top 10 Holdings as of 10/31/19:
Distributions: Monthly
Mentioned in 3 Preferred Stock ETFs for High, Stable Dividends
Last Ex Dividend: 12/2/19 (after purchase)
As with other "preferred stock" ETFs, PFXF owns some senior and junior bonds which are not properly classified as traditional equity preferred stocks that are senior only to common stock.
A few of the bonds that I identified in PFXF's annual report are the following (Verizon bond has since been called):
AT&T Inc. 5.625% Global Notes due 2067 (TBC); AT&T Inc. 5.35% Global Notes due 2066 (TBB); eBay Inc. 6% Notes due 2056 (EBAYL); U.S. Cellular Corp. 7.25% Sr. Notes 12/01/63 (UZB). The Qwest bonds are senior unsecured exchange traded bonds with the symbols CTY, CTBB, CTZ, CTDD, and CTV. Of those bonds, I have only traded EBAYL.
The issuer can call those bonds on or after the dates listed for each bond. That is a problem since many of these securities will be called and are currently selling at prices in excess of their par values.
I did not attempt to identify every bond owned by PFXF. Several of the utility "preferred stocks" are bonds including a few first mortgage bonds.
Some electric utility junior bonds include CMS Energy's CMSC; Dominion's DRUA; DTE Energy's DTQ and DTJ; Duke Energy's DUKH and DUKB; NextEra's NEE-I, NEE-K, NEE-J; Sempra Energy's SREA; and Southern Company's SOJB, SOJC, and SOJA.
The 7% Centerpoint (CNP-B) is a convertible preferred stock. Prospectus; CNP.PRB CenterPoint Energy Inc. Cumulative Convertible Preferred Series B. The issue with that mandatory convertible stock is the conversion date of 9/1/2021, the current CNP common share price, and the exchange ratios for that price (see prospectus, e.g. 1.8349 CNP shares for each $50 par value convertible preferred share with a CNP at or than $27.50 so exchange value at a CNP $25 price would be worth $45.87 for each $50 par value preferred share).
I will add a few more shares at lower prices. I will not be reinvesting the dividend however.
All trades are commission free except as otherwise noted.
1. Bought 100 PFXF at $20.06:
As the name indicates, this ETF does not own bank preferred stocks which are the largest single sector component of the U.S. "preferred" stock universe.
Sponsor's Website VanEck Vectors Preferred Securities ex Financials ETF
Expense Ratio .41% (after .05% fee waiver)
Holdings: 125
SEC Yield: 5.3% as of 11/22/19
Credit Quality as of 10/31/19:
Distributions: Monthly
Last Ex Dividend: 12/2/19 (after purchase)
As with other "preferred stock" ETFs, PFXF owns some senior and junior bonds which are not properly classified as traditional equity preferred stocks that are senior only to common stock.
A few of the bonds that I identified in PFXF's annual report are the following (Verizon bond has since been called):
The issuer can call those bonds on or after the dates listed for each bond. That is a problem since many of these securities will be called and are currently selling at prices in excess of their par values.
I did not attempt to identify every bond owned by PFXF. Several of the utility "preferred stocks" are bonds including a few first mortgage bonds.
 |
| First Mortgage Bonds: EAI, ELC, EMP |
The 7% Centerpoint (CNP-B) is a convertible preferred stock. Prospectus; CNP.PRB CenterPoint Energy Inc. Cumulative Convertible Preferred Series B. The issue with that mandatory convertible stock is the conversion date of 9/1/2021, the current CNP common share price, and the exchange ratios for that price (see prospectus, e.g. 1.8349 CNP shares for each $50 par value convertible preferred share with a CNP at or than $27.50 so exchange value at a CNP $25 price would be worth $45.87 for each $50 par value preferred share).
I will add a few more shares at lower prices. I will not be reinvesting the dividend however.
2 Small Ball Buys:
A. Bought 10 SAR at $25.1:
Quote: Saratoga Investment Corp-A BDC
SEC Filings
Last Filed Form 10-Q (Q/E 8/31/19)
Investments are listed starting at page 23.
