Change in Publication Schedule: I will not publish a post next Wednesday. The next post will be published on 2/29.
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Economy:
Markit's February flash U.S. composite output was reported at 49.6, a 76 month low and indicating a slight ongoing contraction. The flash U.S. services business activity index declined to 49.4 from 53.4 in January. That reading is a 76 month low. The flash U.S. manufacturing PMI was reported at 50.8, down from 51.9 in January. Markit press releases can be accessed here.
Markit's February flash U.S. composite output was reported at 49.6, a 76 month low and indicating a slight ongoing contraction. The flash U.S. services business activity index declined to 49.4 from 53.4 in January. That reading is a 76 month low. The flash U.S. manufacturing PMI was reported at 50.8, down from 51.9 in January. Markit press releases can be accessed here.
Minutes for 1/28-29.20 FED Meeting Fed ("Participants agreed that the labor market had remained strong over the intermeeting period and that economic activity had risen at a moderate rate. Job gains had been solid, on average, in recent months, and the unemployment rate had remained low. Although household spending had risen at a moderate pace, business fixed investment and exports had remained weak. . . . Participants . . expected economic growth to continue at a moderate pace, supported by accommodative monetary and financial conditions. . . In their discussion of the household sector, participants noted that spending growth had moderated in the fourth quarter. However, they generally expected that, in the period ahead, consumption spending would likely remain on a firm footing, supported by strong labor market conditions, rising incomes, and healthy household balance sheets.")
Leading indicators surge in January, point to steady economic expansion in early 2020 - MarketWatch
Remarks by IMF Managing Director Kristalina Georgieva to G20 on Economic Impact of COVID-19 The "baseline scenario" is that China's economy will return to normal during the second quarter. If that happens, the IMF predicts that 2020 growth for China would be at 5.6%, down .4% from the prior forecast; and global growth would be .1% lower. The Stock Jocks have bought into this general forecast that the impact will be short lived and relatively unimportant outside of China.
Over the past week, confirmed cases in South Korea have been accelerating. Coronavirus cases in South Korea up to 433 overnight - ABC News The confirmed infections on the Diamond Princess cruise ship currently stands at 643 out of 3,711 passengers and crew. ‘We’re in a Petri Dish’: How a Coronavirus Ravaged a Cruise Ship - The New York Times
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Leading indicators surge in January, point to steady economic expansion in early 2020 - MarketWatch
Remarks by IMF Managing Director Kristalina Georgieva to G20 on Economic Impact of COVID-19 The "baseline scenario" is that China's economy will return to normal during the second quarter. If that happens, the IMF predicts that 2020 growth for China would be at 5.6%, down .4% from the prior forecast; and global growth would be .1% lower. The Stock Jocks have bought into this general forecast that the impact will be short lived and relatively unimportant outside of China.
Over the past week, confirmed cases in South Korea have been accelerating. Coronavirus cases in South Korea up to 433 overnight - ABC News The confirmed infections on the Diamond Princess cruise ship currently stands at 643 out of 3,711 passengers and crew. ‘We’re in a Petri Dish’: How a Coronavirus Ravaged a Cruise Ship - The New York Times
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Markets and Market Commentary:
Daily Treasury Yield Curve Rates The yield curve has inverted again. The three month treasury bill has a higher yield than the 10 year note.
Goldman Sachs warns of imminent risk for stocks due to complacency on coronavirus - MarketWatch
The Stock Jocks are dismissing the coronavirus epidemic as unimportant. Maybe that will change when and if the epidemic turns into a pandemic with rapidly rising infection rates outside of China. I have no faith in the accuracy of China's numbers.
The 1.05% decline in the S & P 500 last Friday had more to do with Markit's U.S. flash services business index falling into contraction territory. The U.S. is a service based economy.
The coronavirus outbreak is one reason for the recent rise in the USD, just another negative development for U.S. corporate earnings which is being dismissed or ignored altogether. Can stocks keep soaring as the U.S. dollar surges? What investors need to know - MarketWatch
Uptrends in the following indexes indicate USD strength against a specific basket of foreign currencies: U.S. Dollar Index (DXY); Bloomberg Dollar Spot Index; WSJ Dollar Index
Gold has managed to rally notwithstanding the dollars strength:
2/21/20 Closing Price: GLD $154.70 $2.29 $1.50%: SPDR Gold Trust
I view gold as primarily an alternative to fiat currencies, so USD strength would generally provide a headwind to a gold rally. Investors are probably viewing gold now as a safe haven "investment", which is not an opinion that I ascribe to.
I own gold and silver bullion as a hedge against financial armageddon triggered by failed U.S. treasury auctions and a collapse in the USD. I will trade the long cycles with my last sells being when gold went over $1900 an ounce back in 2011 and silver was at $40+ per ounce.
My only exposure to gold and silver in my brokerage accounts is through the Permanent Portfolio (PRPFX) mutual fund.
30-year Treasury yield nears all-time low as coronavirus fears linger - MarketWatch (2/20/20 article)
The Stock Jocks are dismissing the coronavirus epidemic as unimportant. Maybe that will change when and if the epidemic turns into a pandemic with rapidly rising infection rates outside of China. I have no faith in the accuracy of China's numbers.
The 1.05% decline in the S & P 500 last Friday had more to do with Markit's U.S. flash services business index falling into contraction territory. The U.S. is a service based economy.
The coronavirus outbreak is one reason for the recent rise in the USD, just another negative development for U.S. corporate earnings which is being dismissed or ignored altogether. Can stocks keep soaring as the U.S. dollar surges? What investors need to know - MarketWatch
Uptrends in the following indexes indicate USD strength against a specific basket of foreign currencies: U.S. Dollar Index (DXY); Bloomberg Dollar Spot Index; WSJ Dollar Index
Gold has managed to rally notwithstanding the dollars strength:
2/21/20 Closing Price: GLD $154.70 $2.29 $1.50%: SPDR Gold Trust
I view gold as primarily an alternative to fiat currencies, so USD strength would generally provide a headwind to a gold rally. Investors are probably viewing gold now as a safe haven "investment", which is not an opinion that I ascribe to.
I own gold and silver bullion as a hedge against financial armageddon triggered by failed U.S. treasury auctions and a collapse in the USD. I will trade the long cycles with my last sells being when gold went over $1900 an ounce back in 2011 and silver was at $40+ per ounce.
My only exposure to gold and silver in my brokerage accounts is through the Permanent Portfolio (PRPFX) mutual fund.
30-year Treasury yield nears all-time low as coronavirus fears linger - MarketWatch (2/20/20 article)
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Trump:
In the last Gallup poll, Trump's approval rating improved to 49% with a 48% disapproval rating. Trump Job Approval This poll was the first one where his disapproval rating dipped below 50% since 1/29/2017.
Trump repeatedly struggles to pronounce words during conspiracy-laden rally Donald's non-stop vitriol may be his most positive personality characteristic. Trump: “There are a lot of dishonest slimeballs out there. Dishonest scum. Dirty cops, lot of dirty cops … the ones on top, they were absolute scum.” or “Crooked Hillary spent at least three times more than we did and lost. Crooked as hell she’s crooked as hell.”
He also falsely accused Hillary of being the most prolific leaker of classified documents in U.S. history. Trump Renews Attack on Justice System-The New York Times; Senate investigators find no evidence China hacked Clinton server; FBI: No Evidence Clinton Server Hacked Despite Trump Tweet
And the Trumpsters cheered his remarks about Hillary who he defeated more than 3 years ago and chanted in unison "Lock her Up" with Donald giving them the thumbs up.
For those reading or watching Donald's speeches, and reading his tweets hundred years or so from now, there may be a tendency to dismiss him as some kind of aberration in the American experience. He is not. He is just the first demagogue to reach the critical mass necessary to be elected President. His approval rating among republicans is close to 95% and near 50% for all voters.
And, no one should be surprised that it was the republican party who gave birth to this lying, authoritarian demagogue, and republican politicians with overwhelming approval among their tribe members will do anything to nurture and protect him. None of those factual observations are related to Trump's economic or foreign policies.
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John Rood: Top Pentagon policy official who warned against withholding Ukraine aid resigns at Trump's request - CNN
Donald claims that there he is the victim of a seditious conspiracy out of the Justice Department and FBI.
Without that seditious conspiracy and the corrupt news media (who are the "enemy of the people" in TrumpWorld), the Teflon Don believes that his approval rating would be at 70%.
In Trump's America, the corrupt media is defined to include any media organization that reports facts that Donald does not like.
Any media organization that contradicts the Duck's reality creations with facts are frequently identified by him as the "enemy of the people." ‘Enemy of the people’: Trump’s war on the media is a page from Nixon’s playbook-The Guardian; Poll: One-Third of Americans Believe Media Are 'Enemy of the People'-US News; Trump made two remarkably authoritarian remarks in one day - Vox
Trump suggests he may sue over Mueller investigation (includes an analysis of some repeat false statements made by Donald) :
In the last Gallup poll, Trump's approval rating improved to 49% with a 48% disapproval rating. Trump Job Approval This poll was the first one where his disapproval rating dipped below 50% since 1/29/2017.
Trump repeatedly struggles to pronounce words during conspiracy-laden rally Donald's non-stop vitriol may be his most positive personality characteristic. Trump: “There are a lot of dishonest slimeballs out there. Dishonest scum. Dirty cops, lot of dirty cops … the ones on top, they were absolute scum.” or “Crooked Hillary spent at least three times more than we did and lost. Crooked as hell she’s crooked as hell.”
He also falsely accused Hillary of being the most prolific leaker of classified documents in U.S. history. Trump Renews Attack on Justice System-The New York Times; Senate investigators find no evidence China hacked Clinton server; FBI: No Evidence Clinton Server Hacked Despite Trump Tweet
And the Trumpsters cheered his remarks about Hillary who he defeated more than 3 years ago and chanted in unison "Lock her Up" with Donald giving them the thumbs up.
For those reading or watching Donald's speeches, and reading his tweets hundred years or so from now, there may be a tendency to dismiss him as some kind of aberration in the American experience. He is not. He is just the first demagogue to reach the critical mass necessary to be elected President. His approval rating among republicans is close to 95% and near 50% for all voters.
And, no one should be surprised that it was the republican party who gave birth to this lying, authoritarian demagogue, and republican politicians with overwhelming approval among their tribe members will do anything to nurture and protect him. None of those factual observations are related to Trump's economic or foreign policies.
