Economy:
Fed, saying aggressive action is needed, starts unlimited QE - MarketWatch
The FED unleashed the big cannons last Monday. Federal Reserve Board -Federal Reserve announces extensive new measures to support the economy
JPM call the FED's extraordinary actions "Big Bertha" to distinguish them from mere bazookas. Others analysts characterized the FED's actions as "going nuclear".
The Fed will extend its buying program to include ETFs that track the investment grade corporate bond market. Those ETFs would include the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) and the iShares Investment Grade Corporate Bond ETF (LQD)
Trump signs $2 trillion coronavirus stimulus bill
Senate, White House reach $2 trillion stimulus deal to blunt coronavirus fallout I would agree with using the words "blunt coronavirus fallout" to describe the deal.
Morgan Stanley is currently predicting a 2.4% annualized decline in first quarter U.S. GDP and a 30% plunge in the second quarter. Morgan Stanley sees US GDP falling by 30% in second quarter
Unemployment could reach 30% in the U.S., says St. Louis Fed’s Bullard - MarketWatch Unemployment peaked at 25% during the Great Depression.
Unemployment claims soared to 3.3 million last week, most in history - CNN;
Almost one in four Americans lost job or furloughed because of coronavirus, poll finds
It was the worst week for the economy in decades. The pain is just beginning.
Soaring unemployment and new unemployment claims are expected by investors. What may not be fully appreciated is the ramifications on the U.S. economy.
In May 2019, FED published its Report on the Economic Well-Being of U.S. Households in 2018. The FED found that 40% of adults could not meet an unexpected $400 expense.
We will soon find out how that finding will reverberate through the U.S. economy. The shutdowns and social distancing will need to work and soon.
Consumer sentiment sinks to a nearly 4-year low in March as coronavirus spreads - MarketWatch
The FED unleashed the big cannons last Monday. Federal Reserve Board -Federal Reserve announces extensive new measures to support the economy
JPM call the FED's extraordinary actions "Big Bertha" to distinguish them from mere bazookas. Others analysts characterized the FED's actions as "going nuclear".
The Fed will extend its buying program to include ETFs that track the investment grade corporate bond market. Those ETFs would include the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) and the iShares Investment Grade Corporate Bond ETF (LQD)
Trump signs $2 trillion coronavirus stimulus bill
Senate, White House reach $2 trillion stimulus deal to blunt coronavirus fallout I would agree with using the words "blunt coronavirus fallout" to describe the deal.
Morgan Stanley is currently predicting a 2.4% annualized decline in first quarter U.S. GDP and a 30% plunge in the second quarter. Morgan Stanley sees US GDP falling by 30% in second quarter
Unemployment could reach 30% in the U.S., says St. Louis Fed’s Bullard - MarketWatch Unemployment peaked at 25% during the Great Depression.
Unemployment claims soared to 3.3 million last week, most in history - CNN;
Almost one in four Americans lost job or furloughed because of coronavirus, poll finds
It was the worst week for the economy in decades. The pain is just beginning.
Soaring unemployment and new unemployment claims are expected by investors. What may not be fully appreciated is the ramifications on the U.S. economy.
In May 2019, FED published its Report on the Economic Well-Being of U.S. Households in 2018. The FED found that 40% of adults could not meet an unexpected $400 expense.
 |
| Page 2 |
Consumer sentiment sinks to a nearly 4-year low in March as coronavirus spreads - MarketWatch
Consumers could spend $20 billion less for gasoline this April I have almost a full tank of gas and have not been driving for over a week now. I am following the instructions of medical professionals to stay inside, even though I do not have COVID-19 and have no symptoms at all (and have not even had a cold in over 15 years).
The European economy is tanking:
Flash eurozone PMI plunges to worst-ever reading in March - MarketWatch (The flash reading for March was 31.4, a record low since the series began in 1998, and down from 51.6 in February
Germany business morale falls to lowest since 2009; economy 'in shock'
Shellshocked Spain reports record 832 new coronavirus deaths-Reuters (3/28/20)
Mortgage rates declined in the latest Freddie Mac survey:
Mortgage Rates - Freddie Mac
Olive Garden parent Darden Restaurants says same-restaurant sales sank 60% for the current week due to coronavirus - MarketWatch
Cheesecake Factory says it’s not paying rent in April due to ‘unprecedented times’ - MarketWatch
Coronavirus map: Tracking cases around the world
++++++
Markets and Market Commentary:
These indicators suggest a stock-market bottom, but coronavirus fears could send the S&P 500 swooning again - MarketWatch
The Fed's intervention in the corporate investment grade market through purchases of investment grade corporate bond ETFs has provided liquidity and alleviated the dysfunctional and irrational pricing in that market.
For about 10 trading days, it was normal to see BBB+ or higher rated corporate bonds trading far outside normal yield spreads to U.S. treasuries maturing at about the same time.
The bond order books were filled will sell orders, ten or more separate orders were commonplace and frequently no bids at all.
These indicators suggest a stock-market bottom, but coronavirus fears could send the S&P 500 swooning again - MarketWatch
The Fed's intervention in the corporate investment grade market through purchases of investment grade corporate bond ETFs has provided liquidity and alleviated the dysfunctional and irrational pricing in that market.
For about 10 trading days, it was normal to see BBB+ or higher rated corporate bonds trading far outside normal yield spreads to U.S. treasuries maturing at about the same time.
The bond order books were filled will sell orders, ten or more separate orders were commonplace and frequently no bids at all.
A large number of firms have ceased share buyback in response to the COVID-19 pandemic, which removes what has been a major support for stocks. Intel joined that long list last week. SEC Form 8-K
Besides suspending share buybacks, U.S. companies are drawing down their lines of credit. General Motors joined that parade last week. General Motors will draw down $16 billion in credit, suspends 2020 outlook
Companies Tap Their Credit Lines. Should That Worry Investors? | Nasdaq; Markets Insider
Leon Cooperman optimistic stock market bottomed on coronavirus fears
Mortgage REIT stocks are collapsing due to margin calls. New York Mortgage, Invesco Mortgage, and Two Harbors (TWO) suspended both their common and preferred share dividends to preserve capital. Two Harbors Investment Corp. Announces Company Update and Suspension of First Quarter 2020 Common and Preferred Stock Dividends; Invesco Mortgage Capital Inc. Provides Update on Status of Financing Arrangements as of March 23, 2020 and Delays Payment of Quarterly Dividends; New York Mortgage Trust Provides Update on Status of Financing Arrangements as of March 23, 2020 The following is another potential problem for those companies: KBW sees mortgage payment moratorium neutral to agency MBS investors- Seeking Alpha
The $2 trillion stimulus will slam the mortgage industry -- unless the Fed comes to the rescue - CNN
Besides suspending share buybacks, U.S. companies are drawing down their lines of credit. General Motors joined that parade last week. General Motors will draw down $16 billion in credit, suspends 2020 outlook
Companies Tap Their Credit Lines. Should That Worry Investors? | Nasdaq; Markets Insider
Leon Cooperman optimistic stock market bottomed on coronavirus fears
Mortgage REIT stocks are collapsing due to margin calls. New York Mortgage, Invesco Mortgage, and Two Harbors (TWO) suspended both their common and preferred share dividends to preserve capital. Two Harbors Investment Corp. Announces Company Update and Suspension of First Quarter 2020 Common and Preferred Stock Dividends; Invesco Mortgage Capital Inc. Provides Update on Status of Financing Arrangements as of March 23, 2020 and Delays Payment of Quarterly Dividends; New York Mortgage Trust Provides Update on Status of Financing Arrangements as of March 23, 2020 The following is another potential problem for those companies: KBW sees mortgage payment moratorium neutral to agency MBS investors- Seeking Alpha
The $2 trillion stimulus will slam the mortgage industry -- unless the Fed comes to the rescue - CNN
EPR Properties starts buyback program amid market dislocation-Seeking Alpha; EPR Properties Provides Update Regarding the Impact of COVID-19
Gladstone Commercial Corporation Provides Corporate Update (some tenants may be unable to pay rent)
Victoria's Secret parent L Brands halts dividend, furloughs employees - MarketWatch
Tapestry suspends dividends, halts buybacks (NYSE:TPR)-Seeking Alpha
University of Chicago paper sees U.S. dividend annual growth sinking 28% - Vanguard High Dividend Yield ETF -Seeking Alpha Coronavirus: Impact on Stock Prices and Growth Expectations by Niels Joachim Gormsen, Ralph S. J. Koijen- SSRN
Nordstrom suspends dividend, taps credit in midst of coronavirus
AT&T declares $0.52 dividend - AT&T Inc. (NYSE:T) | Seeking Alpha
Abbott Launches Molecular Point-of-Care Test to Detect Novel Coronavirus in as Little as Five Minutes
Larry Kudlow says US has contained the coronavirus and the economy is holding up nicely (2/25/20 article). Kudlow now says he was wrong. Coronavirus: Kudlow admits he was wrong about disease being 'contained' (3/23/20) Kudlow is a former news personality who is Donald's chief economic advisor.
+++++
Portfolio Management:
I have to adjust this reality:
2020 Daily Treasury Yield Curve Rates
Complaining about those interest rates does not solve the problem.
I will not be purchasing any CDs or treasury bills with the proceeds received from maturing securities. (see Item # 4 below which lists securities maturing in April)
The FED is shouting at me to take more risks assuming I want a real rate of return before taxes. Those yields are deeply negative on a real inflation adjusted basis before income taxes.
The significant pricing anomalies in the investment grade corporate bond market, spanning about 10 days, caused me to make a significant reallocation out of cash into purchasing those bonds. I concentrated on maturities within 1 year. YTMs generally ranged from 4% to 8%.
My interest income will increase in 2020 compared to last year notwithstanding the decline in interest rates.
Preferred stocks, both in Canada and the U.S., were in meltdown mode and were priced to produce current yields between 8% to 16%. Pricing has now improved for most issues, other than MREIT preferred stocks, but are not yet back to where they were prior to the common stock meltdown.
Preferred stocks are a disfavored asset category for me. They are junior to all bonds in the capital structure and represent no equity interest in the business even though they are technically equity capital on the balance sheet.
If I own a senior unsecured bond, I have to be paid or the company goes into bankruptcy. A preferred stock owner can have their dividend deferred (cumulative) or eliminated altogether (non-cumulative) when the issuer ceases paying a cash dividend to common stock owners.
Nonetheless, the yields available on preferred stocks this month overwhelmed that distaste.
I increased my allocation by over $10K recently, both in U.S. fixed coupon preferred stocks and Canadian reset equity preferred that were trashed to even a greater extent. It will take several weeks before most of those purchases are discussed here.
We all know by now that Donald's gut is the repository of all knowledge and sound judgment, unmatched in the universe since the Big Bang or any known or unknown dimensions.
I do not claim that my gut has anywhere near the omniscience.
I felt a need to introduce that caveat before making the following statement:
If COVID-19 infections continue to accelerate in April, with widespread shutdowns continuing, my gut tells me that the stock market has not hit bottom yet.