Form 10-K for the fiscal year ending 2/28/19 (risk factor summary starts at page 28 and ends at page 53)
Management: External
Net Asset Value Per Share History:
Annual numbers (2015-2019) are sourced from the F/Y 2019 annual report at page F-45 Form 10-K
8/31/19 : $24.47 Form 10-Q
2/28/19 : $23.62
2/28/18 : $22.96
2/28/17 : $21.97
2/29/16 : $22.06
2/28/15 : $22.70
Dividend: Quarterly at $.56 per share
Saratoga Investment Corp. Increases Quarterly Dividend to $0.56 per Share Represents the 20th Sequential Quarterly Dividend Increase
Last Ex Dividend: 9/12/19
Last Earnings Report (fiscal quarter ending in August):
"Return on equity for the last twelve months ended August 31, 2019 was 14.3%, compared to 11.6% for the comparable period last year.
As of August 31, 2019, the weighted average current yield on Saratoga Investment’s portfolio for the twelve months ended was 10.1%, which was comprised of a weighted average current yield of 10.3% on first lien term loans, 11.6% on second lien term loans, 0.0% on unsecured term loans, 14.7% on CLO subordinated notes and 2.6% on equity interests."
A. Bought 10 SAR at $25.1:
Quote: Saratoga Investment Corp-A BDC
SEC Filings
Last Filed Form 10-Q (Q/E 8/31/19)
Investments are listed starting at page 23.
Form 10-K for the fiscal year ending 2/28/19 (risk factor summary starts at page 28 and ends at page 53)
Management: External
Net Asset Value Per Share History:
Annual numbers (2015-2019) are sourced from the F/Y 2019 annual report at page F-45 Form 10-K
8/31/19 : $24.47 Form 10-Q
2/28/19 : $23.62
2/28/18 : $22.96
2/28/17 : $21.97
2/29/16 : $22.06
2/28/15 : $22.70
Dividend: Quarterly at $.56 per share
Saratoga Investment Corp. Increases Quarterly Dividend to $0.56 per Share Represents the 20th Sequential Quarterly Dividend Increase
Last Ex Dividend: 9/12/19
Last Earnings Report (fiscal quarter ending in August):
"Return on equity for the last twelve months ended August 31, 2019 was 14.3%, compared to 11.6% for the comparable period last year.
As of August 31, 2019, the weighted average current yield on Saratoga Investment’s portfolio for the twelve months ended was 10.1%, which was comprised of a weighted average current yield of 10.3% on first lien term loans, 11.6% on second lien term loans, 0.0% on unsecured term loans, 14.7% on CLO subordinated notes and 2.6% on equity interests."
The $1.9 million net realized gain reflects (i) a $1.3 million gain from the realization of the Company’s Fancy Chap investment during the quarter, as well as (ii) a $0.6 million gain on the Company’s Censis Technologies investment resulting from the receipt of a dividend recap in excess of the investment's cost basis."
Other Recent News: Saratoga Investment Corp. Receives Approval of Second SBIC License Providing Up to $175 Million of Additional Growth Capital
B. Bought 50 HT at $14.06 and 10 at $13.75:
4 Year History HT This Account (Schwab):
Quote: Hersha Hospitality Trust Cl A (HT)
Closing Price Yesterday: HT $13.94 -$0.10 -0.71%
Company Website: Hersha Hospitality Trust
Our Hotels | Hersha Trust
5 Year Chart as of 11/22/19: Bear Market Trend (possible bottoming action far right side)
Average Cost Per share this account = $14.01
Dividend: Quarterly at $.28 per share ($1.12 annually)
Last Ex Dividend: 9/27/19
Dividend Yield at $14.01 Total Cost = 7.99%
Last Transaction: Item # 4.C. Sold 35 HT at $14.72 (11/16/19 Post)(profit snapshot = $34.98)
Third Quarter Earnings Report: Hersha Hospitality Trust Announces Third Quarter 2019 Results
I discussed that report in this comment.
I currently own 80 HT shares in my IB account. Item # 2.A. Bought 30 HT at $13.92 (9/11/19 Post); Item # 4.A. Bought 50 HT at $16.27 (7/7/19 Post)
I also own HTPRD, an equity preferred stock issued by Hersha. I am down to owning just 50 shares.