++
John Rood: Top Pentagon policy official who warned against withholding Ukraine aid resigns at Trump's request - CNN
Donald claims that there he is the victim of a seditious conspiracy out of the Justice Department and FBI.
Without that seditious conspiracy and the corrupt news media (who are the "enemy of the people" in TrumpWorld), the Teflon Don believes that his approval rating would be at 70%.
Any media organization that contradicts the Duck's reality creations with facts are frequently identified by him as the "enemy of the people." ‘Enemy of the people’: Trump’s war on the media is a page from Nixon’s playbook-The Guardian; Poll: One-Third of Americans Believe Media Are 'Enemy of the People'-US News; Trump made two remarkably authoritarian remarks in one day - Vox
Trump suggests he may sue over Mueller investigation (includes an analysis of some repeat false statements made by Donald) :
Demagogue Don routinely makes knowingly false statements about Mueller and the Mueller investigation.
In Trump's America, it is Fake News per se to correct Donald's false statements with facts.
Trump made 56 false claims last week, including debunked New Hampshire conspiracy theory
Demagogue Don is considering cleaning house at the DOJ. Trump Takes Up Call for Barr to ‘Clean House’ at Justice Dept.-The New York Times The general idea is to remove the last vestiges of independence anywhere near the top and to install persons who will do what the Donald tells them.
Donald has an affinity for white collar criminals and seeks to minimize their felony convictions.
GOP campaign donor in Texas among President Trump's pardons;
Trump pardons another round of well-connected white-collar criminals.
Who got pardoned, who got shorter prison sentences under Trump's clemency
++
Barr and Donald may have muzzled the prosecutors in the Southern District of New York from seeking indictments on matters relating to Ukraine. It is too early to reach a firm conclusion, but the following described action is highly suspicious.
This was done by taking away authority from career prosecutors and transferring it to Barr's loyalist Deputy AG Jeffrey Rosen and a federal prosecutor in the Eastern District of New York. DOJ taps U.S. attorney to 'coordinate' Ukraine inquiries - POLITICO; Justice Department puts Brooklyn prosecutor atop Ukraine probes
The ultimate objective may be to protect Rudy from criminal indictments by defanging the SDNY career prosecutors.
That objective would fit with the ongoing effort by Barr and Donald to politically weaponize the DOJ with republican cronies with law decrees. There is no shortage of those folks.
This is just something that I will be watching.
He's known Bill Barr for 40 years. Now, he's calling for his resignation - CNN Video ( Former Deputy Attorney General Donald Ayer, who worked in George H. W. Bush's administration); George H.W. Bush's Deputy AG Says Bill Barr is 'Un-American'
Trump: "I'm actually, I guess, the chief law enforcement officer of the country." CNN Now that is scary.
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Donald has fired the Acting Director of National Intelligence, the retired Vice Admiral Joseph Maguire, after a member of his staff provided a briefing to House members that Russia was once again interfering in a U.S. election on Donald's behalf. Lawmakers Are Warned That Russia Is Meddling to Re-elect Trump
Trump anger cost Joseph Maguire the job of director of national intelligence;
Trump lashed out at acting DNI Maguire over alleged staff disloyalty: report | TheHill;
Intelligence officials warn lawmakers Russia is aiding Trump’s reelection efforts - MarketWatch
Trump has appointed Richard Grenell as the acting director of national intelligence. Grenell has no intelligence experience but he is fiercely loyal to Trump which is all that matters in Trump's America. Richard Grenell Named As Acting Director Of National Intelligence -NPR
Grenell Brings In Ex-Nunes Loyalist And Starts Digging Into Raw Intel On Russia | Talking Points Memo
Trump's New Acting Intelligence Chief Richard Grenell Is a Former Fox News Pundit
Trump’s New Spy Chief Used to Work for a Foreign Politician the U.S. Accused of Corruption — ProPublica
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Russia trying to help Bernie Sanders's campaign, according to briefing from U.S. officials - The Washington Post Helping Donald and Bernie makes sense from Russia's perspective IMO.
The columnist David Brooks, who is a traditional conservative, believes that Bernie Sanders will win the Democrat nomination for President. Opinion | Why Sanders Will Probably Win the Nomination - The New York Times
My best guess now is that is more likely than not, but I would not give it now a greater than 60% probability.
A choice between Sanders and Trump will insure IMO a Trump victory.
If Bernie does not get the nomination, then his supporters will probably throw the election to Trump anyway as they did in the last election. Bernie Sanders Voters Helped Trump Win and Here's Proof; 1 In 10 Bernie Sanders Supporters Ended Up Voting For Trump : NPR As I discussed previously, Bernie's supporters gave Donald the margin of victory in Michigan, Wisconsin and Pennsylvania.
In any event, if my choice is between Bernie and Disgusting Don, I will not be voting in November for the first time in a presidential election. My first election was in 1972.
I did not care for my choice then either. Justifiably despising Nixon (who shared only a few of Donald's less than admirable qualities), and approving of McGovern's anti-Vietnam war stance, were sufficient reasons for me to vote in that one.
In Trump's America, it is Fake News per se to correct Donald's false statements with facts.
Trump made 56 false claims last week, including debunked New Hampshire conspiracy theory
Demagogue Don is considering cleaning house at the DOJ. Trump Takes Up Call for Barr to ‘Clean House’ at Justice Dept.-The New York Times The general idea is to remove the last vestiges of independence anywhere near the top and to install persons who will do what the Donald tells them.
Donald has an affinity for white collar criminals and seeks to minimize their felony convictions.
GOP campaign donor in Texas among President Trump's pardons;
Trump pardons another round of well-connected white-collar criminals.
Who got pardoned, who got shorter prison sentences under Trump's clemency
++
Barr and Donald may have muzzled the prosecutors in the Southern District of New York from seeking indictments on matters relating to Ukraine. It is too early to reach a firm conclusion, but the following described action is highly suspicious.
This was done by taking away authority from career prosecutors and transferring it to Barr's loyalist Deputy AG Jeffrey Rosen and a federal prosecutor in the Eastern District of New York. DOJ taps U.S. attorney to 'coordinate' Ukraine inquiries - POLITICO; Justice Department puts Brooklyn prosecutor atop Ukraine probes
That objective would fit with the ongoing effort by Barr and Donald to politically weaponize the DOJ with republican cronies with law decrees. There is no shortage of those folks.
This is just something that I will be watching.
He's known Bill Barr for 40 years. Now, he's calling for his resignation - CNN Video ( Former Deputy Attorney General Donald Ayer, who worked in George H. W. Bush's administration); George H.W. Bush's Deputy AG Says Bill Barr is 'Un-American'
Trump: "I'm actually, I guess, the chief law enforcement officer of the country." CNN Now that is scary.
++
Donald has fired the Acting Director of National Intelligence, the retired Vice Admiral Joseph Maguire, after a member of his staff provided a briefing to House members that Russia was once again interfering in a U.S. election on Donald's behalf. Lawmakers Are Warned That Russia Is Meddling to Re-elect Trump
Trump anger cost Joseph Maguire the job of director of national intelligence;
Trump lashed out at acting DNI Maguire over alleged staff disloyalty: report | TheHill;
Intelligence officials warn lawmakers Russia is aiding Trump’s reelection efforts - MarketWatch
Trump has appointed Richard Grenell as the acting director of national intelligence. Grenell has no intelligence experience but he is fiercely loyal to Trump which is all that matters in Trump's America. Richard Grenell Named As Acting Director Of National Intelligence -NPR
Grenell Brings In Ex-Nunes Loyalist And Starts Digging Into Raw Intel On Russia | Talking Points Memo
Trump's New Acting Intelligence Chief Richard Grenell Is a Former Fox News Pundit
Trump’s New Spy Chief Used to Work for a Foreign Politician the U.S. Accused of Corruption — ProPublica
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Russia trying to help Bernie Sanders's campaign, according to briefing from U.S. officials - The Washington Post Helping Donald and Bernie makes sense from Russia's perspective IMO.
The columnist David Brooks, who is a traditional conservative, believes that Bernie Sanders will win the Democrat nomination for President. Opinion | Why Sanders Will Probably Win the Nomination - The New York Times
My best guess now is that is more likely than not, but I would not give it now a greater than 60% probability.
A choice between Sanders and Trump will insure IMO a Trump victory.
If Bernie does not get the nomination, then his supporters will probably throw the election to Trump anyway as they did in the last election. Bernie Sanders Voters Helped Trump Win and Here's Proof; 1 In 10 Bernie Sanders Supporters Ended Up Voting For Trump : NPR As I discussed previously, Bernie's supporters gave Donald the margin of victory in Michigan, Wisconsin and Pennsylvania.
In any event, if my choice is between Bernie and Disgusting Don, I will not be voting in November for the first time in a presidential election. My first election was in 1972.
I did not care for my choice then either. Justifiably despising Nixon (who shared only a few of Donald's less than admirable qualities), and approving of McGovern's anti-Vietnam war stance, were sufficient reasons for me to vote in that one.
Donald Trump hasn’t been as tough on Vladimir Putin as he and his supporters claim - The Washington Post (opinion column written by Max Boot, a former republican)
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All trades are commission free except as otherwise noted.
The reasons for selling the highest cost lots first are (1) to reduce my income tax obligation resulting from a sell; (2) to generate a total return in excess of the dividend payments; (3) to increase my dividend yield on the remaining shares; (4) to take advantage of normal up and down volatility by selling the highest cost lots profitably and then by buying when the price falls below the lowest price paid in the chain; (5) to make it more likely that I will buy during a meltdown after selling higher cost shares (psychological); and (6) to mitigate risk through less at risk monetary exposure.
Risk is also controlled through small odd lot trades made economically feasible now with zero brokerage commissions.
I am not concerned about the dollar value of the profit provided I am in achieving the objectives set out above.
1. Small Ball Trades:
A. Eliminated RMT-Sold 113+ at $8.7:
Profit Snapshot: +$79.75 (excludes 1/17/20 sell)
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)
Sponsor's Website: Royce Micro-Cap Trust (RMT)
RMT Page at Morningstar
Last Sell Discussions: Item # 1.B. Sold 100 RMT at $8.73 (1/25/20 Post); 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)
Data Date of Trade (2/13/20):
Closing Net Asset Value Per Share: $9.77
Closing Market Price: $8.75
Discount: -10.44%
Sourced from RMT Royce Micro Cap Trust-CEF Connect
The largest gain from a liquidation was $2,269.61 (see snapshot at Item # 1.A.) I have been trading this stock CEF for over a decade.