Gladstone Commercial Corporation Provides Corporate Update (some tenants may be unable to pay rent)
Victoria's Secret parent L Brands halts dividend, furloughs employees - MarketWatch
Tapestry suspends dividends, halts buybacks (NYSE:TPR)-Seeking Alpha
University of Chicago paper sees U.S. dividend annual growth sinking 28% - Vanguard High Dividend Yield ETF -Seeking Alpha Coronavirus: Impact on Stock Prices and Growth Expectations by Niels Joachim Gormsen, Ralph S. J. Koijen- SSRN
Nordstrom suspends dividend, taps credit in midst of coronavirus
AT&T declares $0.52 dividend - AT&T Inc. (NYSE:T) | Seeking Alpha
Abbott Launches Molecular Point-of-Care Test to Detect Novel Coronavirus in as Little as Five Minutes
Larry Kudlow says US has contained the coronavirus and the economy is holding up nicely (2/25/20 article). Kudlow now says he was wrong. Coronavirus: Kudlow admits he was wrong about disease being 'contained' (3/23/20) Kudlow is a former news personality who is Donald's chief economic advisor.
+++++
Portfolio Management:
I have to adjust this reality:
 |
| Treasury Yield Curve March 2020 |
Complaining about those interest rates does not solve the problem.
I will not be purchasing any CDs or treasury bills with the proceeds received from maturing securities. (see Item # 4 below which lists securities maturing in April)
The FED is shouting at me to take more risks assuming I want a real rate of return before taxes. Those yields are deeply negative on a real inflation adjusted basis before income taxes.
The significant pricing anomalies in the investment grade corporate bond market, spanning about 10 days, caused me to make a significant reallocation out of cash into purchasing those bonds. I concentrated on maturities within 1 year. YTMs generally ranged from 4% to 8%.
My interest income will increase in 2020 compared to last year notwithstanding the decline in interest rates.
Preferred stocks, both in Canada and the U.S., were in meltdown mode and were priced to produce current yields between 8% to 16%. Pricing has now improved for most issues, other than MREIT preferred stocks, but are not yet back to where they were prior to the common stock meltdown.
Preferred stocks are a disfavored asset category for me. They are junior to all bonds in the capital structure and represent no equity interest in the business even though they are technically equity capital on the balance sheet.
If I own a senior unsecured bond, I have to be paid or the company goes into bankruptcy. A preferred stock owner can have their dividend deferred (cumulative) or eliminated altogether (non-cumulative) when the issuer ceases paying a cash dividend to common stock owners.
Nonetheless, the yields available on preferred stocks this month overwhelmed that distaste.
I increased my allocation by over $10K recently, both in U.S. fixed coupon preferred stocks and Canadian reset equity preferred that were trashed to even a greater extent. It will take several weeks before most of those purchases are discussed here.
We all know by now that Donald's gut is the repository of all knowledge and sound judgment, unmatched in the universe since the Big Bang or any known or unknown dimensions.
I do not claim that my gut has anywhere near the omniscience.
I felt a need to introduce that caveat before making the following statement:
If COVID-19 infections continue to accelerate in April, with widespread shutdowns continuing, my gut tells me that the stock market has not hit bottom yet.
+++++++
Trump:
The U.S. Now Leads the World in Confirmed Coronavirus Cases (as of 3/26/20)
The following tweet is just more proof, when none is needed in TrumpWorld, that Donald's gut is the source of wisdom, informed judgment and common sense:
US coronavirus cases top 100,000, doubling in three days (as of yesterday, 3/27/2020)
Coronavirus COVID-19 Global Cases: John Hopkins
S & P 500 on 2/24/20: 3,225.89
S & P 500 on 3/27/20: 2,541.47 -88.60 -3.37%
Down 22.05%
S & P 500 Historical
Coronavirus (COVID-19) live map tracker from Microsoft
In TrumpWorld, Donald proved that he was up to the task by tweeting or retweeting just last Wednesday his disdain for Mitt Romney, Joe Biden, Robert Mueller, Adam Schiff, the "Trump Derangement Syndrome", the "CORRUPT & FAKE NEWS"; liberal "snowflakes", and the "LameStream media". He touted his own magnificence, which goes without saying of course, and what he now calls "Trumbux" (the stimulus money that he can now spend). We can all be grateful that an Extremely Stable Genius is in charge.
Trump told Pence not to call Washington, Michigan governors; Trump Demands Praise From Governors in Return for Aid Disgusting Don derisively referred to Michigan's governor at that young woman. (Trump: We’ve had a big problem with the young, a woman governor from — you know who I’m talking about — from Michigan.”); Michigan governor says shipments of medical supplies 'canceled' or 'delayed' and sent to federal government
Donald assured the nation that there was oversight in how Trumpbux would be spent: "Look, I'll be the oversight. I'll be the oversight".
Don the Authoritarian, the unchallengeable leader of the GOP, announced when he signed the legislation that he will undermine the law's oversight provisions. Trump takes immediate step to try and limit coronavirus inspector general’s power - The Washington Post; Trump pushes back against congressional oversight for $500 billion bailout fund Donald has repeatedly claimed that he can do whatever he wants as President.
Fortunately Don the Magnificent allowed the treasury secretary to handle the negotiations with Congress on the recently passed stimulus bill. Trump is omnipresent in media during coronavirus outbreak, but takes a back seat in some key areas of response - The Washington Post
Donald wants people to attend Easter Sunday services and to return to work before Easter. Inside Trump’s risky push to reopen the country amid the coronavirus crisis
The Republican governors in Texas and Ohio pushed back on that rosy optimism and arbitrary timeline, which runs counter to the darkening realities.
Trump and governors in heated debate over saving lives versus the economy - Los Angeles Times
Trump needs governors to reopen the economy. Even Republican ones aren’t on board.
Trump wants U.S. economy ‘opened up and raring to go’ by Easter - The Washington Post;
Trump made this comment on 3/24: “We’ve never closed down the country for the flu. So you say to yourself, what is this all about?”
Trump also mused that we do not stop driving automobiles simply because people die in accidents.
I recall hearing that exact statement made in reference to justifying the Vietnam War made by my high school history teacher. The justification was made by a doofus assistant football coach who had no business teaching anything. This was in an Alabama public school when I was in the 10th grade. I could not help myself. I immediately responded "You have got to be kidding". He was in shock that anyone disputed his brilliant analogy.
Coronavirus map: Tracking cases in the U.S. and around the world
How coronavirus compares to the 1918 flu, H1N1 and other pandemics
Coronavirus live updates: At least half a million New Yorkers could be unemployed, GM cuts pay
Governors and mayors in growing uproar over Trump’s lagging coronavirus response
Exclusive: U.S. axed CDC expert job in China months before virus outbreak
Desperate, angry state leaders push back on Trump administration claims of mass mask shipments - POLITICO
Fact check: Trump utters series of false and misleading claims at coronavirus briefing (3/27/20)
When Donald was told that Senator Romney was in self-quarantine, he sarcastically responded "gee that is too bad". Donald is not going to quit being an off-the-charts asshole just because the nation has a health crisis. Donald tries to be the worst person that he can possibly be every day and rarely fails to succeed at that task.
PolitiFact | Timeline: How Donald Trump responded to the coronavirus pandemic
Senator says White House turned down emergency coronavirus funding in early February:
At a minimum, Trump wasted over two months in making preparations for a pandemic including stockpiling medical supplies (test kits, gloves, masks, ventilators) that are now in short supply and accelerating their manufacture. He also contributed to widespread nonchalance, particularly among republicans, that caused more infections and probably IMO led to deaths that would not have occurred under a competent President. Governor Cuomo says Trump administration's inaction will decide who dies - CBS News
Now we know: The "conservative" devotion to life ends at birth - The Washington Post (opinion column written by the former republican Max Boot) I had to put "conservative" in quotes since the people referenced in this opinion column are not anywhere close to being properly classified as conservatives. The GOP is not a conservative party.
The U.S. Now Leads the World in Confirmed Coronavirus Cases (as of 3/26/20)
The following tweet is just more proof, when none is needed in TrumpWorld, that Donald's gut is the source of wisdom, informed judgment and common sense:
US coronavirus cases top 100,000, doubling in three days (as of yesterday, 3/27/2020)
Coronavirus COVID-19 Global Cases: John Hopkins
S & P 500 on 2/24/20: 3,225.89
S & P 500 on 3/27/20: 2,541.47 -88.60 -3.37%
Down 22.05%
S & P 500 Historical
Coronavirus (COVID-19) live map tracker from Microsoft
In TrumpWorld, Donald proved that he was up to the task by tweeting or retweeting just last Wednesday his disdain for Mitt Romney, Joe Biden, Robert Mueller, Adam Schiff, the "Trump Derangement Syndrome", the "CORRUPT & FAKE NEWS"; liberal "snowflakes", and the "LameStream media". He touted his own magnificence, which goes without saying of course, and what he now calls "Trumbux" (the stimulus money that he can now spend). We can all be grateful that an Extremely Stable Genius is in charge.
Trump told Pence not to call Washington, Michigan governors; Trump Demands Praise From Governors in Return for Aid Disgusting Don derisively referred to Michigan's governor at that young woman. (Trump: We’ve had a big problem with the young, a woman governor from — you know who I’m talking about — from Michigan.”); Michigan governor says shipments of medical supplies 'canceled' or 'delayed' and sent to federal government
Donald assured the nation that there was oversight in how Trumpbux would be spent: "Look, I'll be the oversight. I'll be the oversight".
Don the Authoritarian, the unchallengeable leader of the GOP, announced when he signed the legislation that he will undermine the law's oversight provisions. Trump takes immediate step to try and limit coronavirus inspector general’s power - The Washington Post; Trump pushes back against congressional oversight for $500 billion bailout fund Donald has repeatedly claimed that he can do whatever he wants as President.
Fortunately Don the Magnificent allowed the treasury secretary to handle the negotiations with Congress on the recently passed stimulus bill. Trump is omnipresent in media during coronavirus outbreak, but takes a back seat in some key areas of response - The Washington Post
Donald wants people to attend Easter Sunday services and to return to work before Easter. Inside Trump’s risky push to reopen the country amid the coronavirus crisis
The Republican governors in Texas and Ohio pushed back on that rosy optimism and arbitrary timeline, which runs counter to the darkening realities.
Trump and governors in heated debate over saving lives versus the economy - Los Angeles Times
Trump needs governors to reopen the economy. Even Republican ones aren’t on board.
Trump wants U.S. economy ‘opened up and raring to go’ by Easter - The Washington Post;
Trump made this comment on 3/24: “We’ve never closed down the country for the flu. So you say to yourself, what is this all about?”
Trump also mused that we do not stop driving automobiles simply because people die in accidents.
I recall hearing that exact statement made in reference to justifying the Vietnam War made by my high school history teacher. The justification was made by a doofus assistant football coach who had no business teaching anything. This was in an Alabama public school when I was in the 10th grade. I could not help myself. I immediately responded "You have got to be kidding". He was in shock that anyone disputed his brilliant analogy.
