Economy:
JPMorgan sees negative GDP growth but says the US will skirt a technical recession JPM is predicting two consecutive negative GDP quarters this year. However, the arbiter of when recessions start and end, the National Bureau of Economic Research, requires more than 2 consecutive quarters of negative GDP growth. Since JPM is predicting a mid-year growth rebound, it does not believe NBER will attach a recession label to the slowdown. It will just feel like a recession without technically being one using NBER's standards.
NBER Historical U.S. Business Cycles Starting in 1854
El-Erian sees 30% market drop and the world skidding to recession A worldwide recession is highly probable IMO, though the U.S. may escape having one. As of Thursday's close, SPX had already declined by about 26.9% from its recent all time high.
JPMorgan sees negative GDP growth but says the US will skirt a technical recession JPM is predicting two consecutive negative GDP quarters this year. However, the arbiter of when recessions start and end, the National Bureau of Economic Research, requires more than 2 consecutive quarters of negative GDP growth. Since JPM is predicting a mid-year growth rebound, it does not believe NBER will attach a recession label to the slowdown. It will just feel like a recession without technically being one using NBER's standards.
NBER Historical U.S. Business Cycles Starting in 1854
El-Erian sees 30% market drop and the world skidding to recession A worldwide recession is highly probable IMO, though the U.S. may escape having one. As of Thursday's close, SPX had already declined by about 26.9% from its recent all time high.
Payroll tax cut would be better than a rate cut — but still won't stop economic fallout I would agree with that assessment. The payroll tax cut would be beneficial when and if consumer spends falls precipitously from current levels.
Consumer spending is not the problem now. The problem is the negative worldwide impact on business revenues and supply chains that are directly related to the coronavirus pandemic. Rate cuts and fiscal stimulus will not cure those problems. And the rate cuts have and will continue to cause a substantial loss in household disposable income through lower interest rates.
Donald had proposed a payroll tax holiday through the election that would cost the federal government about $1 trillion, while depleting the already underfunded Social Security trust fund. But who cares about that when Donald's reelection is at stake? Trump is reportedly seeking to waive payroll taxes for workers until the end of the 2020 election | Markets Insider; Trump pitches 0% payroll tax rate for the rest of 2020 This proposal is a transparent attempt to buy the election regardless of the long term consequences.
Analysis: Why Trump isn’t getting the payroll-tax cut he wanted for the coronavirus
Consumer spending is not the problem now. The problem is the negative worldwide impact on business revenues and supply chains that are directly related to the coronavirus pandemic. Rate cuts and fiscal stimulus will not cure those problems. And the rate cuts have and will continue to cause a substantial loss in household disposable income through lower interest rates.
Donald had proposed a payroll tax holiday through the election that would cost the federal government about $1 trillion, while depleting the already underfunded Social Security trust fund. But who cares about that when Donald's reelection is at stake? Trump is reportedly seeking to waive payroll taxes for workers until the end of the 2020 election | Markets Insider; Trump pitches 0% payroll tax rate for the rest of 2020 This proposal is a transparent attempt to buy the election regardless of the long term consequences.
Analysis: Why Trump isn’t getting the payroll-tax cut he wanted for the coronavirus
Italy shops, bars and restaurants ordered to close (3/12/20 article) A major recession in Italy is inevitable now. Eurostat last reported that Italy had -.3% growth in the 2019 4th quarter. Page 3
France's 2019 4th quarter GDP growth was at -.1% with Germany at zero percent. Those numbers would not have been impacted by the spreading coronavirus epidemic.
CPI rose .1% last month on a seasonally adjusted basis. Over the past 12 months through February, CPI increased by 2.3% without the seasonal adjustment. Core CPI was up 2.4% Y-O-Y.
Consumer Price Index Summary
Mortgage refinance applications spike 79% as interest rates sink For households that can refinance at lower rates now, their disposable income after mortgage interest payments will go up, assuming no increase in the debt balance after refinancing.
Europe is now the 'epicenter' of the coronavirus pandemic, WHO says
U.S. to add Britain, Ireland to European travel ban - airline, U.S. officials
Spain Becomes Latest Epicenter of Coronavirus After a Faltering Response; Coronavirus live updates: Spain to impose nationwide lockdown
Coronavirus Wrecked China's Car Sales, and America Is Probably Next
France's 2019 4th quarter GDP growth was at -.1% with Germany at zero percent. Those numbers would not have been impacted by the spreading coronavirus epidemic.