Sponsor's Website: Royce Micro-Cap Trust (RMT)
RMT Page at Morningstar
Last Sell Discussions: Item # 1.B. Sold 100 RMT at $8.73 (1/25/20 Post); 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)
Data Date of Trade (2/13/20):
Closing Net Asset Value Per Share: $9.77
Closing Market Price: $8.75
Discount: -10.44%
Sourced from RMT Royce Micro Cap Trust-CEF Connect
The largest gain from a liquidation was $2,269.61 (see snapshot at Item # 1.A.) I have been trading this stock CEF for over a decade.
B. Pared IRM-Sold 15 at $33.04 (highest cost lots):
Quote: Iron Mountain Inc. (IRM)
Website: Data & Records Management | Shredding | Iron Mountain
SEC Filings
2019 Annual Report (risk factor summary starts at page 16)
Website: Data & Records Management | Shredding | Iron Mountain
SEC Filings
2019 Annual Report (risk factor summary starts at page 16)
Profit Snapshot: +$36.73 (2/14 sell only)
Average Cost after Pare = $29.47
Sell Discussions: Item # 1.F. Sold 10 IRM at $32.1 (2/12/20 Post); Item # 5.A. Sold 50 IRM at (9/7/19 Post); Item # 1.C. Sold 10 IRM at $33.91-Used Commission Free Trade (12/26/18 Post); Item # 3 Sold 50 IRM at 33.82 Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha
Last Buy Discussions: Item # 2.B. Bought 10 IRM at $29.51-Used Commission Free Trade (7/17/19 Post)(currently own and lowest priced lot in current chain); Item # 1 Bought 50 IRM at $31.58 (5/18/19 Post)(sold); Item # 3.B. Bought 5 IRM at $30.65 and 5 at $30.3-Used Commission Free Trades (11/4/18 Post)(still own lot bought at $30.3)
Dividend: Quarterly at $.6185 ($2.474 annually)
Iron Mountain - Stock - Dividend History and Tax Treatment
Dividend Yield at $29.47 = 8.4%
Last Ex Dividend: 12/13/19
Last Earnings Report (Q/E 12/31/19):
Iron Mountain Reports Fourth Quarter and Full-Year 2019 Results
I discussed this earnings report here.
IRM Trading Profits to Date: $475.15 ($438.42 in prior trades)
Purchase Restriction: Small Ball Rule (next purchase has to be below $29.51).
ROC adjustments have reduced the taxable cost basis. The 5 share lot bought at $30.3 had a tax cost basis of $29.66 as of 12/31/19.
Sell Discussions: Item # 1.F. Sold 10 IRM at $32.1 (2/12/20 Post); Item # 5.A. Sold 50 IRM at (9/7/19 Post); Item # 1.C. Sold 10 IRM at $33.91-Used Commission Free Trade (12/26/18 Post); Item # 3 Sold 50 IRM at 33.82 Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha
Last Buy Discussions: Item # 2.B. Bought 10 IRM at $29.51-Used Commission Free Trade (7/17/19 Post)(currently own and lowest priced lot in current chain); Item # 1 Bought 50 IRM at $31.58 (5/18/19 Post)(sold); Item # 3.B. Bought 5 IRM at $30.65 and 5 at $30.3-Used Commission Free Trades (11/4/18 Post)(still own lot bought at $30.3)
Dividend: Quarterly at $.6185 ($2.474 annually)
Iron Mountain - Stock - Dividend History and Tax Treatment
Dividend Yield at $29.47 = 8.4%
Last Ex Dividend: 12/13/19
Last Earnings Report (Q/E 12/31/19):
Iron Mountain Reports Fourth Quarter and Full-Year 2019 Results
I discussed this earnings report here.
IRM Trading Profits to Date: $475.15 ($438.42 in prior trades)
Purchase Restriction: Small Ball Rule (next purchase has to be below $29.51).
ROC adjustments have reduced the taxable cost basis. The 5 share lot bought at $30.3 had a tax cost basis of $29.66 as of 12/31/19.
C. Eliminated ICMB in Fidelity Account-Sold 219+ at $7.4:
Quote: Investcorp Credit Management BDC Inc. Overview | MarketWatch
Website: Investcorp Credit Management BDC, Inc.
SEC Filings
Profit Snapshot: Net of +$27.97 (some shares bought in 2018 were sold for a loss):
All of the lots were bought in 2018 or 2019. ICMB did not support its dividend payments with ROC in either year.
This is an excerpt from ICMB's tax information release for 2019:
Dividend: Quarterly at $.25 ($1 annually)
Last Ex Dividend Date: 12/12/19
Next Ex Dividend Date: 3/12/20
Investcorp Credit Management BDC, Inc. Common Stock (ICMB) Dividend History | Nasdaq
Last Earnings Report (Q/E 12/31/19) : Investcorp Credit Management BDC, Inc. Reports Results for its Fiscal Second Quarter Ended December 31, 2019
Earnings Call Transcript | Seeking Alpha
I discussed the earnings report in this comment that summarized several concerns which I will not repeat here.
I view this BDC as a high risk investment.
The goal is to sell the shares at any net profit before any ROC adjustments to the tax cost basis, thereby earning a total return in excess of the dividend payments. I accomplished that goal with this sell, so I am pleased with the result.
Most of the average downs were not discussed in the blog. My last discussion was the purchase of 50 shares at $6.88 which I referred to as "probably masochistic" Item # 1.B. (9/25/19 Post) Nonetheless, I thereafter bought 10 shares at 6.4+ and 10 shares at $6.5+. Those averaging down purchases along with averaging down through dividend reinvestment allowed me to escape with a net profit.
Last 2 Dividend Reinvestments:
I still own almost 117+ shares in my Schwab account where I am reinvesting the dividend and 100 shares in my IB account where I am taking the dividends in cash.
D. Pared FDUS in Schwab Account-Sold 50 at $15.34:
Quote: Fidus Investment Corp.
Website: Fidus
SEC Filings
FDUS Chart
Profit Snapshot: +$68.44
I used the specific identification cost method. I owned two lots in my Schwab account that were not bought with dividends.
I elected to sell the highest cost lot bought on 11/23/18. I could not use FIFO accounting to sell just that lot since there were shares earlier in time that were bought with dividends.
The average cost for the remaining shares was reduced to $13.12:
Dividend: $.39 per share or $1.56 annually (regular dividend only)
Fidus Investment Corporation Declares First Quarter 2020 Dividend
Dividend Yield at $13.12 = 11.89%
I am not including special dividends in that yield calculation. FDUS paid a 4 cent special dividend last December.
Next Ex Dividend Date: 3/12/20
Last Buy Discussions: Item # 4.A. Bought 50 FDUS at $13.87 and 30 at $12.63 (12/19/18 Pos)
Last Sell Discussion: Item # 1.C. Pared FDUS-Sold 52 at $15.15 (3/6/19 Post)
Last Earnings Report (Q/E 9/30/2019) :
"The weighted average yield on debt investments was 12.3% as of September 30, 2019."
"As of September 30, 2019, 14 portfolio company’s debt investments bore interest at a variable rate, which represented $152.8 million, or 25.4%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments."
"As of September 30, 2019, we had debt investments in two portfolio companies on non-accrual status, which had an aggregate cost and fair value of $32.8 million and $9.1 million, respectively."
"On October 1, 2019, we exited our debt and equity investments in Simplex Manufacturing Co. We received payment in full of $4.1 million on our subordinated debt investment. We sold our warrant investment for a realized gain of approximately $2.9 million."
The adjusted net investment income ("NII") number of $.35 per share includes a 5 cent reversal of a capital gain incentive fee expense.
I would use the unadjusted $.3 per share NII number to evaluate dividend coverage. The quarterly NII shows what the portfolio is throwing off in income. That number is 9 cents below the regular quarterly dividend.
The company estimates that there was about $16.9M or $.69 per share in spillover income as of 9/30/19.
Technically, that undistributed income can be use to cover the NII dividend deficit, but the spillover income will be eaten up within 2 years at a 9 cent deficit per quarter.
The excess uncovered dividend would reduce net asset value per share. The dividend will need to be cut at some point unless current quarterly NII covers the quarterly dividend of $.39 per share.
Fidus Investment Corporation Announces Third Quarter 2019 Financial Results
The 2019 4th quarter report is scheduled to be released today after the close. I anticipate another significant failure to cover the dividend with net investment income earned during the quarter.
Net Asset Value Per Share History:
9/30/19: $16.47 10-Q
12/30/18: $16.47
9/30/18: $16.41
3/30/18 $16.28
12/31/17 $16.05
12/31/16 $15.76
12/31/15 $15.17
12/31/14 $15.16
12/31/13 $15.35
12/21/12 $15.32
IPO at $15 June 2011
10-Q for the Q/E 9/30/19 (investments listed starting at page 7)
Loans made to Oaktree Medical Centre had been written down to zero as of 9/30/19:
The other non-performing loans as of 9/30/19 were made to US Green Value. Both were second lien debt but one of the two loans is apparently more senior second lien debt than the other.
The 4.6M second lien loan is valued at $4.6M, while the $14.359M second lien had been written down to $4.476M as of 9/30/19.
E. Eliminated FDUS in Fidelity Account-Sold 20 at $15.4:
Profit Snapshot: +$18.07
FDUS Realized Gains to Date = $119.39
Goal: A realized total return in excess of the dividend payments.
I may buy FDUS in a ROTH IRA account where the non-tax favored dividends are tax free. Before doing so, I will want a lower price and better current NII coverage for the regular dividend. The sells discussed above were in taxable accounts.
E. Added 10 SKT at $12.75:
Average Cost Per Share after add: $13.67
Quote: Tanger Factory Outlet Centers Inc.
Closing Price Last Friday: SKT $12.82 +$0.16 +1.26%
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Falling Knife-SKT 5 Year Chart
Dividend: Quarterly at $.3575 or $1.43 annually
Dividend Yield at $13.67 = 10.46%
Next Ex Dividend Date: 4/29/20
Dividend Reinvestment: Yes, as a means of averaging down
I have nothing to add to my recent discussions including those in these posts. Item # 1.D. (2/16/20 Post); Item # 1.D. (1/11/20 Post)
Maximum Position This Account: 100 shares + Shares purchased with dividends
Purchase Restriction: Small Ball Rule (next buy has to be below $12.75).