HT Trading Profits to Date: $357.19
Prior Round-Trips:
Item # 2.B. Sold 50 HT at $19.02-In a Roth IRA Account (4/23/18 Post)-Item # 4.A. Bought 50 HT at $17.37-In a Roth IRA Account (3/1/2018 Post)
Item # 2.C. Sold 10 HT at $19.11-Used Commission Free Trade (4/23/18 Post)-Item 4.B. Bought 10 HT at $16.83 Used Commission Free Trade (3/1/2018 Post)
Item # 2.B. Sold 50 HT at $18.58-Used Commission Free Trade (2/8/18 Post)-Item 5.B. Bought 50 HT at $17.41 (12/18/17 POST)
Strategy: I will continue with my small ball buy program in my IB account, but will periodically try to trade small lots in either my Fidelity or Schwab accounts, particularly when there is a price downdraft shortly before the ex dividend date that is greater than the dividend penny rate.
Dividend: Quarterly at $.28 per share ($1.12 annually)
Last Ex Dividend: 9/27/19
Dividend Yield at $14.01 Total Cost = 7.99%
Last Transaction: Item # 4.C. Sold 35 HT at $14.72 (11/16/19 Post)(profit snapshot = $34.98)
Third Quarter Earnings Report: Hersha Hospitality Trust Announces Third Quarter 2019 Results
I discussed that report in this comment.
I currently own 80 HT shares in my IB account. Item # 2.A. Bought 30 HT at $13.92 (9/11/19 Post); Item # 4.A. Bought 50 HT at $16.27 (7/7/19 Post)
I also own HTPRD, an equity preferred stock issued by Hersha. I am down to owning just 50 shares.
HT Trading Profits to Date: $357.19
Prior Round-Trips:
Item # 2.B. Sold 50 HT at $19.02-In a Roth IRA Account (4/23/18 Post)-Item # 4.A. Bought 50 HT at $17.37-In a Roth IRA Account (3/1/2018 Post)
Item # 2.C. Sold 10 HT at $19.11-Used Commission Free Trade (4/23/18 Post)-Item 4.B. Bought 10 HT at $16.83 Used Commission Free Trade (3/1/2018 Post)
Item # 2.B. Sold 50 HT at $18.58-Used Commission Free Trade (2/8/18 Post)-Item 5.B. Bought 50 HT at $17.41 (12/18/17 POST)
Strategy: I will continue with my small ball buy program in my IB account, but will periodically try to trade small lots in either my Fidelity or Schwab accounts, particularly when there is a price downdraft shortly before the ex dividend date that is greater than the dividend penny rate.
3. Small Ball Eliminations:
I have eliminated almost all of my small stock ETF positions prior to this week. I am only going to briefly mention those liquidations in several subsequent posts through most of December.
I am redirecting the proceeds into a few 100 share individual stock purchases. I previously discussed one of those buys. Item # 1 Bought 100 CBS at $38.4 (11/27/19 Post) CBS will complete its acquisition of Viacom after the close today with a new symbol for the combined company in effect tomorrow.
I will be discussing two more 100 share purchases that have already been made in subsequent posts.
The amounts redirected from ETFs to individual stocks are not material to me.
The goal is simply for the individual stock positions to do better than the ETFs, either going up more in dollars or down less using total return calculations.
I have eliminated almost all of my small stock ETF positions prior to this week. I am only going to briefly mention those liquidations in several subsequent posts through most of December.
I am redirecting the proceeds into a few 100 share individual stock purchases. I previously discussed one of those buys. Item # 1 Bought 100 CBS at $38.4 (11/27/19 Post) CBS will complete its acquisition of Viacom after the close today with a new symbol for the combined company in effect tomorrow.
I will be discussing two more 100 share purchases that have already been made in subsequent posts.
The amounts redirected from ETFs to individual stocks are not material to me.
The goal is simply for the individual stock positions to do better than the ETFs, either going up more in dollars or down less using total return calculations.
