AHT, BHB, FFBC, FITB, NMFC, RMT

Economy: 

White House top economic advisor Larry Kudlow says economic growth will top 3% this year

Head of U.S.’ largest bank says central banks are fueling a sovereign debt bubble, negative-rates won’t ‘end well’ - MarketWatch

Supply of homes for sale hits record low, and prices suddenly jump

Mortgage Rates: 

Freddie Mac Mortgage Market Survey Archive

NY York Fed GDP 4th Quarter Forecast = +1.2%

Nowcasting Report - FEDERAL RESERVE BANK of NEW YORK

++++

Markets and Market Commentary: 

S & P 500 Trailing 12 Month GAAP P/E = 25.94 P/E & Yields (dividend yield at 1.79%)

Shiller PE Ratio = 31.51 (higher than Black Tuesday, October 1929). 

Market Cap to GDP: Higher than in 2000

S & P 500 Estimated Earnings Growth 2019 vs. 2018: slightly negative to barely positive depending on the forecaster.  FactSet (page 9, "flat earnings of .2%" for 2019 based on reports so far). Some major Y-O-Y earnings declines have yet to be reported, including the 4th quarter reports from energy companies)

Surging Swiss franc may have become a gold proxy, Goldman Sachs says

XE: CHF / USD Currency Chart. Swiss Franc to US Dollar Rates The Swiss National Bank has been conducting a Jihad against its own currency since 2011. The current SNB policy rate is -.75%.  Swiss National Bank (SNB) - Current interest rates and exchange rates Yet the CHF is moving up some in value against the USD notwithstanding the SNB's continuing effort to devalue it, thereby making Swiss exports more competitive particularly in the Euro area where the ECB is engaging in the same devaluation strategy.  

Paul Tudor Jones says this 'crazy' market reminds him of 'early '99' The same thoughts have been occurring to me more often recently. 

Housing market falling short by nearly 4 million homes as demand grows

Why one stock-market bull says he’s taking the ‘offense off the field’ - MarketWatch

Intel (INTC) stock soars to dot-com era levels after Q4 earnings

+++++

Trump: 

Trump says GDP, Dow would be 10,000 points higher and real GDP growth would be near 4% if it weren't for the Fed  

Interest rates are abnormally low: 

10 Year Treasury Chart

30 Year Treasury Rate

 

30 Year Fixed Rate Mortgage

15 Year Fixed Rate Mortgage

Effective Federal Funds Rate 

In TrumpWorld, negative interest rates spur robust 4% economic growth as proven by what has happened in Europe and Japan over the past several years. The fact that negative CB benchmark rates has not produced that result is of course irrelevant in Donald's Alternate Reality. 

With QE and a -.4% ECB benchmark rate, the last reported Euro GDP growth Y-O-Y growth was 1.2% through the 2019 third quarter. Eurostat News Release (12/5/19) 

Besides, the republicans promised voters that the tax cuts would spur 3+% growth GDP in perpetuity and pay for themselves. Yet 2019 will end up around 2.3% GDP growth and that is attributable to the $1+ trillion in federal government deficit spending. Trump claimed that the corporate tax cuts would boost GDP growth by 6%. These 7 charts show Trump's tax cuts still haven't been the economic 'rocket fuel' he promised, 2 years after the fact | Markets Insider; Trump defies data with 6% GDP growth forecast

++

GOP senators told their heads ‘will be on a pike’ if they vote against Trump: report - MarketWatch I am guessing that a head stuck on a pike is being used figuratively here, at least for the time being. I recall reading an English history book in college, when I came across someone with my name whose head was put on a pike by King Henry VIII over a disagreement about religion. 

Republican senators were most offended when Schiff referenced that article. Schiff refers to CBS 'head on pike' story, infuriating GOP: 'Every one of us knows it is not true' | Fox News  Apparently, those senators want us to believe that Donald has never tried to pressure them, a thoroughly laughable claim, nor would those politicians ever abandon their "principles", whatever ones they have left, if any such pressure was ever applied. 