CPI rose .1% last month on a seasonally adjusted basis. Over the past 12 months through February, CPI increased by 2.3% without the seasonal adjustment. Core CPI was up 2.4% Y-O-Y.
Mortgage refinance applications spike 79% as interest rates sink For households that can refinance at lower rates now, their disposable income after mortgage interest payments will go up, assuming no increase in the debt balance after refinancing.
Europe is now the 'epicenter' of the coronavirus pandemic, WHO says
U.S. to add Britain, Ireland to European travel ban - airline, U.S. officials
Spain Becomes Latest Epicenter of Coronavirus After a Faltering Response; Coronavirus live updates: Spain to impose nationwide lockdown
Coronavirus Wrecked China's Car Sales, and America Is Probably Next
+++
Markets and Market Commentary:
I viewed the rally last Friday, which occurred during the final thirty minutes of trading, to be machine driven.
Market crash has reached the ‘panic’ stage, and ‘demoralization’ is still to come, Wall Street strategist Tony Dwyer says - MarketWatch (Dwyer noted that last Thursday's action can only happen in a "crash" that is indicative of panic. I would agree)
OPEC deal collapse sparks price war: '$20 oil in 2020 is coming' The existing production cuts expire 3/31. Saudi Arabia cut prices 10% last Friday and indicated that it will start selling 1+M more barrels per day starting in April. Saudi is currently pumping about 9.7M barrels a day but has the capacity to produce 12M barrels a day according to some sources.
Saudi Aramco moves to ramp up production amid Russia feud Saudi Arabia could take prices down to $10 to $20 per barrel in the latest price and production feud.
Why Russia wants to crush U.S. shale oil producers in price war - MarketWatch
Putin dumps Saudi leader to start a war on America's shale oil industry Russia tried this strategy in October 2018 and it did not work. U.S. crude production continued to ramp up notwithstanding the abrupt decline in crude oil prices.: Weekly U.S. Field Production of Crude Oil (Thousand Barrels per Day); WTI Crude Oil Prices - 10 Year Daily Chart | MacroTrends
Russia's desire to kill off U.S. shale production did result in those producers becoming more efficient.
Some highly leveraged producers may file for bankruptcy during the latest price slide, but that will not stop the drilling on their leases. Even before that happens, those companies will have to maintain production just to make their interest payments.
If those producers reorganize in bankruptcy, their debt costs will be reduced as will their breakeven cost points. Their lenders take the hits.
A liquidation in Chapter 7 will only mean that the production acres will fall under another company's control, probably a survivor better able to weather the up and down vicissitudes of crude prices.
A prolonged price collapse would likely substantially curtail U.S. shale production by several million barrels per day.
Russia claims that it can withstand a price war at $25 to $30 per barrel for 6 to 10 years. U.S. Shale Collapse Will Lead To Higher Oil Prices | OilPrice.com I would not mind testing that claim.
And in 6 to 10 years, when Russia and OPEC have depleted their resources by selling at $25 per barrel and prices go back to $60 after a new OPEC-Russia production cut agreement, U.S. shale production would come roaring back.
Russia will suffer from lower crude prices. Revenues will decline notwithstanding an increase in production.
There will also be other negative blowbacks that will weaken the Russian economy, including declines in Russia's stock market. The Ruble is declining in value which will make imports more expensive. Chart. Russian Ruble to US Dollar Rates; Russian Ruble to Euro; Russian Ruble to Japanese Yen Rates
Russia also faces debt downgrades that will make borrowing money more expensive. Currently, Russia's sovereign debt is rated junk by S & P at BB+ and at BBB- by S & P. Saudi Arabia can borrow money more cheaply to meet budget shortfalls. Saudi Arabia - Credit Rating
Russian lawmakers told to rally behind Putin's move to extend rule
Putin approves law that could keep him in power until 2036
Bond investors say some energy companies ‘will not survive’ oil rout slamming markets - MarketWatch
I viewed the rally last Friday, which occurred during the final thirty minutes of trading, to be machine driven.