Coronavirus map: Tracking cases in the U.S. and around the world
How coronavirus compares to the 1918 flu, H1N1 and other pandemics
Coronavirus live updates: At least half a million New Yorkers could be unemployed, GM cuts pay
Governors and mayors in growing uproar over Trump’s lagging coronavirus response
Exclusive: U.S. axed CDC expert job in China months before virus outbreak
Desperate, angry state leaders push back on Trump administration claims of mass mask shipments - POLITICO
Fact check: Trump utters series of false and misleading claims at coronavirus briefing (3/27/20)
When Donald was told that Senator Romney was in self-quarantine, he sarcastically responded "gee that is too bad". Donald is not going to quit being an off-the-charts asshole just because the nation has a health crisis. Donald tries to be the worst person that he can possibly be every day and rarely fails to succeed at that task.
PolitiFact | Timeline: How Donald Trump responded to the coronavirus pandemic
Senator says White House turned down emergency coronavirus funding in early February:
Now we know: The "conservative" devotion to life ends at birth - The Washington Post (opinion column written by the former republican Max Boot) I had to put "conservative" in quotes since the people referenced in this opinion column are not anywhere close to being properly classified as conservatives. The GOP is not a conservative party.
Despite federal guidelines, Trump suggests 'sanitizing' and reusing medical masks Trump knows more than the medical professionals who issue those guidelines. He acquired that superior knowledge by making no effort to learn anything. His gut is the source of all real knowledge and expertise needed in the universe.
Trump also opined, because he is so "smart" and knowledgeable about medicine, that two existing drugs approved for malaria, chloroquine and hydroxychloroquine, could be helpful since they have created miraculous results in treating COVID-19 infections.
Tony Fauci, the director of the National Institute of Allergy and Infectious Diseases responded to a reporter's question about whether those two drugs were effective with this statement: “The answer is no.”
Nigeria records chloroquine poisoning after Trump endorses it for coronavirus treatment - CNN .
Arizona man dies after self-medicating with chloroquine to treat coronavirus - CNN
Donald did not mention that side effects include heart and nerve damage and suicidal thoughts. Label The drugs can be tested in clinical trials to see whether they are effective against COVID-19, starting with a Phase 1 trial which has limited enrollment.
Trump: "It's shown very encouraging -- very, very encouraging early results. And we're going to be able to make that drug available almost immediately. And that's where the FDA has been so great. They -- they've gone through the approval process; it's been approved. And they did it -- they took it down from many, many months to immediate. So we're going to be able to make that drug available by prescription or states." Coronavirus treatment: Officials are cautious about chloroquine and hydroxychloroquine - Vox
Video: Trump's Exaggerated COVID-19 Drug Claims - FactCheck.org; PWHO Publication on potential role of Chloroquine in COVID 19 Treatment
Trump said he disagreed with the expert because he is smart and had a feeling. Trump says his belief in one potential coronavirus drug is ‘just a feeling’; Could the anti-malarial drug chloroquine treat COVID-19? | Live Science
Gupta stunned by Trump-Fauci difference at briefing - CNN Video
The two drugs are in trials as potential treatments. It remains to be seen whether they are effective.
Trump Has Given Unusual Leeway to Fauci, but Aides Say He’s Losing His Patience Trump reportedly has became weary of Dr. Fauci's correcting his false statements.
As Trump signals readiness to break with experts, his online base assails Fauci - The Washington Post
Trump questions New York’s demand for ventilators as coronavirus cases soar - The Washington Post
Rupert Murdoch Put His Son in Charge of Fox. It Was a Dangerous Mistake.-The New York Times The reporter asked Ashish Jha, the director of the Harvard Global Public Health Institute whether people would die because of Fox "News" coverage of the pandemic. Answer: “Yes,” he said. “Some commentators in the right-wing media spread a very specific type of misinformation that I think has been very harmful.”
In modern American history, there has never been a President who has less regard for science, particularly when science reaches a different conclusion that his "smart" gut.
We can all pray that Donald's all knowing gut is preserved for eons so that future generations can draw upon its vast store of knowledge and wisdom.
Liz Cheney, Lindsey Graham warn against easing guidelines Trump wants everybody back to work in two weeks.
Trump also opined, because he is so "smart" and knowledgeable about medicine, that two existing drugs approved for malaria, chloroquine and hydroxychloroquine, could be helpful since they have created miraculous results in treating COVID-19 infections.
Tony Fauci, the director of the National Institute of Allergy and Infectious Diseases responded to a reporter's question about whether those two drugs were effective with this statement: “The answer is no.”
Nigeria records chloroquine poisoning after Trump endorses it for coronavirus treatment - CNN .
Arizona man dies after self-medicating with chloroquine to treat coronavirus - CNN
Donald did not mention that side effects include heart and nerve damage and suicidal thoughts. Label The drugs can be tested in clinical trials to see whether they are effective against COVID-19, starting with a Phase 1 trial which has limited enrollment.
Trump: "It's shown very encouraging -- very, very encouraging early results. And we're going to be able to make that drug available almost immediately. And that's where the FDA has been so great. They -- they've gone through the approval process; it's been approved. And they did it -- they took it down from many, many months to immediate. So we're going to be able to make that drug available by prescription or states." Coronavirus treatment: Officials are cautious about chloroquine and hydroxychloroquine - Vox
Video: Trump's Exaggerated COVID-19 Drug Claims - FactCheck.org; PWHO Publication on potential role of Chloroquine in COVID 19 Treatment
Trump said he disagreed with the expert because he is smart and had a feeling. Trump says his belief in one potential coronavirus drug is ‘just a feeling’; Could the anti-malarial drug chloroquine treat COVID-19? | Live Science
Gupta stunned by Trump-Fauci difference at briefing - CNN Video
The two drugs are in trials as potential treatments. It remains to be seen whether they are effective.
Trump Has Given Unusual Leeway to Fauci, but Aides Say He’s Losing His Patience Trump reportedly has became weary of Dr. Fauci's correcting his false statements.
As Trump signals readiness to break with experts, his online base assails Fauci - The Washington Post
Trump questions New York’s demand for ventilators as coronavirus cases soar - The Washington Post
Rupert Murdoch Put His Son in Charge of Fox. It Was a Dangerous Mistake.-The New York Times The reporter asked Ashish Jha, the director of the Harvard Global Public Health Institute whether people would die because of Fox "News" coverage of the pandemic. Answer: “Yes,” he said. “Some commentators in the right-wing media spread a very specific type of misinformation that I think has been very harmful.”
In modern American history, there has never been a President who has less regard for science, particularly when science reaches a different conclusion that his "smart" gut.
We can all pray that Donald's all knowing gut is preserved for eons so that future generations can draw upon its vast store of knowledge and wisdom.
Liz Cheney, Lindsey Graham warn against easing guidelines Trump wants everybody back to work in two weeks.
In hard-hit areas, testing restricted to health care workers, hospital patients
All of Trump’s Lies About the Coronavirus - The Atlantic
10 Of Trump's Most Damaging Coronavirus Lies
Coronavirus Fact Check: Analyzing the Patterns in Trump's Falsehoods
Gallup's last poll (3/22) showed that Donald's approval rating increased to 49% from 44% on 3/13. Trump Job Approval Lying all of the time about almost everything works on about 1/2 of the U.S. adult population.
The Trump Campaign has threatened libel lawsuits against TV stations airing an advertisement critical of Donald's handling of the pandemic crisis, noting that their licenses can also be pulled by the FCC. The implication is that Donald will cause the licenses to be pulled if media outlets do not adhere to his edicts. Trump Campaign Threatens Lawsuit Over Coronavirus 'Hoax' Ad | Time (Trump Campaign Letter: "[Y]our failure to remove this deceptive ad may be “probative of an underlying abdication of licensee responsibility” that could put your station’s license in jeopardy.")
It is important to Donald to have his name on the stimulus checks.Donald Trump demands his own signature be on coronavirus stimulus checks to every American: WSJ report
This is the first 3 tweets sent out by Our Dear Leader this morning and the only ones prior to publishing this post:
Donald J. Trump (@realDonaldTrump) / Twitter
++++
Senator Rand Paul (R-KY):
All of Trump’s Lies About the Coronavirus - The Atlantic
10 Of Trump's Most Damaging Coronavirus Lies
Coronavirus Fact Check: Analyzing the Patterns in Trump's Falsehoods
Gallup's last poll (3/22) showed that Donald's approval rating increased to 49% from 44% on 3/13. Trump Job Approval Lying all of the time about almost everything works on about 1/2 of the U.S. adult population.
The Trump Campaign has threatened libel lawsuits against TV stations airing an advertisement critical of Donald's handling of the pandemic crisis, noting that their licenses can also be pulled by the FCC. The implication is that Donald will cause the licenses to be pulled if media outlets do not adhere to his edicts. Trump Campaign Threatens Lawsuit Over Coronavirus 'Hoax' Ad | Time (Trump Campaign Letter: "[Y]our failure to remove this deceptive ad may be “probative of an underlying abdication of licensee responsibility” that could put your station’s license in jeopardy.")
It is important to Donald to have his name on the stimulus checks.Donald Trump demands his own signature be on coronavirus stimulus checks to every American: WSJ report
This is the first 3 tweets sent out by Our Dear Leader this morning and the only ones prior to publishing this post:
++++
Senator Rand Paul (R-KY):
Senator Rand Paul (R-KY) tested positive for the coronavirus. He had no trouble arranging for a test whose expense was covered by the major medical insurance provided to him by the U.S. government. Senator Paul voted against the Families First Coronavirus Response Act that makes coronavirus testing free to the public U.S. Senate: U.S. Senate Roll Call Votes 116th Congress - 2nd Session; Coronavirus Aid: What's In The 'Families First' Package : NPR; Sinema criticizes Paul for behavior ahead of coronavirus test results: 'Absolutely irresponsible'
Senator Paul went to the senate gym after he took the COVID-19 test but before he received the results. Rand Paul Becomes First Senator Known To Contract Coronavirus Paul could not be bothered to isolate himself to protect others until he received the test results, resulting him exposing a multitude of persons including fellow senators over a 6 day period. Six days: Tracking Sen. Rand Paul from coronavirus testing to positive diagnosis - The Washington Post
Paul does have the correct attitude for his political tribe.
Senator Paul went to the senate gym after he took the COVID-19 test but before he received the results. Rand Paul Becomes First Senator Known To Contract Coronavirus Paul could not be bothered to isolate himself to protect others until he received the test results, resulting him exposing a multitude of persons including fellow senators over a 6 day period. Six days: Tracking Sen. Rand Paul from coronavirus testing to positive diagnosis - The Washington Post
Paul does have the correct attitude for his political tribe.
++++++
All trades are commission free except as otherwise noted.
I am charged a $1 per bond commission on bond trades. For purchases on the Toronto stock, I pay a C$1 commission for up to a 100 share purchase.
1. U.S. Equity Preferred Stocks:
These securities are senior only to common stock in the capital structure. Preferred shareholders have a superior claim to cash dividends which is enforced through dividend stopper clauses.
The company is "stopped" from eliminating or deferring the preferred stock dividend and paying a cash dividend to the common shareholders.