Alan Dershowitz is one of Trump's impeachment trial lawyers. His role is to argue that the impeachment articles against Trump must be dismissed since they fail to charge Trump with a crime. Constitutional scholars view that argument as frivolous as did Dershowitz before he became Donald's lawyer:

Dershowitz:  “It certainly doesn’t have to be a crime if you have somebody who completely corrupts the office of president and who abuses trust and who poses great danger to our liberty. You don’t need a technical crime. We look at their acts of state. We look at how they conduct the foreign policy. We look at whether they try to subvert the Constitution.”

It is impossible to shame Senator Lindsey Graham by pointing out his flagrant hypocrisies. Democrats use Lindsey Graham's Clinton impeachment speech in Trump Senate trial  

After Republican senators block new impeachment evidence, Trump boasts about what he’s withholding - The Washington Post

Trump Says He's Open to New Trial Witnesses, Then Backtracks | Time  Trump and the republican senators do not want more witnesses with personal knowledge confirming what is already known. For Donald to claim otherwise just proves, when no further proof is needed, that he lies and misleads as easy as he breathes. 

DC attorney general sues Trump inaugural committee, businesses over $1 million spent at Trump hotel; Donald and Ivanka Trump Were Involved in Inauguration’s Inflated Payments to Family Business, New Suit Says  

Trump Opens Door to Cuts to Medicare and Other Entitlement Programs

+++++

U.S. says 34 troops diagnosed with traumatic brain injury after Iran strike

+++++

All trades are commission free unless otherwise noted. 

1. Small Ball Trades-Regional Banks: 

Regional banks are in a bear market. I unloaded almost all of my positions into strength and I am not buying gingerly into their weakness. Most of the 4th quarter regional bank reports that I have reviewed so far show Y-O-Y declines in earnings due mostly, if not entirely, to lower net interest margins caused by the yield curve.    

A. Started Small Ball "Buying Program" in BHB-Bought 10 at $24; 10 at $23.8; 10 at 23.4 and 10 at $23.1: 

Average Cost Per Share = $23.58 
Current Position: 40 Shares
Maximum Position: 100 shares 
Purchase Restriction: Small Ball Rules (averaging down only in 10 share lots, probably in tight ranges from previous buys)

Quote:  Bar Harbor Bankshares (BHB)
BHB SEC Filings
10-Q for the Q/E 9/30/19

Investment Category: Regional Bank Basket Strategy

I am not aware of any analyst E.P.S. estimates. The bid/ask spread is usually wide.

The bank has  56 locations across Maine, New Hampshire and Vermont.  

Last Elimination: Item # 3.B. Eliminated BHB-Sold 54+ Shares at $26.34 (5/18/19 Post)(profit snapshot = $131.1)-Item # 1.A. Bought 50 BHB at $24-Used Commission Free Trade (12/16/18 Post)

Dividend: Quarterly at $.22 per share

Bar Harbor Bankshares Declares Quarterly Cash Dividend

Last Ex Dividend Date: 11/12/19 

Next Ex Dividend Date: 2/14/20

Yield at $23.58 Average Cost =  3.73% 

Last Earnings Report Before Purchases (9/30/19): 

Some of the financial ratios for this quarter were distorted by "non-core charges related to acquisition and restructuring expenses" amounting to $.15 per share. ROA, ROE and the efficiency ratio are the 3 main ones. The ROA and ROE ratios would be below the average for U.S. banks once an adjustment is made for extraordinary items.

Charge Off = .02%
NPL Ratio = .65%
NPA Ratio = .53%
Coverage Ratio = .6%
Tangible Equity To Tangible Assets: 8.2
Tangible Book Value Per Share = $18.49 

Both the NPL and NPA ratios have been trending down:

SEC Filed Press Release

10 Year Chart: Bear Market Trend after a multiyear bull move and a long duration topping action mostly in the $30 to $32 range 

The primary reason for the bear market trend is a lack of earnings growth caused by net interest margin compression resulting from the yield curve inversion last year and a barely positive yield curve when there was an upward slope.    