F. Added 5 FFBC at $24.46:
Quote: First Financial Bancorp (Ohio)
Investment Category: Regional Bank Basket Strategy
FFBC | First Financial Bancorp (Ohio) Analyst Estimates | MarketWatch
Last Buy Discussion: Item # 1.D. (1/25/20 Post) I discussed the last two earnings reports in that post.
Last Elimination: Item # 3.A. Sold 84+ FFBC at $28.1 (3/24/17 Post)
Average Cost Before Add: $25.09
Average Cost After Add: $24.96 (25 shares)
Dividend: Quarterly at $.23 per share ($.92 annually)
Dividend Yield at $24.96 = 3.69%
Maximum Position: 100 shares + share purchased with dividends
Purchase Restriction: Small Ball Rule
FFBC Realized Gains to Date = $1,933.03
I am being extremely cautious with regional bank purchases given the flat yield curve that is restraining earnings growth.
2. Intermediate Investment Grade Corporate Bonds:
It is difficult for me to get my head around current yields and yields-to maturity for higher quality investment grade corporate bonds.
A. Sold 1 Public Service Electric and Gas 3.05% First Mortgage Bond Maturing on 11/15/24 at 105.5:
Profit Snapshot: +$53.52
Item # 1.A. Bought 1 Public Service E & G 3.05% First Mortgage Bond Maturing on 11/15/24 at a Total Cost of 100.075 (4/18/2017 Post) The YTM then at my total cost number was 3.036%.
FINRA Page: Bond Detail (prospectus linked)
YTM at 105.5 = 1.766%
Proceeds at 105.4 after $1 commission
Maybe that 1.77% YTM looks good to an investor in Germany:
Germany 10 Year Government Bond Yield: -.429% as of 2/21/20
And +1.77% looks positively juicy to an investor considering the purchase of a 10 year Swiss government bond, currently at -.812%. Switzerland 10 Year Note Generic Bid Yield Index - Bloomberg Markets
Issuer: Wholly owned subsidiary of Public Service Enterprise Group Inc. (PEG)
Website: Investcorp Credit Management BDC, Inc.
SEC Filings
Profit Snapshot: Net of +$27.97 (some shares bought in 2018 were sold for a loss):
This is an excerpt from ICMB's tax information release for 2019:
Last Ex Dividend Date: 12/12/19
Next Ex Dividend Date: 3/12/20
Investcorp Credit Management BDC, Inc. Common Stock (ICMB) Dividend History | Nasdaq
Last Earnings Report (Q/E 12/31/19) : Investcorp Credit Management BDC, Inc. Reports Results for its Fiscal Second Quarter Ended December 31, 2019
Earnings Call Transcript | Seeking Alpha
I discussed the earnings report in this comment that summarized several concerns which I will not repeat here.
I view this BDC as a high risk investment.
The goal is to sell the shares at any net profit before any ROC adjustments to the tax cost basis, thereby earning a total return in excess of the dividend payments. I accomplished that goal with this sell, so I am pleased with the result.
Most of the average downs were not discussed in the blog. My last discussion was the purchase of 50 shares at $6.88 which I referred to as "probably masochistic" Item # 1.B. (9/25/19 Post) Nonetheless, I thereafter bought 10 shares at 6.4+ and 10 shares at $6.5+. Those averaging down purchases along with averaging down through dividend reinvestment allowed me to escape with a net profit.
Last 2 Dividend Reinvestments:
D. Pared FDUS in Schwab Account-Sold 50 at $15.34:
Quote: Fidus Investment Corp.
Website: Fidus
SEC Filings
FDUS Chart
Profit Snapshot: +$68.44
The average cost for the remaining shares was reduced to $13.12:
 |
| Snapshot Intraday 2/13/20 |
Fidus Investment Corporation Declares First Quarter 2020 Dividend
Dividend Yield at $13.12 = 11.89%
I am not including special dividends in that yield calculation. FDUS paid a 4 cent special dividend last December.
Next Ex Dividend Date: 3/12/20
Last Buy Discussions: Item # 4.A. Bought 50 FDUS at $13.87 and 30 at $12.63 (12/19/18 Pos)
Last Sell Discussion: Item # 1.C. Pared FDUS-Sold 52 at $15.15 (3/6/19 Post)
Last Earnings Report (Q/E 9/30/2019) :
"The weighted average yield on debt investments was 12.3% as of September 30, 2019."
"As of September 30, 2019, 14 portfolio company’s debt investments bore interest at a variable rate, which represented $152.8 million, or 25.4%, of our debt investment portfolio on a fair value basis, and the remainder of our debt investment portfolio was comprised of fixed rate investments."
"As of September 30, 2019, we had debt investments in two portfolio companies on non-accrual status, which had an aggregate cost and fair value of $32.8 million and $9.1 million, respectively."
"On October 1, 2019, we exited our debt and equity investments in Simplex Manufacturing Co. We received payment in full of $4.1 million on our subordinated debt investment. We sold our warrant investment for a realized gain of approximately $2.9 million."
I would use the unadjusted $.3 per share NII number to evaluate dividend coverage. The quarterly NII shows what the portfolio is throwing off in income. That number is 9 cents below the regular quarterly dividend.
The company estimates that there was about $16.9M or $.69 per share in spillover income as of 9/30/19.
Technically, that undistributed income can be use to cover the NII dividend deficit, but the spillover income will be eaten up within 2 years at a 9 cent deficit per quarter.
The excess uncovered dividend would reduce net asset value per share. The dividend will need to be cut at some point unless current quarterly NII covers the quarterly dividend of $.39 per share.
Fidus Investment Corporation Announces Third Quarter 2019 Financial Results
The 2019 4th quarter report is scheduled to be released today after the close. I anticipate another significant failure to cover the dividend with net investment income earned during the quarter.
Net Asset Value Per Share History:
9/30/19: $16.47 10-Q
12/30/18: $16.47
9/30/18: $16.41
3/30/18 $16.28
12/31/17 $16.05
12/31/16 $15.76
12/31/15 $15.17
12/31/14 $15.16
12/31/13 $15.35
12/21/12 $15.32
IPO at $15 June 2011
10-Q for the Q/E 9/30/19 (investments listed starting at page 7)
Loans made to Oaktree Medical Centre had been written down to zero as of 9/30/19:
 |
| Page 9 |
 |
| Page 7 |
E. Eliminated FDUS in Fidelity Account-Sold 20 at $15.4:
Profit Snapshot: +$18.07
Goal: A realized total return in excess of the dividend payments.
I may buy FDUS in a ROTH IRA account where the non-tax favored dividends are tax free. Before doing so, I will want a lower price and better current NII coverage for the regular dividend. The sells discussed above were in taxable accounts.
E. Added 10 SKT at $12.75:
 |
| Snapshot Intraday 2/19/20 |
Closing Price Last Friday: SKT $12.82 +$0.16 +1.26%
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Falling Knife-SKT 5 Year Chart
Dividend: Quarterly at $.3575 or $1.43 annually
Dividend Yield at $13.67 = 10.46%
Next Ex Dividend Date: 4/29/20
Dividend Reinvestment: Yes, as a means of averaging down
I have nothing to add to my recent discussions including those in these posts. Item # 1.D. (2/16/20 Post); Item # 1.D. (1/11/20 Post)
Maximum Position This Account: 100 shares + Shares purchased with dividends
Purchase Restriction: Small Ball Rule (next buy has to be below $12.75).
F. Added 5 FFBC at $24.46:
Investment Category: Regional Bank Basket Strategy
FFBC | First Financial Bancorp (Ohio) Analyst Estimates | MarketWatch
Last Buy Discussion: Item # 1.D. (1/25/20 Post) I discussed the last two earnings reports in that post.
Last Elimination: Item # 3.A. Sold 84+ FFBC at $28.1 (3/24/17 Post)
Average Cost Before Add: $25.09
Average Cost After Add: $24.96 (25 shares)
 |
| Snapshot Intraday 2/19/20 |
Dividend Yield at $24.96 = 3.69%
Maximum Position: 100 shares + share purchased with dividends
Purchase Restriction: Small Ball Rule
FFBC Realized Gains to Date = $1,933.03
I am being extremely cautious with regional bank purchases given the flat yield curve that is restraining earnings growth.
2. Intermediate Investment Grade Corporate Bonds:
It is difficult for me to get my head around current yields and yields-to maturity for higher quality investment grade corporate bonds.
A. Sold 1 Public Service Electric and Gas 3.05% First Mortgage Bond Maturing on 11/15/24 at 105.5:
 |
| Price is adjusted down to reflect $1 commission |
FINRA Page: Bond Detail (prospectus linked)
YTM at 105.5 = 1.766%
Proceeds at 105.4 after $1 commission
Maybe that 1.77% YTM looks good to an investor in Germany:
Germany 10 Year Government Bond Yield: -.429% as of 2/21/20
And +1.77% looks positively juicy to an investor considering the purchase of a 10 year Swiss government bond, currently at -.812%. Switzerland 10 Year Note Generic Bid Yield Index - Bloomberg Markets
Issuer: Wholly owned subsidiary of Public Service Enterprise Group Inc. (PEG)
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.
Today is the first day where the Stock Jocks are experiencing more than a temporary anxiety attack about the coronavirus epidemic.
ReplyDeleteThe concern, based on the rapid rise in infections outside of China, is that the epidemic will turn into a pandemic that will have a material, non-temporary adverse impact on the world economy. That is a rational concern but it is still too early to make that forecast IMO.
It is dicey since several regions were already in a recession or close to one (e.g. the EU). U.S. growth was already slowing before this outbreak.
China last reported 11 new cases outside of the Hubei province which is just not believable.
High quality bonds are up in price and down in yield:
U.S. 10 Year Treasury Note
1.377 % -0.097%
Last Updated: Feb 24, 2020 9:46 a.m. EST
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
Gold is up in price:
SPDR Gold Shares (GLD)
$157.64 +2.94 +1.90%
https://www.marketwatch.com/investing/fund/gld
When I first opened my Fidelity account this morning, Fidelity did not have an account or account balance, a condition that lasted about 10 minutes.