A non-cumulative dividend can be eliminated, just like a common share dividend with no legal claim for future payment.
A cumulative dividend can not be eliminated, but only deferred. When and if cash dividends are resumed to the common shareholders, the preferred shareholders must first be paid all of their deferred dividends which were deferred but still accruing.
A common share dividend can be cut or eliminated.
Preferred stocks do not earn interest on the deferred amount.
Junior bonds will frequently contained a deferral right and a stopper clause, but the deferred amount accrues interest at the coupon rate.
A. Bought 20 CIOPRA at $20.6; 5 at $19.14; 5 at $18.6; 5 at $18.35; 5 at $17.5; 5 at $15.15; 5 at $13.56; 10 at $16.5;:
Quote: City Office REIT Inc. 6.625% Cumulative Preferred Series A Stock
Subsequent those purchase, CIO cut its common stock dividend by 36%. City Office REIT Announces Dividends for First Quarter 2020 The regular dividend was declared for the preferred stock: "the Board of Directors authorized a regular quarterly dividend of $0.4140625 per share of the Company’s 6.625% Series A Cumulative Redeemable Preferred Stock."
As discussed below in Item # 3.A., CIO needed to slash the common stock dividend even before the coronavirus pandemic since it was far too generous and unearned by cash flow.
This development is beneficial to the preferred stock investors IMO, since their dividend can not be cut but only deferred when no cash dividend is paid to the common shareholders.
Slashing the common share dividend provides more of a cash cushion for the preferred shareholders, who after all only have their dividends with no equity interest in the business.
Last Issuer Earnings Report: City Office REIT Reports Fourth Quarter and Full Year 2019 Results
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Sub-Category: Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks
Last Trade Discussions: Item # 1.A. Eliminated CIOPRA-Sold 50 at $24.77-Used Commission Free Trade (4/24/19 Post)-Item # 4.A. Bought 50 CIOPRA at $21.67-Used Commission Free Trade (1/13/19 Post)
Item # 4.A. Sold 50 CIOPRA at $24.14-Used Commission Free Trade (3/17/19 Post)-Item 3.A. Sold 50 CIOPRA at $25.21 (1/27/17 Post)
Security:
CIOPRA Trading Profits to Date: $302.19
City Office REIT Reports Fourth Quarter and Full Year 2019 Results
Corporate Profile – City Office REIT
Our Properties – City Office REIT
City Office REIT Announces Share Repurchase Program
CIO SEC Filings
2019 Annual Report (debt discussed starting at page 72)
Chart:
Average Cost Per Share: $18.4
Current Yield at Average Cost = 9%
Next Ex Dividend Date: 4/8/20
Closing Price Last Friday: CIO-PA $17.95 +$0.17 +0.98%
Purchase Restriction: Each subsequent purchase has to reduce my average cost per share.
I also restarted a position in the common shares, see below.
2. Bought 50 STAG at $20.9:
Quote: STAG Industrial Inc. (STAG)
Home Page | STAG Industrial
SEC Filings
2019 Annual Report ("As of December 31, 2019, we owned 450 buildings in 38 states with approximately 91.4 million rentable square feet, consisting of 365 warehouse/distribution buildings, 69 light manufacturing buildings, eight flex/office buildings, six Value Add Portfolio buildings, and two buildings classified as held for sale. We own both single- and multi-tenant properties, although we focus on the former. As of December 31, 2019, our buildings were approximately 95.0% leased to 414 tenants, with no single tenant accounting for more than approximately 1.9% of our total annualized base rental revenue and no single industry accounting for more than approximately 11.1% of our total annualized base rental revenue. We intend to maintain a diversified mix of tenants to limit our exposure to any single tenant.")
This last 50 share purchase was an average up:
The prior lots had some ROC adjustment to the tax cost basis. The 50 shares bought on 2/8/16 has an original cost basis of $15.75.
I did not reinvest the dividends since 2018 because I viewed the stock to be overvalued until the recent price decline brought the share price back into a reasonable valuation range IMO.
What I in effect did with this purchase at $20.9 is to reinvest all of the cash dividends received for several years at a price of my choosing. (additional cash added)
5 Year Chart:
Dividend: Monthly at $.12 per share ($1.2 annually)
Last Ex Dividend Date: Monday, 3/30/20
Average Cost Per Share This Account: $17.66
Dividend Yield at Average Cost = 6.8%
My prior discussions can be found at my SA Instablog. South Gent's Blog Posts | Seeking Alpha
My last transactions were to sell shares at $25.20 and at $23.81 back in 2016: Item # 10 Pared STAG-Sold 42 at $25.2 Update For Equity REIT Basket Strategy As Of 7/28/16-South Gent | Seeking Alpha (profit snapshot = $271.31); Item # 2 Pared STAG- Sold 54 at $23.81 Update For Equity REIT Basket Strategy As Of 7/1/16 - South Gent | Seeking Alpha (profit snapshot $318.54)
Last Earnings Report (Q/E 12/31/2019): SEC Filed Press Release
STAG reported "$0.47 of Core FFO per diluted share for the fourth quarter of 2019, an increase of 2.2% compared to the fourth quarter of 2018. Generated Core FFO of $65.5 million for the fourth quarter of 2019 compared to $52.4 million for the fourth quarter of 2018, an increase of 24.8%."
Occupancy Rate: 95%
Recent Capital Market Activity:
The last sentence in the preceding snapshot refers to a stock offering completed last month: Prospectus That offering raised $311M.
I also own 50 shares in my IB account with a current tax cost basis of $16.59 per share.
STAG Trading Profits to Date: $794.49
All trades are commission free except as otherwise noted.
I am charged a $1 per bond commission on bond trades. For purchases on the Toronto stock, I pay a C$1 commission for up to a 100 share purchase.
1. U.S. Equity Preferred Stocks:
These securities are senior only to common stock in the capital structure. Preferred shareholders have a superior claim to cash dividends which is enforced through dividend stopper clauses.
The company is "stopped" from eliminating or deferring the preferred stock dividend and paying a cash dividend to the common shareholders.
A non-cumulative dividend can be eliminated, just like a common share dividend with no legal claim for future payment.
A cumulative dividend can not be eliminated, but only deferred. When and if cash dividends are resumed to the common shareholders, the preferred shareholders must first be paid all of their deferred dividends which were deferred but still accruing.
A common share dividend can be cut or eliminated.
Preferred stocks do not earn interest on the deferred amount.
Junior bonds will frequently contained a deferral right and a stopper clause, but the deferred amount accrues interest at the coupon rate.
A. Bought 20 CIOPRA at $20.6; 5 at $19.14; 5 at $18.6; 5 at $18.35; 5 at $17.5; 5 at $15.15; 5 at $13.56; 10 at $16.5;:
Quote: City Office REIT Inc. 6.625% Cumulative Preferred Series A Stock
Subsequent those purchase, CIO cut its common stock dividend by 36%. City Office REIT Announces Dividends for First Quarter 2020 The regular dividend was declared for the preferred stock: "the Board of Directors authorized a regular quarterly dividend of $0.4140625 per share of the Company’s 6.625% Series A Cumulative Redeemable Preferred Stock."
As discussed below in Item # 3.A., CIO needed to slash the common stock dividend even before the coronavirus pandemic since it was far too generous and unearned by cash flow.
This development is beneficial to the preferred stock investors IMO, since their dividend can not be cut but only deferred when no cash dividend is paid to the common shareholders.
Slashing the common share dividend provides more of a cash cushion for the preferred shareholders, who after all only have their dividends with no equity interest in the business.
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Sub-Category: Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks
Last Trade Discussions: Item # 1.A. Eliminated CIOPRA-Sold 50 at $24.77-Used Commission Free Trade (4/24/19 Post)-Item # 4.A. Bought 50 CIOPRA at $21.67-Used Commission Free Trade (1/13/19 Post)
Item # 4.A. Sold 50 CIOPRA at $24.14-Used Commission Free Trade (3/17/19 Post)-Item 3.A. Sold 50 CIOPRA at $25.21 (1/27/17 Post)
Security:
Par Value: $25
Last Ex Dividend:
Issuer: City Office REIT Inc. (CIO)
Optional Redemption: On or after 10/4/21 at par value plus accrued and unpaid dividends
Dividend Stopper Clause = Yes (page S-22 of the prospectus)
Change of Control Provision: Yes
CIOPRA Trading Profits to Date: $302.19
City Office REIT Reports Fourth Quarter and Full Year 2019 Results
Corporate Profile – City Office REIT
Our Properties – City Office REIT
City Office REIT Announces Share Repurchase Program
CIO SEC Filings
2019 Annual Report (debt discussed starting at page 72)
Chart:
Current Yield at Average Cost = 9%
Next Ex Dividend Date: 4/8/20
Closing Price Last Friday: CIO-PA $17.95 +$0.17 +0.98%
Purchase Restriction: Each subsequent purchase has to reduce my average cost per share.
I also restarted a position in the common shares, see below.
2. Bought 50 STAG at $20.9:
Home Page | STAG Industrial
SEC Filings
2019 Annual Report ("As of December 31, 2019, we owned 450 buildings in 38 states with approximately 91.4 million rentable square feet, consisting of 365 warehouse/distribution buildings, 69 light manufacturing buildings, eight flex/office buildings, six Value Add Portfolio buildings, and two buildings classified as held for sale. We own both single- and multi-tenant properties, although we focus on the former. As of December 31, 2019, our buildings were approximately 95.0% leased to 414 tenants, with no single tenant accounting for more than approximately 1.9% of our total annualized base rental revenue and no single industry accounting for more than approximately 11.1% of our total annualized base rental revenue. We intend to maintain a diversified mix of tenants to limit our exposure to any single tenant.")
This last 50 share purchase was an average up:
I did not reinvest the dividends since 2018 because I viewed the stock to be overvalued until the recent price decline brought the share price back into a reasonable valuation range IMO.
What I in effect did with this purchase at $20.9 is to reinvest all of the cash dividends received for several years at a price of my choosing. (additional cash added)
5 Year Chart:
Last Ex Dividend Date: Monday, 3/30/20
Average Cost Per Share This Account: $17.66
Dividend Yield at Average Cost = 6.8%
My prior discussions can be found at my SA Instablog. South Gent's Blog Posts | Seeking Alpha
My last transactions were to sell shares at $25.20 and at $23.81 back in 2016: Item # 10 Pared STAG-Sold 42 at $25.2 Update For Equity REIT Basket Strategy As Of 7/28/16-South Gent | Seeking Alpha (profit snapshot = $271.31); Item # 2 Pared STAG- Sold 54 at $23.81 Update For Equity REIT Basket Strategy As Of 7/1/16 - South Gent | Seeking Alpha (profit snapshot $318.54)
Last Earnings Report (Q/E 12/31/2019): SEC Filed Press Release
STAG reported "$0.47 of Core FFO per diluted share for the fourth quarter of 2019, an increase of 2.2% compared to the fourth quarter of 2018. Generated Core FFO of $65.5 million for the fourth quarter of 2019 compared to $52.4 million for the fourth quarter of 2018, an increase of 24.8%."