5 Year Financial Data Through 12/31/18: 

Page 32 2018 Annual Report at page 32  

The increase in shares, revenues and net income result mostly from the acquisition of Lake Sunapee Bank Group. I owned Lake Sunapee Bank (LSBG) when BHB made its acquisition offer. Bar Harbor Bankshares and Lake Sunapee Bank Group Complete Merger; Bar Harbor Bankshares Expands Into New Hampshire and Vermont with Lake Sunapee Bank Group Merger (5/5/16 Press Release)("each outstanding share of Lake Sunapee common stock will be exchanged for 0.4970 shares of Bar Harbor common stock"; South Gent's Comment Blog # 6: Sold 100 LSBG (profit $627.02, snapshot at Item # 1.A.; Item # 1 Sold 200 LSBG Update For Regional Bank Basket Strategy As Of 6/6/16 - South Gent | Seeking Alpha (profit snapshot = $223.95)

Branch Ownership, Closures and Purchases:

Last October, BHB announced that it would close before year end five branches acquired from Lake Sunapee.

Last year, BHB purchased 8 branches in Maine from People's United Bank (PBCT) based in Connecticut. Bar Harbor Bank to Acquire 8 Bank Branches in Central Maine I have not seen any information on whether BHB has received regulatory approval to acquire those branches. 

As of 12/31/18, BHB owned its main office building located at 82 Main St, Bar Harbor  Mains and 30 other branch properties. Page 30 With the tiny regional banks, owning the main office and several branches are a material asset in the context of the stock market capitalization.   

Stock Splits: In 2017, there was a 3 for 2 stock split that gave me an additional 75 shares. Snapshot in 3/25/17 Post I also received a 3 for 2 split on shares bought in 2012 and owned in 2014. BHB Split History That original lot then split again 3 for 2 in 2017.

BHB Trading Profit to Date: $ 4,187.54

Other Trading History Discussions: 

Item # 1.A. Sold 100 BHB at $30.69-Used Commission Free Trade (7/15/18 Post)  Item # 1.A. Sold 50 BHB at $30.02 (5/21/18 Post); Item #3.A. Sold 100 BHB at $29.55 (4/26/18 Post); Item # 1. A. Sold 30 BHB at $29.42 (3/25/18 Post) 

Most of the realized profits occurred in 2018 and 1 trade in 2016: 

2018 BHB +$3,078.46 Fidelity

2016 BHB +$936.96 Schwab

Other News: Last November, BHB sold $40M of fixed-to-floating rate subordinated notes that pay a  4.625% fixed coupon until 12/1/24 when BHB has the option to call at par value. If not called, the coupon will then reset quarterly at a 327 basis point spread to the Secured Overnight Financing Rate provided by the FRBNY, as the administrator of the benchmark (or a successor administrator), on the FRBNY’s Website. The SOFR may be one of the alternatives that replace Libor. 

Bonds Detail at Finra (no trades)

Secured Overnight Financing Rate - Federal Reserve Bank of New York

Goal: Low expectations for as long as the yield curve is suppressed by Fed monetary policy. 

The continuation of that policy for an extended period is the most likely future scenario IMO. 

This explains my trepidation and caution now with any regional bank stock purchase. 

There is another possible scenario where the FED loses control over intermediate and long term rates due to a persistent rise in inflation. The yield curve starts to expand as the FED stubbornly continues to anchor short term rates at abnormally low levels. Assuming no recession in this scenario which increases loan losses and charge-offs, NIM expansion would rise and create a better earnings growth picture for regional banks highly dependent on NIM for E.P.S. growth. 

For now, I will use the small ball rules to play BHB and other regional banks, which means averaging down in small lots and selling the highest cost lots on pops. 