The 3 and 6 month treasury bills were auctioned today and the results were noteworthy IMO.
ReplyDeleteInvestment Rates:
3 month: 1.536%
6 month: 1.475%
That inversion indicates to me that the Bond Ghouls are starting to price another .25% federal funds cut.
Last Monday, the 6 month T Bill was actioned at a 1.547% investment rate.
https://www.treasurydirect.gov/instit/annceresult/annceresult.htm
The probability for a .25% FF rate cut in March was at 11.1% last Friday and is currently at 23.2%. The probability of at least a .25% on or before the April meeting has increased to 56.2%.
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
The 10 year treasury note is currently at a 1.36% yield.
I will be doing some shotgun spray buying today.
U.S. 10 Year Treasury Note 1.314% -0.06%
ReplyDeleteLast Updated: Feb 25, 2020 at 2:13 p.m. EST
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
I believe the current 10 year treasury yield, referenced above, is the lowest in U.S. history. The 10 year was first sold around 1790.
The yield was higher during the Great Depression.
Today's downdraft is clearly tied to the coronavirus outbreak and specifically to the warnings made and concerns expressed earlier today by the CDC.
S&P 500 Index 3,137.35 -88.54 -2.74%
Last Updated: Feb 25, 2020 2:22 p.m. EST
https://www.marketwatch.com/investing/index/spx?mod=home-page
I am allocating about $2K to shotgun spray buying in U.S. common stocks, continuing my past practice of buying into volatility spikes at a measured and extremely slow pace:
CBOE Volatility Index
28.75 +3.72 +14.86%
Last Updated: Feb 25, 2020 at 1:10 p.m. CST
https://www.marketwatch.com/investing/index/vix
My out-of-pocket common stock purchases today came to $1,777, somewhat below my initial allocation of $2K. Most, if not all, orders were placed when the DJIA was down 700+ points. All purchases were dividend paying stocks with yields ranging from 3.8% to 13%. All lots were small with some multiple purchases of the same stock during the day as prices declined further. I only added to existing positions. All purchases were in the 1 to 10 share lot range. All purchases with 1 exception were all made under the small ball purchase restriction which required purchases to be at the lowest price in the applicable chain.
DeletePurchase selections are made based primarily on particular stock valuations, viewed as reasonable before the recent downdraft, dividend yields and dividend growth prospects to a lesser extent.
I will only be discussing a sample of these trades.
The VIX closed at 27.85. That qualifies as day 1 in my Trigger Event calculation. I am already down to a stock allocation of less than 5% of my total brokerage assets, so the formation of an Unstable Vix Pattern is not going to lead to a reduction in an already slashed stock allocation.
I missed that close on VIX. I must have only seen after an afterhours futures rise.
DeleteThat's notable.
I don't see this virus making enough difference to justify this. It seems like valuations were extended and it's just about resetting those.
Land: It is still an open question IMO whether the coronavirus epidemic will have a material negative impact that extends into the second quarter.
DeleteWhen valuations become high and there are events that call into question the blue sky narrative, a valuation reset will occur. I view the 50% or so decline in 2000-2002 to be almost an entirely a valuation reset.
https://www.advisorperspectives.com/dshort/updates/2020/01/02/the-four-totally-bad-bear-recoveries-where-is-todays-market
The coronavirus epidemic is occurring at a time when growth was already anemic, particularly in Europe and Japan. China will slow dramatically in response.
The question is whether the epidemic turns into a worldwide pandemic sufficient to tilt the world into a recession. Some regions will only need a little push.
In the U.S., the Markit survey released last Friday was troubling in that it showed contraction in the U.S. service sector.
U.S. GDP growth is dependent on the federal government spending $1 trillion per year of borrowed money with households continuing to spend using more borrowed money as well.
The yield curve inversion, using the 3 month treasury bill and the 10 year treasury note, started again on 1/30/20:
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2020
The earlier inversion already signalled a recession, using models based on history, but that indicator is mushy on the lag period.
There is a debate whether the signal is accurate since central bank monetary policies, here and abroad, have distorted the yield curve. So is the inversion caused in significant part by central bank manipulation rather than rates set by private market participants based on predictions about the future?
The answer is unknowable, but I lean toward a conclusion that this indicator is not as reliable as in the past due to CB interference in normal market based interest rate settings.
I watched about 20 minutes of the debate last night which was about 15 minutes more than I could stand. I find the candidates annoying except for Senator Amy Klobuchar, who does not stand a chance IMO. I have already voted for her in the TN primary. I find it particularly annoying that the candidates raise their hands whenever someone else is speaking.
I missed that the inversion had already started back up. In and out from Jan 30 but under completely since Feb 18.
DeleteI've been buying for long term with some enthusiasm (not huge amounts of money though), but need to rethink that. As long as there's a recovery period, I'm fine - can sell then. (There's always the risk that there'll not be one, but it's indices and can wait many years out.)
My preference has been AmyK from the beginning too. She did well considering where she started, but no chance.
I'll vote Biden if he's in the lead of the moderates with any chance. I liked his CNN townhall, even if otherwise I haven't been all that impressed. Then again, maybe I should stick with AmyK so during the convention 2nd vote, they have a true sense of what % people voted for each of the moderates... for when they pick on. (I'm hanging hope on that taking care of Bernie. It's hope, not certainty.)
I listened on radio while driving. Saw the hand waving later on replays. Not a well done debate.
The inversion is baaaaaack!
ReplyDeleteI had a backtest written up. I can't find it. I vaguely remember the return being a big deal to the market then finally pulling back. After the 1st inversion the yield would normalize for a while. Then 'surprisingly' flip again.
Of course the low rates to begin with & punch happy fed, might make this less meaningful??
The VIX is striking. It's barely managed to get above 20. It never made it over 25 to be a trigger for the model's counting. I would expect so far based on that, the market to recover. Also that it'd be best to wait before selling stocks.
Has anything given a modeling idea of how this may go... or how low before reversing? (The golden question.)
Even Buffet's camp is saying to not jump right back in. But fear/greed indicator was at far fear. So that's everyone on one side of the boat, so it tends to right itself.
Along with planning to get in, the question beyond indices is which stocks. Amgen so far is the only one I noticed. CRM has no div, so it's a timing stock, but it did drop a lot with the CEO leaving.
I wonder if the recovering will be as straight up and fast as the decline?
Market isn't being dull!
I'm holding out hope that something happens to offset the Bernie train. I can't vote for him. I can't vote for Trump. Like you I (and a bunch of people I know) won't vote if he's the DNC nominee (while not being a DNC candidate.)
ReplyDeleteThere's a poll from the summer of Jewish Democrats. They polled with less than 1/2 the support of Bernie than other democrats have.
When you're vaguely your community can't stand you and thinks your an opportunist and sellout... that's not a good sign. Community is very concerned about him by now.
Even this week, he has Russia helping but hasn't said anything for 2 months to clarify his positions on Russia?
Bernie bros are predictable. I've have been called "antisemitic' repeatedly by them. Then they switch to racist and hatefully against working class. Then back to telling me I'm antisemitic. I've been asking for a month now if they are Russian bots. I might have been right.
BTW, Aipac is bipartisan, slightly right of center but not by much, normally doesn't comment on politicians by it's own policy, but last year reprimanded Netanyahu.
In the debate AmyK claimed she had a bill to close the boyfriend loophole on gunownership (against domestic violence perps owning them) and then Bernie claimed it was his. I haven't heard the fact checking on that and want to.
It's all so depressing and distracting. I want normal again. Where is it?
Any of those stocks you bought of companies that I'd understand? The Regional banks & Canadian are over my head :).
ReplyDeleteI just sold my 25 shares of Square. At $30-40 loss (computer froze in the middle, and I haven't opened the older transaction page to check.)
Has no dividend. No PE cause earnings are neg. Has been way down at points. Probably should have been patient to wait for this scare to be over, but today is earnings day and it's got a minor rally going (was 1%, then .3%). I don't want to risk bad news & feeling stuck or having to sell at a big loss. The fundamentals make this unsure for a long term.
One of my first - sell my loser - sales. Then again, I often to do - sell when it's finally in recovery. Then it rallies.
Land: I have only sold one stock this week, 100 shares of RNW:CA, that netted a C$511 profit.
Deletehttps://www.marketwatch.com/investing/stock/rnw?countrycode=ca
I am buying some regional bank stocks but only in extremely small doses even more me. I do not expect them work anytime soon.
I doubt that the coronavirus motivated panic attack is over. The rally today faded after an FDA official opined that the outbreak was on the "cusp of a pandemic", which is obviously the case, but Stock Jocks get the shacks whenever some health official makes those kind of statements.
Energy stocks are getting crushed. Any purchases in that sector now will probably work long term but more pain is likely IMO.
I had sold my OXY position down to 4 shares as discussed and added just 1 share yesterday and may buy 1 more today. So it would be fair to say that I am not throwing caution to the wind or swinging for home runs.
The electric utility sector has held up relatively well.
Recently I sold 50 out of 100 PPL and I am starting to buy back a few of those 50 shares.
https://www.marketwatch.com/investing/stock/ppl
My high quality bonds, steady cash flow from dividends and interest payments, a currently substantial cash allocation, some hedging purchases in TWM, QID, and SDS, and an immaterial stock allocation have combined to cause almost no loss so far.
I am taking significant percentage hits on my few energy stocks and hotel REITs but the overall sums are immaterial.
Occidental Petroleum Corp.
$35.17 -$1.015 -2.80%
Last Updated: Feb 26, 2020 at 1:22 p.m. EST
https://www.marketwatch.com/investing/stock/oxy
I doubt that I have a greater than $5K exposure to energy stocks so I have some room to nibble here.
I have gotten nailed on my VIAC position. I am adding to that position some in small lots, but will not be discussing the trades here.
ViacomCBS Inc. Cl B
$24.98 -$0.385 -1.52%
https://www.marketwatch.com/investing/stock/viac
Did some more buying in regular non-IRA and Roth accounts.
ReplyDeleteSPY, IWM, QQQ. And in Roth SPY, IWM.
I'm betting that market will get higher than this again, even if it sinks.
Trump will trumpet and in spite of the obvious irrelevance (he can't talk a virus away), market will gain confidence for a small rally.
Also if this is a VIX model trigger, there's likely to be a recovery period (not that this was too big of a selloff compared to all the climbing last year.)