A. Sold 30 DGRO at $40.95:
Quote: iShares Core Dividend Growth ETF Overview
Yesterday's Closing Price: DGRO $40.60 -$0.36 -0.88%
Yesterday's Closing Price: DGRO $40.60 -$0.36 -0.88%
Profit Snapshot: +$106.21
Last Discussed: Added 5 DGRO at $36.37 (6/5/19 Post); Item # 4.A. Bought 5 DGRO at $37.17 and 5 ant $36.71 (5/15/19 Post)
B. Sold 20 FDVV at $31.28:
Profit Snapshot: $36.11
Last Discussed: Item 4.B. Bought 5 FDVV at $29.3 (6/5/19 Post) Item # 4.A. Bought 10 FDVV at $30.2 (4/27/19 Post)
C. Sold 10 FDRR at $33.98:
Quote: Fidelity Dividend ETF for Rising Rates (FDRR)
Closing Price Yesterday: FDRR $33.59 $-0.29 -0.86%
Closing Price Yesterday: FDRR $33.59 $-0.29 -0.86%
Profit Snapshot: +$45.25
Last Discussed: Item # 1.D. Bought 10 FDRR at $29.5 (1/27/19 Post)
Prior Sell: Item # 1.C. Sold 10 FDRR at $31.16 (7/25/18 Post)(profit = $14.26)-Item # 1.D. Bought 10 FDRR at $29.71 (5/10/18 Post)
Sponsor's Website: FDRR | ETF Snapshot - Fidelity
Expense Ratio: .29%
Prior Sell: Item # 1.C. Sold 10 FDRR at $31.16 (7/25/18 Post)(profit = $14.26)-Item # 1.D. Bought 10 FDRR at $29.71 (5/10/18 Post)
Sponsor's Website: FDRR | ETF Snapshot - Fidelity
Expense Ratio: .29%
D. Sold FCOM at $34.95:
Quote: Fidelity MSCI Communication Services Index ETF Overview
Closing Price Yesterday: FCOM $34.69 -$0.03 -0.09%
Closing Price Yesterday: FCOM $34.69 -$0.03 -0.09%
Expense Ratio: .084%
Sponsor's Website: FCOM | ETF Snapshot - Fidelity
Profit Snapshot: +$39.19
Last Discussed: Item # 4.A. (4/20/19 Post)
4. Canadian Reset Equity Preferred Stocks:
A. Added 50 CPXPRE at C$17.24 (C$1 IB Commission):
Quote: Capital Power Corp. Cumulative Preferred Series 5
I have nothing to add to my recent discussion. Item # 3.A. Bought 50 CPXPRE at C$17.63 (10/30/19 Post)
Current Position: 100 shares
Average Total Cost Per Share: C$17.455
Yield at Current Coupon Rate: 7.5%
Next Quarterly Ex Dividend Date: 12/13/19
5. Tennessee Municipal Bonds:
A. Bought 5 Kingsport, TN. 3.25% GO Maturing on 3/1/36:
The 103.6 number shown in this confirmation is my total cost which includes a $1 per bond commission. The purchase price was 103.5.
Emma Page
Credit Ratings:
Moodys at Aa2
S & P at AA
Issuer Optional Redemption: At par value on or after 3/1/25
IMO, this bond's current price reflects a consensus opinion that it will be called on 3/1/25. That is of course subject to change.
Current Tax Free Yield at TC of 103.6 = 3.1371%
Yield to Worst = 2.512% (assumes issuer redemption on 3/1/25)
The 5 year treasury closed yesterday with a 1.54% yield. Daily Treasury Yield Curve Rates If I assume that Kingsport will call this bond on 3/1/25, which is the only reasonable assumption at the moment, the 5 year treasury is the relevant benchmark yield. The Kingsport bond provides me with almost a 1% higher yield per year than the 5 year treasury which goes up even higher on an after tax basis.
I do not view the yield to maturity number as being relevant unless there is a significant rise in interest rates that renders the optional redemption unlikely. The YTM assumes that the issuer will make all interest payments and redeem the bond at par value upon maturity. The YTM would be close to 3%, probably around 2.96%.
Kingsport, TN. - Google Maps
Security:
I still own 5 Kingsport 3% GO bonds maturing on 3/31/36 that has the same optional call date. Item # 8.B. Bought 5 Kingsport 3% GO Maturing on 3/1/36 at a TC of 98.524 (9/28/17 Post)
Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.