The dividend provides some downside support and BHB has been raising the dividend annually for 16 years with a 5 year annual growth rate of 7.4%. The last increase was 10%. SEC Filed Press Release (dated 4/18/19) 

I do not believe BHB is doing anything wrong. It is more a victim of a flat yield curve. Bank depositors are also victims of the worldwide CB Jihad against savers.  

For the Trumpsters, I would just note that Donald would like to see rates go negative on a nominal basis. Being negative on a inflation adjusted basis is not good enough for the Duck. 

B. Pared RMT-Sold 100 at $8.73: 

Quote: Royce Micro-Cap Trust Inc. (RMT)
Sponsor's Website: Royce Micro-Cap Trust (RMT)
RMT SEC Filings
Royce Micro Cap Trust (RMT) Page at Morningstar

Profit Snapshot: +$23.25 

I am being cautious with this CEF compared to my trading in the past. The general idea will be to sell for small profits and then hopefully buy the shares back at a lower price within 30 days of the next quarterly ex dividend date.  Average Cost Before Pare: $8.24

Average Cost After Pare: $8.01

Snapshot Intraday 1/17/20

I still own the shares purchased with dividends and two 50 share lot purchases. Item # 2.B. Added 50 RMT at $7.91 (8/21/19 Post);Item # 1 Bought 50 RMT at $8.03-Used Commission Free Trade. (6/15/19 Post)

Data Date of Trade (1/17/20):
Closing Market Price: $8.72
Closing Net Asset Value Per Share: $9.8
Discount: -11.02%

RMT Royce Micro Cap Trust-CEF Connect

Last SEC Filed Shareholder Report (semi-annual for period ending on 6/30/19)

Historical Dividends:

Last Liquidations: Item # 3.A. Sold 274+ RMT at $8.9 (8/3/17 Post); Item 3.A. Sold 276+ RMT at $8.4 (5/17/17 Post)

The largest gain on a liquidation was $2,269.61 in 2014:

C. Started Small Ball Buy Program in FITB-Bought 10 at $29.32: 

Quote: Fifth Third Bancorp
2020 Consensus E.P.S. Estimate at $2.95 as of 1/17/20
FITB | Fifth Third Bancorp Analyst Estimates | MarketWatch
P/E at $29.32 and E.P.S. of $2.95 = 9.94

"As of September 30, 2019, Fifth Third had $171 billion in assets and operated 1,143 full-service banking centers . . . in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina."

FITB SEC Filings

Investment Category: Regional Bank Basket Strategy

Dividend: Quarterly at $.24 

Dividend History | Fifth Third Bancorp Last increased from $.22 effective for the 2019 second quarter payment. 

Fifth Third Bancorp Announces Cash Dividends 

Last Ex Dividend: 12/30/19 

Yield at $29.32 = 3.27%

Last Earnings Report Before Purchase (Q/E 9/30/19): Fifth Third Announces Third Quarter 2019 Results 

The following numbers are unadjusted for $.04 per share in special expense items that are detailed in the release. 

E.P.S.  $.71 (diluted)
Adjusted E.P.S. $.75 (ahead of $.73 consensus)
NIM = 3.32% (up 9 basis points Y-O-Y)
Efficiency Ratio = 58.4% 
NPA Ratio = .47%
Charge Off Ratio = .36%
ROA = 1.28%
ROE = 10.07%
ROTE = 14.2%

Tangible Book Value Per Share = $21.06

Adjusting for the 4 cents in special expense items, ROA, ROTE and the efficiency ratio were 1.35%, 16.5%, and 56.7% respectively. 

Last Earnings Report (Q/E 12/31/19): This report was released after my purchase. 

Fifth Third Announces Fourth Quarter 2019 Results or SEC Filed Press Release

There was a positive $.28 per share impact to GAAP E.P.S. from special items:

Backing $.28 out of the reported GAAP E.P.S. of $.96, the operating E.P.S. number was $.68, up from $.64 in the 2018 4th quarter but 5 cents below the consensus estimate of $.73.

Other financial metrics need to be adjusted down to reflect those items:

Capital Ratios, Employees, ATMs and Branches:

Credit Quality:

NPL Ratio = .56%, up from .37% in the 2018 4th quarter. 