Hoping to see more sell off, so can buy more. I couldn't bring myself to buy huge amounts here.
Land: As I have become older, I am less likely to engage in future predictions, having being admonished by the 6th Century Chinese Poet Lau Tzu who made the following observation:
Delete"Those who have knowledge, don't predict. Those who predict, don't have knowledge."
https://www.brainyquote.com/authors/lao-tzu-quotes
The VIX Model is a future forecast based on prior history. In the past, there has been a Recovery Period after a Trigger Event that provides a better opportunity to lighten up on stocks than during the elevated volatility period. The next time may be different.
There were two elevated volatility spikes in 2018 that almost produced a Trigger Event. The first started in late January and the next one started in October 2018. In both cases, I did some common stock buying into the volatility spike and later sold most of those purchases when the market recovered and hit new highs. This may or may not work now.
Today looks like another major down day so I will be doing some light shotgun scatter purchases, sprinkling around $1k to $2K into several dividend paying stocks. About all that I can say now with any certainty is that my dividend yields are going up as the stock prices decline.
In cases where the falling knife characterization does justice to the chart, I may still buy but I am chopping up orders into even smaller pieces. For example, in this post I discussed buying 10 SKT. If I buy that stock again today, it will be a 5 share order and will any subsequent purchase using the small ball purchase restriction until I hit my maximum limit of 100 shares + shares purchased with dividends.
I am increasingly using redemption proceeds from treasury bills, corporate bonds and CDs to purchase 1 to 3 month treasury bills as an alternative to leaving the funds in a MM account.
The 28 and 56 days treasury bills will be auctioned later today and I have an order placed for the 28 day bills.
U.S. 1 Month Treasury Bill
https://www.marketwatch.com/investing/bond/tmubmusd01m?countrycode=bx
Selling SQ before earnings didn't work out too well. Would have made $125 instead of lost $25. Still, it was a reasonable idea to not take a risk on an 8% decline instead. No div. I was tired of that stock's problems.
DeletePPL seems interesting. Nice div, and PE. I need to explore more.
I need accumulation. Don't have enough in the market. The more I can put in at good divs the better.
So don't want to miss this post-virus recovery any more than want to get stuck buying too soon.
So I started to buy yesterday, in small amounts, since I can't time it, so have to just get in at various points.
When recovery starts, I consistently freeze on buying since it moves up so fast these days.
Waiting now. 3% down this morning looked good, but with yesterday's buys, decided to wait.
My energy stocks are well under. I have too much in energy for diversification. But when this looks like it's cooling off, I intend to buy some. I have CVX, TOT, Shell. And a few smaller that went poorly. I've never owned OXY.
Interestingly, the stocks I bought in 2019's low that did well, are holding up decently here. (The ones that were down already, are still down.) Those were mostly div buys as long term holds for the next 10-20 years.
Supposedly chip stocks are taking it. So they too may be a place to buy, if/after more pain has shown up in them.
Hi SG, still following; been selling prior to events ; very light stock; any opinion of whether the sanders ticket will win and how hard healthcare could be trashed ie, may be parts of the sector will be good; with the boomers ;(I did see you take on Poet Lau Tzu) so i understand your unwilling to predict; just your thoughts!! It looks like MMt is coming ; whether it works or not we will see; IMHO; covid 19 sound like a very bad form of Flu and last year I think @ 40k people died in US and only half of pop get the vaccine; no prob with the risks that are known!!! go figure!! thanks; keep writing even if its only once a week ; we are loyal followers
ReplyDeleteG: I will not be voting for either Sanders or Trump. I am 100% certain that this future prediction will prove to be true.
DeleteI view it as unlikely that Sanders will beat Trump but conditions may change between now and election day that could change that forecast (recession, rapidly rising unemployment, stock market crash, etc).
I mentioned that my current opinion is that Sanders has no better than 60% chance to win the nomination, with the odds improving when and if Warren drops out.
Among large segments of the population, confiscating money from those who have it, and distributing it through new benefits to those who do not, has appeal.
After all, those who receive the benefits (e.g. free college, forgiveness of student loans, Medicare for All) are not paying for the costs.
And, there is a misplaced belief among liberal democrats that (1) rich people can finance those expenditures and (2) their contribution to tax revenues can grow when taxes are increased on them. The law of diminishing returns from milking the well to do will occur.
I do not have the numbers in front of me. But if the government confiscated all of the wealth of the richest 20 people in the U.S., that would still be insufficient to cover the $1T annual budget deficit generated by existing spending levels.
I doubt that Medicare for All will pass in my lifetime, but eventually it will become the law. Maybe it will become affordable after the baby boomers pass; and improvements in medical care, including new drugs, substantially lower the costs with better results.
If Sanders or Warren become President, they will face a united republican front and major defections from Democrats when they try to pass Medicare for All.
Even if I am right about that failure to pass that kind of law, investors will likely still react negatively to the possibility that it may pass. The most unfavorably impacted during a fear event would be the private health insurers. I do not have any exposure in that sector.
The "blame the rich people" is in my view, just another version of blame someone, which creates tribalism. We've had enough of tribalism already.
DeleteWe need a stronger economy. Not finger in dyke safetynets for what would not need a net, if we had a stronger economy.
Moving money around doesn't strengthen. Quality gov't projects and better streamlined regulations (less red tape, helpful to small businesses, remove monopolies), do. (Quality projects don't include southern walls.)
I've dealt with medical issues, and spent time on forums with people from around the world. There's a lie in M4A that it can be simply expanded. Foreign programs have restrictions and structure to them, that would have to be invented here. Those selling m4a don't even begin to mention that. Plus overseas, they don't get the most advanced treatments as quickly as we do. Lots to clean up in our system, but the conversation has to be more realistic.
I time my common stock "buy program" this morning to at least a 700 point DJIA decline, spending up to $3K. I made it up to $887 before the stock market started to rally. I will now wait to see whether the decline resumes later today before buying more. All buy orders were small lots with the largest being 10 shares of PPL, where I may buy more at lower prices to replace the 50 shares recently sold at $36.2.
ReplyDeleteItem # 2.D.
https://tennesseeindependent.blogspot.com/2020/01/akba-ffhprica-jcap-pnnt-ppl.html
PPL Corp.
$32.57 -$0.67 -2.02%
https://www.marketwatch.com/investing/stock/ppl
The foregoing are simply some risk reduction techniques that are multi-layered and tightly controlled. I am far more concerned about further downside than missing a robust V shape reversal. Or put another way, I want to control my potential loss exposure while taking some measured risks more than I want to participate in a stock rally.
HI SG, thanks for reply; i think I may have missed your thoughts on MMT and how the US can get out of all this " leverage" companies have created w stock repurchase based on borrowing and basically free money; a lot of pundits think the highly indebted BBB (lower tier S and P companies )can not withstand a recession and stay solvent because they are not profitable; and i wanted to get your thoughts; I may have missed your take; thanks
ReplyDeleteG: If you mean Modern Monetary Theory, I am not a believer:
Deletehttps://www.investopedia.com/modern-monetary-theory-mmt-4588060
For now, the federal government can borrow enough money to cover the $1T annual budget deficits that will only increase with slower growth and accelerate during a recession and its aftermath. Eventually, there will be a limit hit, possibly when the interest on the national debt exceeds $1 trillion per year. Sure the FED can buy whatever debt can not be sold after a failed treasury auction, but that will be viewed IMO with extreme negativity by stock, currency and bond investors whose values are expressed in USDs.
As to BBB credits, I do not own many corporate bonds rated below A- and many of those will mature this year. My Tennessee municipal bonds probably have a weighted average debt rating of AA or AA+. I also own a lot of short term U.S. treasury bills.
It is hard to make any general assessment about how a recession will impact lower tier investment grade corporate bonds. The default rate will be higher than now, but most will probably survive anything short of a Financial Armageddon.
The ETF LQD is weighted in BBB credits and is doing okay but is down today:
$131.05 -$0.36 (-0.27%)
As of 2:50PM EST.
https://finance.yahoo.com/quote/LQD?p=LQD
Junk bonds will crater in price during a recession. For awhile now, I have avoided them altogether since their yields were insufficient compensation for their default risks.
SPDR Bloomberg Barclays High Yield Bond ETF (JNK)
$107.29 -$0.86 (-0.80%)
As of 2:51PM EST.
https://finance.yahoo.com/quote/JNK/?p=JNK
BDC's are being hit during this downturn since their loans are made mostly to highly leveraged private companies that would be junk rated if any service rated them.
The bond ETF that is doing the best today is ZROZ:
PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund (ZROZ)
$157.14 +1.85 (+1.19%)
https://finance.yahoo.com/quote/ZROZ?p=ZROZ&.tsrc=fin-srch
That one owns long duration zero coupon treasuries that are highly sensitive to up and down moves in interest rates.
Do you have any thoughts on why the VIX isn't looking nearly as steeply increasing, as the market is diving?
ReplyDeleteThat may be that I've been looking at futures, not the chart when I'm glancing.
Looks like just over 25 now. Finally approaching the tradewar dip's VIX.
Maybe I'm overreading, and it's just reflecting how slow investors are to deflate their expectations these days. In other words, I'd seen the 2nd stage patterns, this is what VIX looks like in the 3rd exuberant stage.
Land: I do not have access to real time VIX quotes. The quotes are generally delayed by 15 minutes as is this quote:
DeleteCBOE Volatility Index
32.46 +4.90 +17.78%
Last Updated: Feb 27, 2020 at 1:46 p.m. CST
https://www.marketwatch.com/investing/index/vix
That is close to what I would expect on a day like today. The percentage movement will be far greater than the decline in SPX which is currently down about 2.84%.
Today will be the third day in my Trigger Event count. On 2/20/20, the VIX closed at 15.56 and at 13.74 on 2/12/20:
https://finance.yahoo.com/quote/%5EVIX/history?p=%5EVIX
VIX is finally reflecting the worries the market prices are indicating.
DeleteIt was beginning to look disconnected to me, just barely over 20 with a 3% down day.
I've had your VIX asset model summary open for a while (I have far too many tabs open). So just read through it.
Lots of watch and wait now, on the virus, and it's impact or lack of, and market's reactions.
Google's stopped notifying me again. Even with the box checked.
Over 4% down today. I bought way too soon. Used about 2.6% of my investment funds. Plus another .4% at the start of the pullback.