Recent Capital Market Activity:
I also own 50 shares in my IB account with a current tax cost basis of $16.59 per share.
STAG Trading Profits to Date: $794.49
3. Small Ball Trades:
A. Restarted CIO-Bought 20 at $7.3; 5 at $7:
Quote: City Office REIT Inc. (CIO)
Website: City Office REIT
Closing Price Last Friday: CIO $7.02 -$0.19 -2.64%
52 Week Range: $6.8 to $14.5
Our Properties-City Office REIT (currently owns 66 office properties with approximately 5.9M square feet of net rentable area located in the "metropolitan areas of Dallas, Denver, Orlando, Phoenix, Portland, San Diego, Seattle and Tampa." About Us – City Office REIT
CIO Interactive Chart: Traded over $14 last month
CIO SEC Filings
2019 Annual Report: Properties
CIO Information Intraday Date of Trade (3/24/20):
CIO 1 Year Chart Intraday 2/24/20:
City Office REIT Announces Share Repurchase Program (3/10/2020)
Dividend: Prior quarterly dividends were at a quarterly penny rate of $.23 (not earned out of FAD, see discussion below)
CIO reduced the payout to $.15 per quarter effective for the next payment. City Office REIT Announces Dividends for First Quarter 2020
This announcement made in the preceding linked press release makes sense to me:
"As of March 24, 2020, the Company has over $140 million in unrestricted cash and cash equivalents and over $90 million of further availability under its unsecured credit facility. The Company also announced that it has paused its acquisition activity and now expects that it will not acquire any properties in 2020. Instead, the Company intends to allocate capital to the previously announced $100 million share repurchase program and to continue to operate with lower leverage."
Last Ex Dividend Date: 1/9/2020
Next Ex Dividend Date: 4/8/20
Average Cost Per share = $7.24
Dividend Yield at new annual $.60 per share = 8.29% after the dividend slash
Recent Earnings Report (12/30/19): City Office REIT Reports Fourth Quarter and Full Year 2019 Results
Note the AFFO payout ratio of 163%:
Office REITs have to make continuing routine maintenance expenditures and tenant improvements. Funds spent on those routine and recurring expenditures are not available for distribution to common shareholders.
When evaluating dividend coverage for an office REIT, I would not use the FFO number but the FAD number.
The FAD number may be called AFFO, but the investor needs to determine whether the REIT is using the NAREIT definition of AFFO which subtracts routine maintenance expenditures from FFO.
CIO does use the NAREIT definition in making adjustments to FFO. For other REITs, they may label the adjustments AFFO but fail to make the necessary adjustments to FFO to arrive at a meaningful real cash flow number.
The preferred shareholder would want to see the common share dividend cut to below 90% of the AFFO number. I do not view the common share dividend as sustainable without a major slash.
2020 Guidance:
Current Position: shares
Maximum Position: 100 shares
Purchase Restriction: None
Broker Actions:
I do not have access to these reports. I would note that it is not helpful to reduce the price targets from $13 to $16 to $9-$10 after the stock has already fallen to $7:
On 3/27/20, Janney reduced its PT to $10 from $15. A $10 PT sounds more reasonable to me than $15 now.
On 3/26/20, Compass Point cut its PT to $9 from $13 and reduced its rating to neutral from buy.
On 3/26/20, D.A. Davidson cut its price target to $10 from $16.
B. Bought Back 50 UBS at $10.93;10 at $10.41; 5 at $9.71 and 5 at $7.9:
Quote: UBS Group AG (U.S.: NYSE)
UBS Group AG Consensus Analyst E.P.S. Estimates
Last Round-Trip: Item # 1.E. Eliminated UBS-Sold 50 at $13.16 (2/16/20 Post)Item # 3.B. Bought 50 UBS at $10.66 (9/14/19 Post)
Dividend: Annually
Detailed dividend payment history | UBS Global
2020 Dividend: US$.73 per share
UBS proposes annual dividend of $0.73/share - UBS Group AG (NYSE:UBS) | Seeking Alpha
Ex Dividend: 5/5/20
Average Cost Per Share: $10.55
Dividend Yield at Average Cost: 6.92% (before taxes including Switzerland's withholding tax on dividends)
Last Earnings Report (Q/E 12/31/19): UBS's fourth-quarter 2019 results | UBS Global topics
UBS Group AG (UBS) CEO Sergio Ermotti on Q4 2019 Results - Earnings Call Transcript | Seeking Alpha
A. Restarted CIO-Bought 20 at $7.3; 5 at $7:
Website: City Office REIT
Closing Price Last Friday: CIO $7.02 -$0.19 -2.64%
52 Week Range: $6.8 to $14.5
Our Properties-City Office REIT (currently owns 66 office properties with approximately 5.9M square feet of net rentable area located in the "metropolitan areas of Dallas, Denver, Orlando, Phoenix, Portland, San Diego, Seattle and Tampa." About Us – City Office REIT
CIO Interactive Chart: Traded over $14 last month
CIO SEC Filings
2019 Annual Report: Properties
 |
| Page 30 |
Dividend: Prior quarterly dividends were at a quarterly penny rate of $.23 (not earned out of FAD, see discussion below)
CIO reduced the payout to $.15 per quarter effective for the next payment. City Office REIT Announces Dividends for First Quarter 2020
This announcement made in the preceding linked press release makes sense to me:
"As of March 24, 2020, the Company has over $140 million in unrestricted cash and cash equivalents and over $90 million of further availability under its unsecured credit facility. The Company also announced that it has paused its acquisition activity and now expects that it will not acquire any properties in 2020. Instead, the Company intends to allocate capital to the previously announced $100 million share repurchase program and to continue to operate with lower leverage."
Last Ex Dividend Date: 1/9/2020
Next Ex Dividend Date: 4/8/20
Average Cost Per share = $7.24
Dividend Yield at new annual $.60 per share = 8.29% after the dividend slash
Recent Earnings Report (12/30/19): City Office REIT Reports Fourth Quarter and Full Year 2019 Results
Note the AFFO payout ratio of 163%:
When evaluating dividend coverage for an office REIT, I would not use the FFO number but the FAD number.
The FAD number may be called AFFO, but the investor needs to determine whether the REIT is using the NAREIT definition of AFFO which subtracts routine maintenance expenditures from FFO.
CIO does use the NAREIT definition in making adjustments to FFO. For other REITs, they may label the adjustments AFFO but fail to make the necessary adjustments to FFO to arrive at a meaningful real cash flow number.
The preferred shareholder would want to see the common share dividend cut to below 90% of the AFFO number. I do not view the common share dividend as sustainable without a major slash.
2020 Guidance:
Maximum Position: 100 shares
Purchase Restriction: None
Broker Actions:
I do not have access to these reports. I would note that it is not helpful to reduce the price targets from $13 to $16 to $9-$10 after the stock has already fallen to $7:
On 3/27/20, Janney reduced its PT to $10 from $15. A $10 PT sounds more reasonable to me than $15 now.
On 3/26/20, Compass Point cut its PT to $9 from $13 and reduced its rating to neutral from buy.
On 3/26/20, D.A. Davidson cut its price target to $10 from $16.
B. Bought Back 50 UBS at $10.93;10 at $10.41; 5 at $9.71 and 5 at $7.9:
UBS Group AG Consensus Analyst E.P.S. Estimates
Last Round-Trip: Item # 1.E. Eliminated UBS-Sold 50 at $13.16 (2/16/20 Post)Item # 3.B. Bought 50 UBS at $10.66 (9/14/19 Post)
Dividend: Annually
Detailed dividend payment history | UBS Global
2020 Dividend: US$.73 per share
UBS proposes annual dividend of $0.73/share - UBS Group AG (NYSE:UBS) | Seeking Alpha
Ex Dividend: 5/5/20
Average Cost Per Share: $10.55
Dividend Yield at Average Cost: 6.92% (before taxes including Switzerland's withholding tax on dividends)
Last Earnings Report (Q/E 12/31/19): UBS's fourth-quarter 2019 results | UBS Global topics
Maximum Position: 100 shares
Current position: 70 shares
Purchase Restriction: Each purchase must reduce my average cost per share.
C. Bought Back 20 FDUS at $13.75; 5 at $11.99; 5 at $11.5; 5 at $9; 2 at $8.56; 2 at $5.98; 1 at $4.65 (FidelityAccount):
Quote: Fidus Investment Corp.- A BDC
Website: Fidus
SEC Filings
FDUS Chart
While last week brought a stabilization of BDC stock prices and a slight rise for most of them, the current prices makes sense only if there are massive loan losses that incinerate assets to zero values and causes substantial dividend cuts as well.
Prior to the COVID-19 pandemic, I viewed BDCs as high risk. There is no doubt in my mind now that their risk has increased substantially due to a U.S. recession that has probably already started.
As of 12/31/19, Fidus reported a net asset value per share of $16.84.
As with all future forecasts embedded in stock prices, the level of asset destruction that would make the current price reasonable may prove to be about right, too pessimistic or too optimistic.
The answer lies in the future, which is ultimately unknowable, but my best guess now is that forecasted losses for FDUS which are embedded in its current price, is too pessimistic. Losses will accelerate in the coming quarters however. The open question is by how much and will they be consistent with the forecast now being made in the FDUS stock price.
The same phenomenon is observable in regional bank stock prices. For the current prices to be rational and reasonable, the banks will have to suffer massive charge-offs.
I recently sold 20 FDUS in this account. Item 1.E. Sold 20 FDUS at $15.4 (2/22/20 Post) The sell was before the onset of the volatility event, and eliminated the FDUS position in my Fidelity account.
I discussed in Item # 1.D. of that post paring the FDUS position in my Schwab account. I sold 50 shares at $15.34, reducing the position to 40+ shares with an average cost per share of $13.12.
Dividend: $.39 per share or $1.56 annually (regular dividend only)
Fidus Investment Corporation Declares First Quarter 2020 Dividend
The company paid a $.04 per share special dividend in December.
Current Position This Account: 47 shares
Average Cost Per Share: $11.62
Dividend Yield: 13.43% (regular dividend only)
Last Ex Dividend Date: 3/12/20
Net Asset Value Per Share History:
12/31/19: $16.85
$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
Last Earnings Report (12/31/19): SEC Filed Press Release
Edward Ross, Chairman and CEO of Fidus Investment Corporation. “I am pleased to report that in February 2020 we successfully completed the partial sale of a portfolio of equity investments, generating $35.9 million in net proceeds and a net realized gain of approximately $20.4 million." (emphasis added)
The adjusted net income adds $.12 per share to net investment income due to a reversal of a capital gain incentive fee payable to the external manager. I would ignore that adjustment and focus instead on the recurring NII per share number of $.22.
FDUS is nowhere close to earning its quarterly dividend of $.39 per share from current net investment income. The dividend is covered, however, by spillover income that has not been distributed to shareholders. The company estimated that "spillover income (or taxable income in excess of distributions) as of December 31, 2019 of $15.3 million, or $0.63 per share."
"The weighted average yield on debt investments was 12.0% as of December 31, 2019."