.07% of that increase was due to an accounting change resulting from the conversion to a national bank charter and adoption of accounting rules promulgated by the "Office of the Comptroller of the Currency (OCC) guidance regarding non-reaffirmed loans included in Chapter 7 bankruptcy filings to be accounted for as nonperforming troubled debt restructurings (TDRs) and collateral dependent loans regardless of payment history and capacity to pay in the future."   

2020 Outlook as of 1/22/20: 

Sourced From SEC Filed Earnings Presentation

FITB Round Trip Discussions: Most of the $960.83 in realized FITB gains were from two 50 share trades: Item # 2.A. Sold 50 FITB at $24.57 (7/3/17 Post)(profit snapshot: $443.21) Bought 50 FITB at $15.71 Update For Regional Bank Basket Strategy As Of 2/8/16 - South Gent | Seeking Alpha; Stocks, Item # 2.C. Sold 50+ FITB at $27.53 (2/27/17 Post)(profit snapshot = +481.05)

Subsequent to my last sell, FITB completed its acquisition of MB Financial based in Chicago: Fifth Third Bancorp Completes Merger With MB Financial, Inc. 

Brokerage Reports (available to Schwab customers): 

Argus (10/22/19): Buy with a $32 PT

Morningstar (1/2/20):  3 stars with a FV of $28. 

There were several ratings changes made on 1/6/20. I do not have access to any of the following report: 

Goldman Sachs raised its PT to $34 from $32 and kept its rating at neutral. 

Deutsche Bank lifted its PT to $34 from $31 and kept its buy rating. 

Barclays upgraded to overweight from equal weight and raised its PT to $38 from $34. 

Evercore ISI raised its PT to $29 from $27 and kept its underperform rating. 

Last Bond Offering (10/19): $750M of 2.375% SU notes due 2025 rated at Baa1 by Moody's.

Current Position: 10 Shares

Maximum Position: 100 shares 

Purchase Restriction: Small Ball Rule 

D. Started Small Ball Buy Program in FFBC- Bought 10 at $25.35; 5 at $24.9 and 5 at $24.75: 

Average Cost Per Share: $25.09
Maximum Position: 100 Shares
Current Position: 20 shares 
Purchase Restriction: Small Ball Rule 
Adds: 5 or 10 share lots

Quote: First Financial Bancorp (Ohio)
2020 Consensus E.P.S. Estimate at $2.03 as of 1/17/20
FFBC | First Financial Bancorp (Ohio) Analyst Estimates | MarketWatch
P/E at Average Cost and E.P.S. of $2.03 =  12.36

As of 9/30/19, FFBC had $14.5B in assets and $9.1B in loans and operated 145 full service banking locations primarily in Ohio, Indiana and Kentucky.  

FFBC Stock Information (as of 1/17/20): 

Investment Category: Regional Bank Basket Strategy

Last Elimination: Item # 3.A. Sold 84+ FFBC at $28.1 (3/24/17 Post)(profit snapshot = $1,129.21)

First Financial Bancorp Key Developments | Reuters

FFBC SEC Filings; 10-Q for the Q/E 9/30/19

Dividend: Quarterly at $.23 per share ($.92 annually), raised from $.22 effective for the 2019 third quarter payment.

First Financial Bancorp Declares Quarterly Cash Dividend

When I owned shares in the past, FFBC had excess capital and distributed a number of special dividends in the 2012-2014 time period. Those special dividends are added to the regular dividend rate in the compilation found at FFBC's website.