A. Added 50 CPXPRE at C$17.24 (C$1 IB Commission):
Quote: Capital Power Corp. Cumulative Preferred Series 5
I have nothing to add to my recent discussion. Item # 3.A. Bought 50 CPXPRE at C$17.63 (10/30/19 Post)
Current Position: 100 shares
Average Total Cost Per Share: C$17.455
Yield at Current Coupon Rate: 7.5%
Next Quarterly Ex Dividend Date: 12/13/19
5. Tennessee Municipal Bonds:
A. Bought 5 Kingsport, TN. 3.25% GO Maturing on 3/1/36:
The 103.6 number shown in this confirmation is my total cost which includes a $1 per bond commission. The purchase price was 103.5.
Emma Page
Credit Ratings:
Moodys at Aa2
S & P at AA
Issuer Optional Redemption: At par value on or after 3/1/25
IMO, this bond's current price reflects a consensus opinion that it will be called on 3/1/25. That is of course subject to change.
Current Tax Free Yield at TC of 103.6 = 3.1371%
Yield to Worst = 2.512% (assumes issuer redemption on 3/1/25)
The 5 year treasury closed yesterday with a 1.54% yield. Daily Treasury Yield Curve Rates If I assume that Kingsport will call this bond on 3/1/25, which is the only reasonable assumption at the moment, the 5 year treasury is the relevant benchmark yield. The Kingsport bond provides me with almost a 1% higher yield per year than the 5 year treasury which goes up even higher on an after tax basis.
I do not view the yield to maturity number as being relevant unless there is a significant rise in interest rates that renders the optional redemption unlikely. The YTM assumes that the issuer will make all interest payments and redeem the bond at par value upon maturity. The YTM would be close to 3%, probably around 2.96%.
Kingsport, TN. - Google Maps
Security:
I still own 5 Kingsport 3% GO bonds maturing on 3/31/36 that has the same optional call date. Item # 8.B. Bought 5 Kingsport 3% GO Maturing on 3/1/36 at a TC of 98.524 (9/28/17 Post)
Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.
""Jeff Saut: Recent market sell-off is an 'early Christmas gift' I don't know what this guy is smoking. The decline so far amounts to nothing significant, with the major indexes near their all time highs. Importantly, the risks that could cause a major slide are not reflected at all in current stock index levels""
ReplyDeleteThat's my impression too. Lots of climb days just happened, I think a whole month's worth. So two days at around 1% down, is hardly a clean out.
It may be a great time to buy, because the market clearly is continuing up in it's mood. Question still is, when will factors be counted in?
I think this is doing a great setup for the VIX pattern, when it switches to unstable, for the recovery phase to happen like it has in the past. The emotional disbelief needed for that phase is available. So after a shock, there'll be recovery. Before reality sets in -- unless what triggers seeing reality is THAT effective when it happens.
I'm thinking of doing some buying, but going into election year ... will market see DNC wins as positive financially, or negative? Is the election looming going to be a risk factor that effects the market?
I'm saving this comment in case it disappears too.
Land: ADP reported earlier today that private sector jobs increased by only 67,000 last month. The economy is in a slowdown, notwithstanding abnormally low interest rates, the tax cuts, and a federal government deficit spending close to $1 trillion per year.
DeleteEuphoria builds up during a long and powerful stock market rally. Dips, like the one experienced during the 2018 4th quarter, are viewed as buying opportunities.
It will take a lot of bad news to cause a change from everything is going to be fine to its bad now and will only get worse.
Trump said earlier today that the negotiations are going very well, which is impossible to reconcile with his comments yesterday.
The Stock Jocks are used to having their chained jerked by Trump and others in his administration relating to the trade negotiations.
Maybe there will need to be a longer term and material reassessment when and if negotiations break down and new tariffs are levied on 12/15, with no roll back in existing ones. Fear of a breakdown is not going to cause that reassessment IMO.
I'll keep my eye on 12/15 then to see what Trump does... and market reaction.
DeleteOh wait, by then he'll find a way to smooth this over with "listeners" and push the date. It won't be a meaningful day for negotiations. They won't breakdown. They'd be "going super, the best they've ever been, but need to move them to next year because of those *@$% democrats."
Economy real slow down is more of a concern. With unemployment so low, wouldn't new jobs slow down naturally?
The bigger question is wages, which need to move up already.
Land: There are a lot of data points that are important when looking at employment data including new jobs, wage growth, hours worked, the U-6 rate in Table A-15, and the labor participation rate.
DeleteThe monthly reports have all of these data points.