D. Added 10 HBAN at $11.6; 10 at $11; 5 at $9.5; 5 at $8.4; 2 at $7.5:
Quote: Huntington Bancshares (HBAN)
I discussed the last earnings report in this post: Item # 1.D. (2/2/20 Post)
Dividend: Quarterly at $.15 per share
Last Ex Dividend: 3/17/20
E. Added 5 THQ at $16.25; 5 at $14.3; 5 at $14.07; 5 at $11.9:
 |
Website: Fidus
SEC Filings
FDUS Chart
While last week brought a stabilization of BDC stock prices and a slight rise for most of them, the current prices makes sense only if there are massive loan losses that incinerate assets to zero values and causes substantial dividend cuts as well.
Prior to the COVID-19 pandemic, I viewed BDCs as high risk. There is no doubt in my mind now that their risk has increased substantially due to a U.S. recession that has probably already started.
As of 12/31/19, Fidus reported a net asset value per share of $16.84.
As with all future forecasts embedded in stock prices, the level of asset destruction that would make the current price reasonable may prove to be about right, too pessimistic or too optimistic.
The answer lies in the future, which is ultimately unknowable, but my best guess now is that forecasted losses for FDUS which are embedded in its current price, is too pessimistic. Losses will accelerate in the coming quarters however. The open question is by how much and will they be consistent with the forecast now being made in the FDUS stock price.
The same phenomenon is observable in regional bank stock prices. For the current prices to be rational and reasonable, the banks will have to suffer massive charge-offs.
I recently sold 20 FDUS in this account. Item 1.E. Sold 20 FDUS at $15.4 (2/22/20 Post) The sell was before the onset of the volatility event, and eliminated the FDUS position in my Fidelity account.
I discussed in Item # 1.D. of that post paring the FDUS position in my Schwab account. I sold 50 shares at $15.34, reducing the position to 40+ shares with an average cost per share of $13.12.
Dividend: $.39 per share or $1.56 annually (regular dividend only)
Fidus Investment Corporation Declares First Quarter 2020 Dividend
The company paid a $.04 per share special dividend in December.
Current Position This Account: 47 shares
Average Cost Per Share: $11.62
Dividend Yield: 13.43% (regular dividend only)
Last Ex Dividend Date: 3/12/20
Net Asset Value Per Share History:
12/31/19: $16.85
$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
Edward Ross, Chairman and CEO of Fidus Investment Corporation. “I am pleased to report that in February 2020 we successfully completed the partial sale of a portfolio of equity investments, generating $35.9 million in net proceeds and a net realized gain of approximately $20.4 million." (emphasis added)
FDUS is nowhere close to earning its quarterly dividend of $.39 per share from current net investment income. The dividend is covered, however, by spillover income that has not been distributed to shareholders. The company estimated that "spillover income (or taxable income in excess of distributions) as of December 31, 2019 of $15.3 million, or $0.63 per share."
"The weighted average yield on debt investments was 12.0% as of December 31, 2019."
D. Added 10 HBAN at $11.6; 10 at $11; 5 at $9.5; 5 at $8.4; 2 at $7.5:
Quote: Huntington Bancshares (HBAN)
I discussed the last earnings report in this post: Item # 1.D. (2/2/20 Post)
Dividend: Quarterly at $.15 per share
Last Ex Dividend: 3/17/20
E. Added 5 THQ at $16.25; 5 at $14.3; 5 at $14.07; 5 at $11.9:
Quote Tekla Healthcare Opportunities Fund Overview: A leveraged CEF
SEC Filing (Holding as of 12/31/19)
Sponsor's Website: Fund Basics-Leveraged Closed End Fund
Last Sell Discussions: Item # 1.B. Sold Remaining THQ-61+ Shares at $17.5 (9/1/19 Post); Item # 2.A. Sold 53 THQ at $17.98(7/31/19 Post); Item # 5 Sold 100 THQ at $17.59-Used Commission Free Trade(7/7/19 Post)(contains 2017 profit snapshots =$555.56); Item # 2.C. Sold 232+ THQ at 17.59 (7/3/17 Post); Item # 2.D. Sold 118+ THQ at $18.7 in a Roth IRA Account (7/3/17 Post)
Distributions: Monthly at $.1125 (ROC supported/needs to cut until market conditions improve)
Tekla Healthcare Opportunities Fund Declares Monthly Cash Distribution
Last Ex Dividend: 3/19/20
Last SEC Filed Shareholder Report (period ending 9/30/19)
Leveraged: Yes (at 20.62% as of 12/31/19 according to fund's factsheet)
Current Position: 35 shares
Average Cost Per Share: $15.21
Dividend Yield at Average Cost Per Share: 8.88%
Data date of 3/11/20 Trade:
Closing Net Asset Value Per Share: $18.43
Closing Market Price: $16.09
Discount: -12.7
Data date of 3/17/20 Trade:
Closing Net Asset Value Per Share:$16.9
Closing Market Price: $14.71
Discount: -12.96%
Date date of 3/23/20 Trade:
Closing Net Asset Value Per Share: $14.56
Closing Market Price: $11.63
Discount: -20.12%
Sourced: THQ-CEF Connect
Purchase Restriction: The purchase price must be at a greater than 5% discount to net asset value per share and reduce my average cost per share.
F. Restarted GIS-Bought 2 at $47.88:
Quote: General Mills Inc. (GIS)
Closing Price Last Friday: GIS $51.82 +$1.82 +3.64%
General Mills: Brands overview
General Mills Inc. Interactive Charts
GIS Analyst Estimates
Dividend: Quarterly at $.49 per share ($1.96 annually) The penny rate is currently frozen to pay for the Blue Buffalo acquisition.
Last Elimination: Item # 1.A. Eliminated GIS-Sold 27+ at $54.86 (3/21/20 Post)(profit snapshot = $426.37) I mentioned in this post that I would start buying again when the price fell below $45. I changed that limit to have a placeholder for GIS stock when and if I restart wave buying programs.
Other Recent Sell Discussions: Item # 1.A. Sold 13 GIS at $55.02-Used Commission Free Trade (8/17/19 Post); Item 1.B. Sold Highest Cost GIS lots at $51.69 (4/7/2019 Post)
Realized Gains 2017 to Date: $2,421.51
Last Buy Discussion: Item # 5 A. Bought 2 GIS at $40.25, 2 at $39.45, 10 at $38.3 and 5 at $36.75-Used Commission Free Trades (12/29/18 Post)(all of those shares have sold)
Last Earnings Report (F/Q 2/23/20): General Mills Reports Fiscal 2020 Third-Quarter Results and Updates Full-Year Guidance
"Net earnings attributable to General Mills totaled $454 million, up 2 percent from a year ago."
Diluted EPS of $0.74 essentially matched prior-year results. Adjusted diluted EPS of $0.77 were down 6 percent from the prior year in constant currency, driven primarily by lower adjusted operating profit, a higher adjusted effective tax rate, and higher average diluted shares outstanding, partially offset by lower net interest expense and higher non-service benefit plan income. Lower contributions from ice cream net sales in Asia in February reduced third-quarter adjusted diluted EPS results versus the prior year by an estimated 150 basis points."
"Net sales of $4.2 billion were flat to last year. Organic net sales were also flat to last year, with strong growth for the Pet segment largely offset by declines in North America Retail and Convenience Stores & Foodservice. . . . Third-quarter net sales results versus the prior year included a 50 basis-point headwind from lower Häagen-Dazs net sales in Asia in February, driven by the impact of the COVID-19 virus outbreak on consumer traffic in Häagen-Dazs shops and foodservice outlets."
Discussed at General Mills sales miss expectations, says retail orders have jumped as coronavirus outbreak spreads- MarketWatch
General Mills, Inc. (GIS) CEO Jeff Harmening on Q3 2020 Results - Earnings Call Transcript | Seeking Alpha
Haagen-Dazs closes about half of Greater China stores on coronavirus fears - Reuters
4. Short Term Bond/CD Ladder Basket Strategy:
April 2020 Maturities:
SU = Senior Unsecured Bond ($1K par value per bond)
CD = Certificate of Deposit ($1K par value per CD)-FDIC Insured
MI = Monthly Interest Payments
SI = Semi-Annual Interest Payments
Treasury: U.S. Treasury Debt ($1K par value per bill, note or bond)
SI = Semi-Annual Interest Payments
Treasury: U.S. Treasury Debt ($1K par value per bill, note or bond)
IR: Investment Rate for Treasury Bills bought at auction
Secondary Market: Treasury purchases made at less than par value commission free
All corporate bonds are bought at less than par value.
Secondary Market: Treasury purchases made at less than par value commission free
All corporate bonds are bought at less than par value.
2 Zimmer Biomet 2.7% SU 4/1 (bought 4/19)
2 Amphenol 2.2% SU 4/1 (bought 12/18)
2 Treasury 6MO Bills 1.842%IR 4/2 (bought at auction)
10 Treasury 3Mo Bills 1.551%IR (bought at auction)
2 State BK India 1.8% CDs 4/7 (3 month CDs)
10 Treasury 58 Day Bill 1.58% IR 4/7(bought at auction)
3 Valley National 1.85% CDs 4/9 (6 month CD)
2 Mizrahi 1.75% CDs 4/9 (3 month CDs)
5 Treasury 3Mo Bill 1.551%IR 4/9 (bought at auction)
2 Gen.Mot.Fin. 2.65% SU 4/13 (bought 5/19)
3 Republic BK 1.9% CDs 4/14 (6 month CD)
10 Treasury 58 Day 1.595%IR 4/14 (bought at auction)
4 Treasury 1.5% 4/15 (secondary market purchases)
2 Treasury 3Mo Bill 1.53% IR 4/16 (bought at auction)
3 Treasury 6MO 1.661%IR 4/16 (bought at auction)
2 Treasury 6MO Bills 1.842%IR 4/2 (bought at auction)
10 Treasury 3Mo Bills 1.551%IR (bought at auction)
2 State BK India 1.8% CDs 4/7 (3 month CDs)
10 Treasury 58 Day Bill 1.58% IR 4/7(bought at auction)
3 Valley National 1.85% CDs 4/9 (6 month CD)
2 Mizrahi 1.75% CDs 4/9 (3 month CDs)
5 Treasury 3Mo Bill 1.551%IR 4/9 (bought at auction)
2 Gen.Mot.Fin. 2.65% SU 4/13 (bought 5/19)
3 Republic BK 1.9% CDs 4/14 (6 month CD)
10 Treasury 58 Day 1.595%IR 4/14 (bought at auction)
4 Treasury 1.5% 4/15 (secondary market purchases)
2 Treasury 3Mo Bill 1.53% IR 4/16 (bought at auction)
3 Treasury 6MO 1.661%IR 4/16 (bought at auction)
2 Bank of America 2.25% SU 4/21 (bought 8/18)
2 State BK. India 1.85% CDs 4/21 (6 month CDs)
5 Treasury 1 Year Bills 2.443% IR 4/23(bought at auction)
2 Wells Fargo 1.8% CDs MI 4/27 (3 year CDs)
10 Treasury 56 Day Bill 4/28 (bought at auction)
2 State BK. India 1.85% CDs 4/21 (6 month CDs)
5 Treasury 1 Year Bills 2.443% IR 4/23(bought at auction)
2 Wells Fargo 1.8% CDs MI 4/27 (3 year CDs)
10 Treasury 56 Day Bill 4/28 (bought at auction)
2 People's Bank CDs 1.6% 4/28 (3 MO CDs)
2 BK China 1.85% CDs 4/29 (6 MO CDs)
2 BK China 1.85% CDs 4/29 (6 MO CDs)
7 Treasury 2.375% 4/30 (secondary market purchases)
2 Zions 1.6% CDs 4/30 (3 mo CDs)
5 Centennial 2.4% CDs MI 4/30 (11 month CDs)
2 Zions 1.6% CDs 4/30 (3 mo CDs)
5 Centennial 2.4% CDs MI 4/30 (11 month CDs)
$101K
* Lost 6 Ventas 2.7% bonds that would have matured this month but were redeemed early last August. Lost 4 Harris 2.7% SU 4/27 redeemed last December. Both early redemptions triggered make whole payments.