Last Ex Dividend Date: 11/25/19

Yield at Average cost =  3.67 %

Last Earnings Report Before Purchase (Q/E. 9/30/19): 

SEC Filed Press Release or First Financial Bancorp Announces Third Quarter Financial Results

Last Earnings Report (Q/E 12/31/19, released after purchases):

Adjusted E.P.S. $.52, GAAP at $.49 
NIM: 3.89% (down from 4.21% Q/E 12/31/18)
Efficiency ratio of 59.8%; 56.4% as adjusted
NPL Ratio: .65% (down from .98% Q/E 12/31/18)
NPA Ratio: .42% (down from .63% Q/E 12/31/18)) 
Charge Off Ratio: .15% (down from .29% ")
Coverage Ratio: 119.69% (to nonaccrual loans)
Tangible book value per share of $12.42
6.0% Loan Growth on an Annualized Basis
8.1% Average Deposit Growth on an Annualized Basis
ROA: 1.34% with adjustments at 1.41%
ROE: 8.6%
ROTC: 15.84% with adjustments at 16.73%

Adjustments To GAAP: 
$0.7 million of severance and other merger related costs
$2.9 million historic tax credit investment write-down; offset by impact to income taxes
$1.7 million of other nonrecurring costs such as branch consolidation costs
$0.7 million of taxes on merger-related executive compensation

First Financial Bancorp Announces Fourth Quarter and Full Year 2019 Financial Results 

10 Year Chart: Bear Market Pattern Since August 2018

Data as of 1/24/20: 

Other FFBC Realized Gains:

Total FFBC Realized Gains = $1,933.03


2. Small Ball-BDCs: 

A. Eliminated NMFC-Sold 102+ at $14.2: 

Quote: New Mountain Finance Corp.   (NMFC)
Website: New Mountain Finance Corporation
SEC Filings
10-Q for the Q/E 9/30/19 List of investments starts at page 8.
Management: External

Profit Snapshot: +$84

Item # 2.A. Bought 100 NMFC at $13.37  (9/18/19 Post)

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

Last Ex Dividend: 12/12/19 

Last Earnings Report: New Mountain Finance Corporation Announces Financial Results for the Quarter Ended September 30, 2019 

Last Reported Net Asset Value Per Share = $13.35 (9/30/19)

Goal: Any total return in excess of the dividends

NMFC Trading Profits to Date: +$229.57 ($145.57 in prior trades) Any number over zero is viewed as satisfactory given the dividend yield. 

I recently discussed this BDC when I sold 50 shares: Item  # 2.A. Sold 50 NMFC at $13.95 (1/15/20 Post) I have nothing further to add at this time. 

B. Eliminated AHT-Sold 100 at $2.72: 

Quote: Ashford Hospitality Trust Inc (AHT)

Profit Snapshot: +$10.61

Item # 2.A. Bought 100 AHT at $2.6 (11/30/19 Post)

Beats a stick in the eye. I received 1 quarterly dividend payment. 

As previously discussed, hotel REIT stocks have been in a bear market and AHT is the leading loser, with a one year price decline of over 40%.

Hotel REITs have reacted negatively to the latest coronavirus. The fear run amok syndrome is building up steam, where investors conjure up all kinds of fantasies about worse case scenarios that are highly unlikely to occur which results in the sell and flee response. 

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

As noted in that post, I have a low opinion of this hotel REIT and view the stock as very risky. I do still own 150 shares of AHTPRI which is 100 more shares than I want to own. It is the the kind of high risk preferred stock that I will take a nibble in the 12th year of the FED's Jihad Against Savers.  

Ashford Hospitality Trust 7.5% Preferred Series I

50 Shares Fidelity Account-Average Total Cost per share = $20.53; Item 1.B. Bought 30 AHTPRI at $21.86-Used Commission Free Trade (12/26/18); Added 20 AHTPRI at $18.52 Used Commission Free Trade (12/29/18 Post)

50 Shares IB Account-Bought at $22.3: Item # 5 (6/26/19 Post) This is my highest cost lot. This is my highest cost lot and will be sold first. 

50 Shares Schwab Account-TC of $21.54 per share: Item # 1.A. Bought 50 AHTPRI at $21.54(11/30/19 Post) 

Only Round-Trip So Far: Item # 3.B. Sold 50 AHTPRI at $23.16 (4/20/19 Post)

Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.