Link to last report:
https://www.bls.gov/news.release/empsit.nr0.htm
Given the size of the labor force, for example, a .1 change in the average work week can have a significant aggregate impact on wages.
The last BLS report had the work week unchanged at 34.4 hours and had annual wage growth at 3%.
A continuation of private sector job growth similar to the ADP's number for November, which assumes that is an accurate survey number, will result in a rise in unemployment.
The BLS will issue its employment report for November on Friday. The median forecast is currently at 189,000:
https://www.marketwatch.com/tools/calendars/economic?link=MW_Nav_EP
The median forecast for the BLS November report is not consistent with the ADP private sector job number. The BLS does include government workers but government hires would not come anywhere close to making up the difference if the ADP +67K number for nationwide private payroll growth is accurate or anywhere close to being accurate.
In the last report, federal government employment decreased by 17,000 as temporary census workers completed their assignments.
My guess is that Donald's brain is trying to figure out whether he will be better off in November 2020 by accepting a skinny trade deal now.
On some days, like yesterday, he realizes that a smoke and mirrors trade deal would hurt him politically.
Then his advisors talk to him and argue that something is necessary just to keep confidence from going down significantly.
Then he thinks that he has to do something to keep the current slowdown from becoming worse.
An ongoing recession and rising unemployment at election time, considering his current poll numbers, could lead to a Democrat trifecta.
Another factor is his confidence in his ability to manipulate voters through B.S. unconnected to the real world.
So, even with a trade deal that does nothing much, Donald believes that he can sell it as the best trade deal ever negotiated in world history. And, unfortunately, that will likely work on more than 1/2 of voters.
3% wage growth is a very solid number. More than we had been seeing.
DeleteYou're pointing out that ADP's numbers are when factors are considered, too high compared to BLS's...?
How can BLS's increase in jobs, be a slow down that will lead to rise in unemployment. More jobs is good even if it's slower than in the past?...not a reduction in jobs?
He's going to make a deal then sell it. The same 35-41% will buy it as a step forward on China. I will watch something old and funny on TV to make myself feel better.
There is inflation. When I buy food, it's up .30 an item. When I buy clothes, prices are up. With enough deals, I can buy cheap stuff quite cheaply and wait for it to fall apart as I try it on... but even clothes at Walmart are up, probably 80%, or at least 60%.
Land: The BLS reported that annual wage growth was 3.1% through November, which is higher than the norm for recent years, but the recent trend has been down after hitting 3.4% in February.
Deletehttps://www.bls.gov/news.release/archives/empsit_03082019.htm
The economy needs to create jobs for new entrants into the labor force. If they are not able to find work, they become unemployed and could contribute to rise in the unemployment rate.
I cited in this post a study by the Atlanta Federal Reserve that the economy needs to create at least 107,000 jobs each month just to keep the unemployment rate steady. That is just an estimate which depends on a lot of inputs.
It is impossible IMO to come up with a hard number on just about any data point in an economy as large and diverse as the U.S.
Generally speaking, the major rise in unemployment will be caused by currently employed workers losing their jobs which will occur during a recession. The new entrants into the labor force would have difficulty finding work during an economic contraction which only adds to uptrend in unemployment.
The inflation numbers are at best estimates and will vary greatly depending on the individual. For example, I am not concerned about the rise in rents or the BLS owner equivalent rent since I own my home free and clear and have no intention of moving.
https://www.investopedia.com/terms/o/owners-equivalent-rent.asp
For stock investors, it is important that the inflation readings are subdued and interest rates are abnormally low. It is probably more important that the expectation is that those conditions will continue long term .
The break-even inflation rate for the 30 year TIP is now 1.74%, which provides stock investors with a consensus type forecast that the annual average inflation rate over the next 30 years will be about 1.74%.
https://fred.stlouisfed.org/series/T30YIEM
That kind of number influences interest rates now and the multiples stock investors are willing to pay for reasonably anticipated future corporate earnings.
I suspect that people were wrong over the past several years when predicting inflation would take off with massive money creation related to QE programs because the money was largely unused in the real economy.
Instead, the money was used largely to increase the value of paper assets (stocks and bonds) that has no meaningful inflationary impact, though it does increase the wealth of those who do not spend it.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/12/cjref-duk-gci-hseprcca-ibb-iemg-ieur-m.html