I drew down my cash balances in March in an amount exceeding the proceeds that will be received in April from the $101K in maturing securities in order to buy bonds, preferred stocks, ETFs, CEFs and common stocks.
The majority of the cash was used to purchase short term investment grade corporate bonds whose prices became dysfunctional and irrational earlier in March. Without totalling the amounts, I would guess that about 70-80% of the cash was used to purchase $1K par value investment grade bonds maturing within 1 year.
As those proceeds are received throughout April, I will then make a decision to keep all or some of those funds in money market accounts or to redirect some of the proceeds into risk assets.
5. Canadian Reset Equity Preferred Stocks:
A. Bought 100 TRPPRE at C$15 and 50 at C$11.12 (C$1 commission):
Quote: TRP-PE.TO
Canadian reset equity preferred have been smashed worse than U.S. equity preferred stocks which were smashed to smithereens during the stock market meltdown. It does not make any sense to me for the reasons generally discussed below, so I just keep on buying.
Last Discussed: Item # 2 Bought 100 TRPPRE at C$15.6 (9/29/20 Post)
Security Description: This security reset its coupon commencing on 10/31/19 at 3.762%, a 2.35% spread to the 5 year Canadian bond yield.
The coupon will reset in October 2024 at a 2.35% spread to the then existing 5 year Canadian bond yield. The issuer can redeem at par value on reset dates.
Average Cost Per Share: C$14.49
Current Position: 250 shares
Par Value: C$25 per share Issuer: TC Energy Corporation
Reset Coupon: 3.762%
Par Value: C$25
Current Yield at C$14.49 = 6.49%
Dividends: Quarterly and Cumulative
Canada 5 Year Government Bond Overview | MarketWatch
Next Ex Dividend Date: Tomorrow, March 30.
A 6.49% yield for this preferred stock looks good to me now with treasury bills near zero percent.
The concern may be that the coupon will reset in October 2024 at an even lower rate, but that is not a rational concern IMO now.
No one knows what the 5 year Canadian bond yield will be over 4 years from now.
And, the yield would then have to be below 1.412% for this preferred stock to reset at a lower rate than the current 3.762%. It is at least equally likely (or close to it) that the coupon will reset at a higher rate.
I will trade the Canadian reset equity preferred stocks. I would probably sell the highest 100 cost TRPPRE lot somewhere in the C$16 to C$18 range.
I may buy 50 more shares.
Raymond James December 2019 Canadian Preferred Stock Report.pdf This report claims that the credit rating for TC Energy preferred stock is Pfd-2L, a DBRS rating that is equivalent to the S & P BBB-.
I drew down my cash balances in March in an amount exceeding the proceeds that will be received in April from the $101K in maturing securities in order to buy bonds, preferred stocks, ETFs, CEFs and common stocks.
The majority of the cash was used to purchase short term investment grade corporate bonds whose prices became dysfunctional and irrational earlier in March. Without totalling the amounts, I would guess that about 70-80% of the cash was used to purchase $1K par value investment grade bonds maturing within 1 year.
As those proceeds are received throughout April, I will then make a decision to keep all or some of those funds in money market accounts or to redirect some of the proceeds into risk assets.
5. Canadian Reset Equity Preferred Stocks:
A. Bought 100 TRPPRE at C$15 and 50 at C$11.12 (C$1 commission):
Quote: TRP-PE.TO
Canadian reset equity preferred have been smashed worse than U.S. equity preferred stocks which were smashed to smithereens during the stock market meltdown. It does not make any sense to me for the reasons generally discussed below, so I just keep on buying.
Last Discussed: Item # 2 Bought 100 TRPPRE at C$15.6 (9/29/20 Post)
Security Description: This security reset its coupon commencing on 10/31/19 at 3.762%, a 2.35% spread to the 5 year Canadian bond yield.
The coupon will reset in October 2024 at a 2.35% spread to the then existing 5 year Canadian bond yield. The issuer can redeem at par value on reset dates.
Average Cost Per Share: C$14.49
Current Position: 250 shares
Par Value: C$25 per share Issuer: TC Energy Corporation
Reset Coupon: 3.762%
Par Value: C$25
Current Yield at C$14.49 = 6.49%
Dividends: Quarterly and Cumulative
Canada 5 Year Government Bond Overview | MarketWatch
Next Ex Dividend Date: Tomorrow, March 30.
A 6.49% yield for this preferred stock looks good to me now with treasury bills near zero percent.
The concern may be that the coupon will reset in October 2024 at an even lower rate, but that is not a rational concern IMO now.
No one knows what the 5 year Canadian bond yield will be over 4 years from now.
And, the yield would then have to be below 1.412% for this preferred stock to reset at a lower rate than the current 3.762%. It is at least equally likely (or close to it) that the coupon will reset at a higher rate.
I will trade the Canadian reset equity preferred stocks. I would probably sell the highest 100 cost TRPPRE lot somewhere in the C$16 to C$18 range.
I may buy 50 more shares.
Raymond James December 2019 Canadian Preferred Stock Report.pdf This report claims that the credit rating for TC Energy preferred stock is Pfd-2L, a DBRS rating that is equivalent to the S & P BBB-.
Sell Discussion: Item # 2.A. Sold 100 TRPPRE at C$22.26 (5/23/17 Post)(profit snapshot = C$467.5)
B. Bought 50 BPOPRP at C$7.95 (C$1 commission):
Quote: BPO-PP.TO
This brings me up to 200 shares.
My last purchases were discussed here: Item # 2.A. Bought 50 BPOPRP at C$13.86 (9/11/19 Post); Item # 1.A. Bought 50 BPOPRP at C$15.95 (7/27/19 Post)
Issuer: Brookfield Office Properties, a REIT
In 2014, Brookfield Property Partners L.P. (BPY) acquired Brookfield Office Properties. BPY 2019 Annual Report
Preferred Share Prospectus Links: Preferred Shares-Brookfield Office Properties
Par Value: C$25
Last Coupon Reset: March 2017 at a 3% spread to the 5 year Canadian bond yield.
Current Coupon: 4.161% paid on a C$25 par value
Current Yield at C$7.95 = 13.08%
Next Reset: March 2022
Last Ex Dividend Date: 3/12/2020
6. Short Term Corporate Bonds-Alternative to Treasury Bills:
The investment grade corporate bond market was in disarray until the Fed announced that it would be buying ETFs that broadly track the U.S. investment grade corporate bond market.
The disarray caused prices to significantly decline.
The decline was due IMO mostly to a lack of liquidity and secondarily to increased credit concerns that were largely irrational.
I am using the past tense above since the dysfunctional pricing has mostly evaporated as of last Friday due to the FED's intervention.
There remains clearly erroneous pricing by the third party services used by brokers to price their customers bond holdings.
By buying bond ETFs, the FED addressed the liquidity problem. Those funds would then use the cash to buy bonds providing a buyer to match the sellers, calming everyone down at least for now.
The bond price declines had extended into investment grade corporate bonds that mature within 1 year.
I was buying those bonds as an alternative to short term treasury bills that currently have yields very close to zero.
I am taking on more credit risk but view that risk to be minimal given the credit quality of the issuers and the short time frame to maturity.
A. Bought 2 AT & T 2.45% SU Bonds Maturing on 6/30/20:
I now own 6 bonds. The other 4 bonds were bought in February 2017.
AT & T may call at par (no make whole payment) within 30 days of maturity.
FINRA Page: Bond Detail (prospectus linked)
This is an actively traded bond.
Issuer: AT&T Inc. (T)
Credit Quality:
Bought at 99.5
Cost at 99.6
YTM at 99.6 = 3.844%
B. Bought 1 Morgan Stanley 2.8% SU Maturing on 6/16/20:
I now own 3 bonds.
FINRA Page Bond Detail (prospectus linked)
Credit Ratings:
Issuer: Morgan Stanley (MS)
MS | Morgan Stanley Analyst Estimates
Bought at a Total Cost of 100
Yield: 2.8%
C. Bought 10 EBAY 3.25% SU Bonds Maturing on 10/15/20:
FINRA Page: Bond Detail (prospectus not linked)
Prospectus Supplement (sold in 2010)
I will receive the accrued interest paid to the seller when EBAY makes its semi-annual interest payment next month.
EBAY may redeem this bond on or after 7/15/20 at par value plus accrued interest.
"On and after July 15, 2020, we may at our option redeem the 2020 notes at any time or from time to time, either in whole or in part, at a redemption price equal to 100% of the principal amount of the 2020 notes to be redeemed, plus accrued and unpaid interest to the redemption date." Page S-4
Ebay has already raised the funds to pay off this note. Prospectus at page S-14 (see below)
Issuer: eBay Inc. (EBAY)
EBAY | eBay Inc. Analyst Estimates | MarketWatch
EBAY SEC Filings
Last Bond Offering-March 2020: Prospectus
In the use of proceeds section, Ebay states that part of the proceeds will be used to redeem the 3.25% bond that matures on 10/15/20.
"We intend to use all or a substantial portion of the net proceeds from this offering and, if necessary or if we so elect, other available funds to repay all of our outstanding 2.150% Notes due 2020 and 3.250% Notes due 2020. We currently have $500 million aggregate principal amount of 2.150% Notes due 2020 outstanding, which mature on June 5, 2020, and $500 million aggregate principal amount of 3.250% Notes due 2020 outstanding, which mature on October 15, 2020."
Credit Ratings:
Bought at a Total Cost of 99.525
YTM at 99.525 = 4.112% (YTM includes $47.5 profit when bonds redeemed)
D. Bought 2 Capital One 2.5% SU Bonds Maturing on 5/12/20:
FINRA Page: Bond Detail
Bought at a Total Cost of 99.6
YTM at 99.6 = 6.624%
The YTM includes both the 2.5% coupon interest plus a $4 profit on each $1K par value bond. There will only be one more coupon payment. I paid the seller accrued interest of $18.33. I will get that sum back from the issuer on 5/12/20 plus the interest that accrues from the date of my purchase.