ReplyDeleteThere's that big slide down at end of day!
Says VIX close at 34.41. Day 3 is confirmed.
Land: You were looking at a delayed VIX quote.
DeleteI have the close at 39.16, up 11.60 or 42.09%.
https://www.marketwatch.com/investing/index/vix
With that kind of elevation, a Trigger Event is highly likely. Any day with a close of 26 makes the count and fewer days are required with readings over 30.
I am doing some light common stock buying but switched near the close today to paring two of my double short ETFs (27 of QID and 30 TWM-recently bought).
ProShares UltraShort QQQ (QID)
$24.65 +$2.25 +10.04%
https://www.marketwatch.com/investing/fund/qid
There was no place to hide today in stock land-just a sea of red. REITs and utility stocks had been holding up, but were shellacked today.
Utilities Select Sector SPDR ETF
$64.33 -$3.03 -4.50%
https://www.marketwatch.com/investing/fund/xlu
Vanguard Real Estate ETF
$89.49 -$5.03 -5.32%
https://www.marketwatch.com/investing/fund/vnq
The ten year treasury hit a new all time low today, closing near 1.27%. The 30 year treasury bond is also hitting new all time yield lows closing today near 1.76%.
Interest rates are not the problem, contrary to what Doofus Don has been saying for months.
I'd added a comment shortly after, that that was from 2:55pm (when I noticed it was.)
DeleteWonder where that comment went? Google goblin?
Just shy of 40.
I hadn't thought of making money on the downside. Hum, I should think about it. Harder because you can't hold mistakes forever.
Land: I no longer discuss in the blog purchases of double short ETFs, though I did mention in a recent comment that I owned QID, TWM and SDS and still do. I just pared the overall dollar exposure about two minutes before the close today.
DeleteThose securities are potentially toxic. Due to losing tracking with the index after one day, timing purchases needs to be close to spot on. The parabolic rise in the stock indexes caused major declines in those securities. QID has a 52 week range of $18.75 - $39.04 and was trading below $19 on 2/19/20. I had some purchases below $19 as I recall.
I will use them as temporary hedges since I only have cash accounts and do not trade options. Without a margin account, I can not short individual stocks or ETFs like QQQ, IWM or SPY.
I will use the double short ETFs for short periods unless I forget about having one which happens. In several recent posts, I mentioned that it was becoming extremely difficult for me to keep any stocks, even though I had sold down to less than a 5% allocation. When I start talking like that, I am either going to a zero allocation which I did in 2000 or late 1999, or will do some light buying of dividend stocks into major downdrafts with hedges in place. The double shorts are an immaterial part of the hedging process. The later approach is what I am doing now.
My main hedges are cash, treasury bills, short term corporate bonds maturing this year (bought in prior years) and some CDs. If there is a substantial decline tomorrow or next week, I will probably sell the remaining double short ETF shares.
Thanks.
DeleteI have no intention to hedge my portfolio. I don't need the money to live on - I keep a rainy day fund. In prior downturns I ignored them until recovery, so I'm hoping to be emotionally able to again.
I would like to make money on whatever the market is going. But haven't ventured for all the reasons you gave. Still, if enough lines up to be obvious, it might be worth a try. I've made money on short ETFs in day trades a while ago, during downturns.
" In several recent posts, I mentioned that it was becoming extremely difficult for me to keep any stocks, even though I had sold down to less than a 5% allocation. "
This sounds like an instinct that's feeling a different phase coming, (even if it will be a while.)
Land: Cash and upcoming proceeds from maturing fixed coupon investments are my main hedge now. Those assets are producing income and are not losing value. I can at anytime redirect those funds into other asset classes including common stocks without having to sell common stocks to fund the purchases.
DeleteMy money market balances are now at the highest level in my lifetime by a substantial amount, but not at the highest level on a percentage of total investable assets.
In March, I will be receiving $101K in proceeds from maturing treasuries, corporate bonds and CDs and similar amounts in subsequent months. Some of that cash flow will be redirected into common stocks.
The 10 year treasury yield crashed earlier today to 1.16% and has recovered somewhat with a yield near a 1.19% now.
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
The 1, 2 and 3 month treasury bills are also crashing in yield, making those alternatives for idle cash less attractive.
U.S. 3 Month Treasury
1.346% -0.149%
Last Updated: Feb 28, 2020 at 9:01 a.m. EST
https://www.marketwatch.com/investing/bond/tmubmusd03m?countrycode=bx
The Bond Ghouls are forecasting that the FED will soon cut the FF rate by .25%. Yesterday, I bought at auction the 56 day treasury bill that had a 1.524% investment rate.
https://www.treasurydirect.gov/instit/annceresult/annceresult.htm
The 3 month treasury bill, auctioned last Monday which I bought at auction, had an investment rate of 1.536%.
Money Market yields will follow the short term rates down. The Fidelity Government MM fund currently has a 1.22% yield but that will decline as higher yielding securities mature.
None of these short term investments will produce a positive real return before taxes.
There is a lot of talk now about central banks coming to the rescue by lowering short term rates further. This will not help matters and will probably IMO end up making matters worse on a net effect basis.
Land: I went back and read some of my earlier posts expressing my difficulty in holding any stocks now. The latest one was my 2/19/20 post: "I am barely able to keep myself from selling all stocks currently owned." The reason was not a feeling but the valuation statistics set out immediately thereafter. There is no room for error on earnings growth forecasts when major indexes become as expensive as those statistics indicated then. Goldman came out and said that it expects no earnings growth for the S & P 500 this year, and that does not support the P/E multiples when I published that post or now for that matter.
Deletehttps://tennesseeindependent.blogspot.com/2020/02/dpg-enb-gnl-igr-nrz-sret.html
I'm mistaken. The 4pm VIX isn't in yet.
ReplyDeleteIn a family member's retirement account at Fidelity, I had worked the GDO position down to a zero cost basis. Fidelity assigns a zero cost basis to shares purchased with dividends in retirement accounts. So I thought about adding 10 shares in that account today and ended up buying 10 in my taxable account at $17.4.
ReplyDeleteWestern Asset Global Corp Defined Opportunity Fund Inc.
$17.39 -$0.41 -2.30%
https://www.marketwatch.com/investing/fund/gdo
I sometimes make these errors, thinking that I am in one account when I am actually in another. But that is what happens when you start to push close to 70 and there are a lot of different balls in the air.
I had sold GDO in all of my accounts as previously discussed here. I had a few reservations about the fund. First, it is a leveraged fund and the cost of leverage was rising when I last sold the share. That has now reversed. Second, the discount had narrowed to the point where I lost interest in owning shares. And, I am not a fan of junk bonds now, and the fund has a significant exposure to those credits.
CEF Page:
https://www.cefconnect.com/fund/GDO
Click the portfolio characteristics tab for the junk bond exposure.
High quality bonds had a good day today, but this fund will probably suffer a decline in net asset value per share due largely to that exposure when it reports later today.
Dividends are paid monthly with the last ex dividend on 2/20. (click distributions tab)
I completely missed this concept on SQ:
ReplyDeletehttps://www.cnbc.com/2020/02/27/square-emerges-as-coronavirus-hedge-after-earnings.html
It's domestic was considered a hedge for the virus. I missed a 10% climb by selling right before.
That seems like it's reaching logic.
Land: I would not view Square as a hedge against the coronavirus. Apparently, it is less exposed to international travel and tourism than its competitors. Square still generates about 10% of its revenues outside the U.S.
DeleteSquare is an interesting company but one that I barely follow since it is not earning a GAAP profit and does not pay a dividend.
The E.P.S. consensus estimate for 2020 of $.95 per share is a non-GAAP number.
The company is forecasting that it will incur a GAAP loss of 9 to 5 cents per share this year.
SEC Filed Earnings Report
https://www.sec.gov/Archives/edgar/data/1512673/000119312520050074/d888202dex991.htm
The stock did gain 3.55% yesterday but is down at the moment 3.24% in pre-market trading.
That confirms my impression and reasons for my decision.
DeleteIt doesn't have earnings used for PE on Finviz's calculations - so apparently that site doesn't use the non-GAAP number. (Seems wise to me.)
I was trying to say that the logic of being a hedge, seemed like a reach. So nice to hear your thoughts.
It's gained 3.77% today to go with yesterdays. I've done this a few times. Waited well through the downs, only to sell RIGHT before the climb. Advance Auto was one of the others.
But it's a lose based on what was a solid decision this time.
I became somewhat more adventuresome this morning when the DJIA had declined by another 1,000 points. I sold most of my double short ETFs except for a few QID shares. At the moment, I am focusing on buying back some dividend stocks that I have recently sold at significantly higher prices, though I am not buying back all of the shares sold in one trade.
ReplyDeleteAgain, about all that I can say for certain is my dividend yield for each stock is going up with every purchase.
3:00pm CST so 4pm EST - 42.24
ReplyDeleteBy 3:10, 4:10 EST - under 40
Land: The final VIX closing quote, which is the relevant one in my Vix Model, is generally available at Marketwatch or Yahoo Finance around 4:15. EST.
DeleteCBOE Volatility Index
40.11 +0.95 +2.43%
Last Updated: Feb 28, 2020 3:14 p.m. CST
https://www.marketwatch.com/investing/index/vix
I was looking at that link, which you'd given yesterday.
DeleteI figured when it was after 4pm, and it said 3:00 CST, it was giving the 4pm rate.
I'm not going to be very good with the model if I don't master the totally utter basics of collecting that one data point!
I was up in the middle of the night (not intentionally). So looked up stocks.
ReplyDeleteI'm puzzling out a couple of fundamentals, and how to assessment (on any stock).
One is debt ratio. The other payout.
https://finviz.com/quote.ashx?t=PPL&ty=c&ta=1&p=d
For example, PPL's debt ratio short and long term is 1.77-1.60. A few other stocks were in similar ranges.
Do you assess that when looking for a comfortable long term hold? Use a cut off?
Another fundamental,
Payout on PPL is 68.60%. A couple other stocks were in similar range. Do you use a cut off that makes it not the time to buy?
When CVX was down during a prior time, it's ratio jumped to 123% or over more. I decided not to sell. Had I wanted to buy, if it'd used a strict cutoff, I wouldn't have bought. Yet the stock did well after that. One factor has to be whether it's high during a down time for the stock... or the stock isn't tanked but it's still high as indicator that they've been having longer term problems since they raised it.