Issuer: Capital One Financial Corp. (COP)
Credit Ratings:
I own 4 bonds. The other 2 were bought in my IB account back in March 2019.
7. Exchange Traded Bonds:
A. Bought 10 ENBA at $15.17:
Quote: Enbridge Inc. 6.375% Fixed-to-Floating Rate Subordinated Notes due 2078
Closing Price Last Friday: ENBA $19.28 -$0.62 -3.12%
Issuer: Enbridge Inc. (ENB)
I bought relatively small amounts of several exchange traded bonds during their most recent price collapse.
I have noted in the past that both preferred stocks and exchange trade bonds will crater in price when there is a substantial decline in common stock prices accompanied by a parabolic increase in the VIX.
E.G. Item # 1 Enhanced Price Volatility (8/9/2011 Post) The SPX decline during the 2011 volatility event was almost 20%. The decline this year was significantly worse.
Back to ENBA. The quote for this bond indicates that it is subordinated which is just another word for a bond that is junior to senior unsecured and senior secured debt.
Generally, without even looking at the prospectus or the capital structure, the use of that word indicates that the bond is senior only to common and equity preferred stocks in the capital structure.
Credit Ratings:
Security: Prospectus
Par Value: $25
Coupon Rate: initially at a 6.375% per annum fixed rate paid on the $25 par value (or about $1.59+ annually per share) until 4/15/23
Floating Rate: On 4/15/23, the coupon will reset at a 3.593% spread to the three month libor rate until 4/15/2028; then resets at a 3.843% spread until 4/15/43; and then resets at a 4.593% spread to the 3 month Libor until the note matures in 2078.
B. Bought 50 BPOPRP at C$7.95 (C$1 commission):
Quote: BPO-PP.TO
This brings me up to 200 shares.
My last purchases were discussed here: Item # 2.A. Bought 50 BPOPRP at C$13.86 (9/11/19 Post); Item # 1.A. Bought 50 BPOPRP at C$15.95 (7/27/19 Post)
Issuer: Brookfield Office Properties, a REIT
In 2014, Brookfield Property Partners L.P. (BPY) acquired Brookfield Office Properties. BPY 2019 Annual Report
Preferred Share Prospectus Links: Preferred Shares-Brookfield Office Properties
Par Value: C$25
Last Coupon Reset: March 2017 at a 3% spread to the 5 year Canadian bond yield.
Current Coupon: 4.161% paid on a C$25 par value
Current Yield at C$7.95 = 13.08%
Next Reset: March 2022
Last Ex Dividend Date: 3/12/2020
6. Short Term Corporate Bonds-Alternative to Treasury Bills:
The investment grade corporate bond market was in disarray until the Fed announced that it would be buying ETFs that broadly track the U.S. investment grade corporate bond market.
The disarray caused prices to significantly decline.
The decline was due IMO mostly to a lack of liquidity and secondarily to increased credit concerns that were largely irrational.
I am using the past tense above since the dysfunctional pricing has mostly evaporated as of last Friday due to the FED's intervention.
There remains clearly erroneous pricing by the third party services used by brokers to price their customers bond holdings.
By buying bond ETFs, the FED addressed the liquidity problem. Those funds would then use the cash to buy bonds providing a buyer to match the sellers, calming everyone down at least for now.
The bond price declines had extended into investment grade corporate bonds that mature within 1 year.
I was buying those bonds as an alternative to short term treasury bills that currently have yields very close to zero.
I am taking on more credit risk but view that risk to be minimal given the credit quality of the issuers and the short time frame to maturity.
A. Bought 2 AT & T 2.45% SU Bonds Maturing on 6/30/20:
I now own 6 bonds. The other 4 bonds were bought in February 2017.
AT & T may call at par (no make whole payment) within 30 days of maturity.
FINRA Page: Bond Detail (prospectus linked)
This is an actively traded bond.
Issuer: AT&T Inc. (T)
Credit Quality:
Cost at 99.6
YTM at 99.6 = 3.844%
B. Bought 1 Morgan Stanley 2.8% SU Maturing on 6/16/20:
FINRA Page Bond Detail (prospectus linked)
Credit Ratings:
MS | Morgan Stanley Analyst Estimates
Bought at a Total Cost of 100
Yield: 2.8%
C. Bought 10 EBAY 3.25% SU Bonds Maturing on 10/15/20:
Prospectus Supplement (sold in 2010)
I will receive the accrued interest paid to the seller when EBAY makes its semi-annual interest payment next month.
EBAY may redeem this bond on or after 7/15/20 at par value plus accrued interest.
"On and after July 15, 2020, we may at our option redeem the 2020 notes at any time or from time to time, either in whole or in part, at a redemption price equal to 100% of the principal amount of the 2020 notes to be redeemed, plus accrued and unpaid interest to the redemption date." Page S-4
Ebay has already raised the funds to pay off this note. Prospectus at page S-14 (see below)
Issuer: eBay Inc. (EBAY)
EBAY | eBay Inc. Analyst Estimates | MarketWatch
EBAY SEC Filings
Last Bond Offering-March 2020: Prospectus
"We intend to use all or a substantial portion of the net proceeds from this offering and, if necessary or if we so elect, other available funds to repay all of our outstanding 2.150% Notes due 2020 and 3.250% Notes due 2020. We currently have $500 million aggregate principal amount of 2.150% Notes due 2020 outstanding, which mature on June 5, 2020, and $500 million aggregate principal amount of 3.250% Notes due 2020 outstanding, which mature on October 15, 2020."
Credit Ratings:
YTM at 99.525 = 4.112% (YTM includes $47.5 profit when bonds redeemed)
D. Bought 2 Capital One 2.5% SU Bonds Maturing on 5/12/20:
Bought at a Total Cost of 99.6
YTM at 99.6 = 6.624%
The YTM includes both the 2.5% coupon interest plus a $4 profit on each $1K par value bond. There will only be one more coupon payment. I paid the seller accrued interest of $18.33. I will get that sum back from the issuer on 5/12/20 plus the interest that accrues from the date of my purchase.
Issuer: Capital One Financial Corp. (COP)
Credit Ratings:
I own 4 bonds. The other 2 were bought in my IB account back in March 2019.
7. Exchange Traded Bonds:
A. Bought 10 ENBA at $15.17:
Quote: Enbridge Inc. 6.375% Fixed-to-Floating Rate Subordinated Notes due 2078
Closing Price Last Friday: ENBA $19.28 -$0.62 -3.12%
Issuer: Enbridge Inc. (ENB)
I bought relatively small amounts of several exchange traded bonds during their most recent price collapse.
I have noted in the past that both preferred stocks and exchange trade bonds will crater in price when there is a substantial decline in common stock prices accompanied by a parabolic increase in the VIX.
E.G. Item # 1 Enhanced Price Volatility (8/9/2011 Post) The SPX decline during the 2011 volatility event was almost 20%. The decline this year was significantly worse.
Back to ENBA. The quote for this bond indicates that it is subordinated which is just another word for a bond that is junior to senior unsecured and senior secured debt.
Generally, without even looking at the prospectus or the capital structure, the use of that word indicates that the bond is senior only to common and equity preferred stocks in the capital structure.
Credit Ratings:
Par Value: $25
Coupon Rate: initially at a 6.375% per annum fixed rate paid on the $25 par value (or about $1.59+ annually per share) until 4/15/23
Floating Rate: On 4/15/23, the coupon will reset at a 3.593% spread to the three month libor rate until 4/15/2028; then resets at a 3.843% spread until 4/15/43; and then resets at a 4.593% spread to the 3 month Libor until the note matures in 2078.
During the reset coupon periods, the reset will occur every 3 months.
Libor Rate: This rate will soon cease to exist.
Alternative Rate to Libor: The prospectus discusses what happens when the Libor rate is no longer being quoted:
I am unlikely to own this bond on 4/14/23 and will keep my position small due to the credit risk and the uncertainty relating to the Libor phase out.
Issuer Optional Redemption Summary:
Last Quarterly Ex Interest Date: 3/31/2020
Yield at $15.17 = 10.51% (rounded)
Trades Flat: Whoever owns the bond receives the entire quarterly interest payment
Interest Deferral and Stopper Summary:
The stopper clause requires the company to cease making cash dividend payments to common shareholders before deferring interest payments to the junior bond owners. It "stops" deferral until the cash common stock dividend is eliminated and prevents the use of cash to buy common stock as well.
6. Long Term Bond Strategy-Tennessee Municipal Bonds:
A. Bought 5 Harpeth Valley Utility District 3.25% Tax Free Bonds Maturing on 9/1/2038:
Harpeth Valley is a water/sewer utility operating in Middle Tennessee.
Emma Page
S & P Rating: AA+
Total Cost: 90.07 (includes $1 per bond commission)
YTM at TC = 4.026% (includes bond profit of $465 for 5 bonds)
Current Tax Free Yield at 90.07 = 3.6083%
Issuer Optional Redemption: At par on or after 9/1/2025
I am currently classifying this bond in my long term category (over 10 years to maturity), even though it may only turn out to be an intermediate term one.
Security:
I currently own 5 bonds from this issuer that mature in 2040 Item # 1. E. The coupon is 4% and the optional call date starts on 9/1/2022. I expect that the issuer will call the bond effective for that day. The purchase of the 5 Harpeth Valley bonds discussed above is intended to replace the bonds that I anticipate being called in 2022.
The third party pricing service now claims that this bond had a 104.24 value as of last Friday's close:
The individual investor who sold me this bond may have be influenced by the then third party price and the purported rapid decline in price, which had nothing to deal with reality. The third party pricing services are worst than worthless for that reason among others.
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.
Libor Rate: This rate will soon cease to exist.
Alternative Rate to Libor: The prospectus discusses what happens when the Libor rate is no longer being quoted:
Issuer Optional Redemption Summary:
Last Quarterly Ex Interest Date: 3/31/2020
Yield at $15.17 = 10.51% (rounded)
Trades Flat: Whoever owns the bond receives the entire quarterly interest payment
Interest Deferral and Stopper Summary:
6. Long Term Bond Strategy-Tennessee Municipal Bonds:
A. Bought 5 Harpeth Valley Utility District 3.25% Tax Free Bonds Maturing on 9/1/2038:
Harpeth Valley is a water/sewer utility operating in Middle Tennessee.
Emma Page
S & P Rating: AA+
Total Cost: 90.07 (includes $1 per bond commission)
YTM at TC = 4.026% (includes bond profit of $465 for 5 bonds)
Current Tax Free Yield at 90.07 = 3.6083%
Issuer Optional Redemption: At par on or after 9/1/2025
I am currently classifying this bond in my long term category (over 10 years to maturity), even though it may only turn out to be an intermediate term one.
Security:
I currently own 5 bonds from this issuer that mature in 2040 Item # 1. E. The coupon is 4% and the optional call date starts on 9/1/2022. I expect that the issuer will call the bond effective for that day. The purchase of the 5 Harpeth Valley bonds discussed above is intended to replace the bonds that I anticipate being called in 2022.
The third party pricing service now claims that this bond had a 104.24 value as of last Friday's close:
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.