These are in my mind, entry level questions, and take time to explore and develop methods around these fundamentals.
I'm trying to remember what I looked up. Amgen was one - which has good numbers and great div and in my prior reviews good management, but it's been in a downtrend from before the virus started. I need to figure out why before buying.
JNJ, BABA (not hit even though it's China based), MMM, LTM, LAZ, VZ (I own those 4).
Land: I do not use absolute cut off numbers for the payout ratio. The industry sector is an important consideration when evaluating the payout ratio and the safety of the dividend.
DeletePPL is a regulated utility that has what I would call monopoly power within its U.S. service areas and in its U.K. electric distribution business. A payout ratio for a regulated utility can be higher than a company that is more sensitive to economic cycles like a regional bank where I would generally like to see payout ratios less than 50%.
Equity REITs will generally have payouts significantly in excess of GAAP E.P.S. but the safety of the dividend needs to be evaluated in terms of funds available for distribution which is more of a cash flow number that adjusts GAAP E.P.S. down by certain expenses including non-cash depreciation of owned properties.
Duke Energy, one of the blue chips, has a higher payout ratio than PPL.
https://seekingalpha.com/symbol/DUK/dividends/dividend-safety?s=duk
Dividend growth for most electric and/or gas utilities will be much slower than growth companies that have lower dividend yields.
Amgen is growing its dividend at a much faster rate than PPL or other electric utility companies.
https://www.gurufocus.com/term/dividend_growth_5y/AMGN/5-Year-Dividend-Growth-Rate/Amgen-Inc
While an investor may start off with a higher dividend yield with a PPL than an Amgen, the dividend growth company can overtake the slower growing company that has a current higher yield over time, which is the reason why a lot of investors focus on stock with high dividend growth rates funded by growth in earnings and cash flow.
As for PPL I have now bought back 20 of the 50 shares sold at a higher price, with the last 10 shares bought today at $30.16. I sold the 50 share lot on 12/20/19 at $36.2:
Item # 2.D.
https://tennesseeindependent.blogspot.com/2020/01/akba-ffhprica-jcap-pnnt-ppl.html
As far as I am concerned, I am ahead by selling 50 at $36.2 (profit of $114.96 + 1 quarterly dividend) and then buying back 20 of those 50 shares at a lower price than my prior purchase price just before the next ex dividend date.
Brain malfunction in prior comment. Maybe I need to proof read before hitting the publish button. Depreciation is added to GAAP E.P.S. for REITs to arrive a cash flow number (along with other adjustments)
DeleteThat's all very interesting.
DeleteWith utility's slower div growth, a higher payout isn't going to escalate into problem range as quickly as a higher div growing company.
For the high div company's set up that way like REITs, they're obligated to pay out, so it becomes the cash flow to measure their ability to.
So I'm going to need to develop a sense for each industry area, like large energy, consumers, and tech.
Land: Given my age, I am more likely to gravitate to a stock with a higher dividend yield than one with a lower yield that is growing the dividend faster. The likelihood that a faster growth will overtake a slower growth in 10 years, with the purchase option being now, is not that relevant to me. It needs to be a more relevant consideration for younger people. The questions remain whether the dividend growth is sustainable and even whether the current dividend is safe.
DeleteMy general rule of thumb now is to consider the faster grower when the current dividend yield is over 3%. Amgen qualifies using that standard, but I have not looked at that stock since selling some shares awhile back.
I last sold out at $170.76 (8/30/16) based on my then concerns about replacing revenues from legacy product sales.
See comments made in November 2016 for example in this SA Instablog:
https://seekingalpha.com/instablog/434935-south-gent/4926266-south-gents-comment-blog-3-reits-preferred-stocks-and-bonds-regional-banks-healthcare
I have not looked at the fundamentals since then.
My last substantive discussion was in this 2016 post:
https://seekingalpha.com/instablog/434935-south-gent/4904291-amgen
Was good to go through the older posts, see what effects that subsector, and shows up on earnings reports.
DeleteNow a days talk about drug price regulations, add to the pricing factor.
I have PFE. It climbed nicely at first, up 20%. I kept and it's was underwater before this selloff. Lower earnings this year (not negative) but I haven't figured out more yet.
Makes sense to look for higher div than higher DGI. I've found it hard to spot DGIs at above 3%. For any lower amount, that stock would have to be rock solid.
Do you have thoughts on debt ratio? Use a cut off for it? PPL also was 1.5-7ish on that ratio.
A few stocks I'd looked at were over 1.0.
It matter's what a particular company's reason is, but it's another factor that can look bad during a downturn.
Land: The debt to equity ratio for PPL is lower than 79% of the companies in the regulated utilities industry.
Deletehttps://www.gurufocus.com/term/deb2equity/NYSE:PPL/Debt-to-Equity/PPL
There is no one cut off for every energy group. Regulated utilities are capital extensive and those expenditures will largely be financed with debt and equity issuances. With some exceptions, those expenditures earn a rate of return set by a regulatory body. People generally pay their electric bills since the alternative is to lose power.
A lot of the debt is issued by its operating subsidiaries. Kentucky Utilities, for example, issues first mortgage bonds that are rated A1/A. Its 3.3% first mortgage bond last closed at 109.8 which is almost a 10% premium to its par value which results in a 1.39% yield to maturity.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C639821&symbol=PPL4291192
Louisville Gas and Electric, another subsidiary for the PPL holding company, issues first mortgage bonds rated at A1/A.
The same is true for its Pennsylvania operating subsidiary.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C611715&symbol=PPL4131789
I have owned and continue to own a significant number of first mortgage bonds issued by operating subsidiaries of publicly traded utility companies. The problem is that the yield on those bonds are just too low now for me to make new purchases.
The PPL common shares now yield north of 5%.
As to PFE, I last owned shares in 2017 when I traded small lots to generate that year a $469.95 profit.
Item # 4.A.
https://tennesseeindependent.blogspot.com/2017/08/observations-and-sample-of-recent_13.html
I view PFE as a bond substitute. When a stock is so classified, I am only interested in harvesting the dividend and selling at a profit.
I am prejudiced against PFE. The market value of this stock is less than the value of PFE's acquisitions since Warner Lambert in 1999 which was probably the only successful one. Pipeline growth was mostly achieved through costly acquisitions rather than drugs discovered in its research labs. The drugs acquired during the older acquisitions have lost patent protection with the main one being Lipitor which came with the Warner deal. The company continues to face patent expiration headwinds this year from Lyrica and Enbrel as I recall. I will need to take a look to see how the newer drugs are selling and its pipeline before buying now. Ibrance has a patent expiration in 2023 and that drug produces close to 9.5% of revenues now. Sutent's patent expires in 2021. You need to pay attention to patent expirations:
See pages 10- 11
https://www.sec.gov/ix?doc=/Archives/edgar/data/78003/000007800320000014/pfe-12312019x10kshell.htm
Product Sales by Drugs:
Scroll to page 131:
https://www.sec.gov/ix?doc=/Archives/edgar/data/78003/000007800320000014/pfe-exhibit13x12312019.htm
Ibrance 2019 = $4.961B
Total Revenues: $51.75B
What a great resource site. I can see where keeping up infrastructure leads to higher debt than another industry might have. Also that it's a regulated solid customer base industry, so more stable that way.
DeleteWhy would PFE be a bond substitute? It's not a very stable business base. Is it purely because it's a high div and not going out of business soon, but not a quickly expanding company?
That's a lot of good detail on what's happened with this stock. I do need to pay attention to the patent expirations, and pipelines. I wonder why these issues weren't hurting the price, then now are only a year later. But it seems like the higher price and not hurting, was the outlier. Those are a lot of expirations coming up.
I suppose if I sell now at a slight lose, the year of divs makes up for it. And going forward, will need to see if there's a reason to hold. i.e. whether there's a reason to 'buy' here.
I ended up investing more today than in the prior 4 days this week.
ReplyDeleteI expanded my buy list to include leveraged CEFs that I previously eliminated at higher prices.
The Nasdaq has a decent rally into the close, finishing slightly in green. The S & P 500, the DJIA, and Russell 2000 managed to rally as well off their lows but still finished in the red.
The 10 year treasury yield finished at around 1.16%. Interest rates for CDs and short term treasury bills tanked as well. The lower cost of leverage is one reason for venturing back into the leveraged CEFs. I will however pace my buying in small lots using the small ball purchase restriction. 5 to 15 share purchases were made today in THQ (a stock ETF), BTZ, ERC and GDO and I restarted DPG and the ETF PFXF that were recently sold.
VanEck Vectors Preferred Securities ex Financials ETF (PFXF)
$19.30 -0.43 -2.18%
https://www.marketwatch.com/investing/fund/pfxf
Preferred stocks are subject to downdrafts when stock volatility spikes and junk bonds see massive selling, which occurred this week.
An extreme case of that connection was discussed in a
Duff & Phelps Utility & Infrastructure Fund (DPG)
$13.73 -0.54 -3.78%
I only bought back 10 DPG shares today at $13.35, having just sold 123+ at $15.76:
Item # 2
https://tennesseeindependent.blogspot.com/2020/02/dpg-enb-gnl-igr-nrz-sret.html
I feel like I am ahead even if DPG goes down from here. This is an example of starting to buy back in pieces securities recently sold at higher prices. I am not trying to time the market so much as just playing the price volatility in measured ways.
The VIX had a terrific ride up this week, finishing at 40.11:
https://www.marketwatch.com/investing/index/vix
The Trigger Event is probably in the bag. If there is a Recovery Period where the VIX returns to below 20 movement, I will likely sell some of the securities bought during this volatility spike as I did in the 2 that happened in 2018.
https://www.macrotrends.net/2603/vix-volatility-index-historical-chart
I did not finish a sentence in the prior comment since I got lost trying to find my post discussing how preferred stocks and exchange traded debt securities can become extremely volatile with a strong downside bias during volatility spikes in stocks even though interest rates are declining.
DeleteThis is the post that I was thinking about:
Tuesday, August 9, 2011
Item # 1. Enhanced Price Volatility in CEFs, European Hybrids, and Equity Preferred Stocks During Periods of Fear
https://tennesseeindependent.blogspot.com/2011/08/sold-hnz-at-5010probable-formation.html
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2020/02/ahtpri-axpra-dpg-eaf-ffbc-hban-ing-rdsb.html