Market crash has reached the ‘panic’ stage, and ‘demoralization’ is still to come, Wall Street strategist Tony Dwyer says - MarketWatch (Dwyer noted that last Thursday's action can only happen in a "crash" that is indicative of panic. I would agree)
OPEC deal collapse sparks price war: '$20 oil in 2020 is coming' The existing production cuts expire 3/31. Saudi Arabia cut prices 10% last Friday and indicated that it will start selling 1+M more barrels per day starting in April. Saudi is currently pumping about 9.7M barrels a day but has the capacity to produce 12M barrels a day according to some sources.
Saudi Aramco moves to ramp up production amid Russia feud Saudi Arabia could take prices down to $10 to $20 per barrel in the latest price and production feud.
Why Russia wants to crush U.S. shale oil producers in price war - MarketWatch
Putin dumps Saudi leader to start a war on America's shale oil industry Russia tried this strategy in October 2018 and it did not work. U.S. crude production continued to ramp up notwithstanding the abrupt decline in crude oil prices.: Weekly U.S. Field Production of Crude Oil (Thousand Barrels per Day); WTI Crude Oil Prices - 10 Year Daily Chart | MacroTrends
Russia's desire to kill off U.S. shale production did result in those producers becoming more efficient.
Some highly leveraged producers may file for bankruptcy during the latest price slide, but that will not stop the drilling on their leases. Even before that happens, those companies will have to maintain production just to make their interest payments.
If those producers reorganize in bankruptcy, their debt costs will be reduced as will their breakeven cost points. Their lenders take the hits.
A liquidation in Chapter 7 will only mean that the production acres will fall under another company's control, probably a survivor better able to weather the up and down vicissitudes of crude prices.
A prolonged price collapse would likely substantially curtail U.S. shale production by several million barrels per day.
Russia claims that it can withstand a price war at $25 to $30 per barrel for 6 to 10 years. U.S. Shale Collapse Will Lead To Higher Oil Prices | OilPrice.com I would not mind testing that claim.
And in 6 to 10 years, when Russia and OPEC have depleted their resources by selling at $25 per barrel and prices go back to $60 after a new OPEC-Russia production cut agreement, U.S. shale production would come roaring back.
Russia will suffer from lower crude prices. Revenues will decline notwithstanding an increase in production.
There will also be other negative blowbacks that will weaken the Russian economy, including declines in Russia's stock market. The Ruble is declining in value which will make imports more expensive. Chart. Russian Ruble to US Dollar Rates; Russian Ruble to Euro; Russian Ruble to Japanese Yen Rates
Russia also faces debt downgrades that will make borrowing money more expensive. Currently, Russia's sovereign debt is rated junk by S & P at BB+ and at BBB- by S & P. Saudi Arabia can borrow money more cheaply to meet budget shortfalls. Saudi Arabia - Credit Rating
Russian lawmakers told to rally behind Putin's move to extend rule
Putin approves law that could keep him in power until 2036
Bond investors say some energy companies ‘will not survive’ oil rout slamming markets - MarketWatch
Foreign investors are piling into U.S. real estate, viewed by them as a coronavirus safe haven Maybe they need to start buying hotel REIT stocks (or taking them private) that offer a better valuation than buying the hotels. There was a saying that circulated many years ago that it was cheaper to drill for oil on Wall Street than with the drill bit. That analogy is appropriate now in a few real estate sectors.
It’s still way too soon to buy stocks, warns Deutsche Bank’s Torsten Slok - MarketWatch
Chip stocks dive after Broadcom rescinds guidance, questions second-half rebound amid coronavirus - MarketWatch
Hotel companies have withdrawn their guidance for the first quarter and 2020 due to the COVID-19 pandemic.
+++++++++++
Portfolio Management:
If I knew how serious the COVID-19 pandemic would become, I could make better investment decisions now. But, alas, I am not an omniscience being. I recognize that I do not know how serious the impact will be on the U.S. or the world economy. What's more, I know that no one else knows either. Everyone is making a wide range of guesses.
For stocks in several sectors, the current prices already reflect a valuation consistent with recessionary conditions with a slow recovery therefrom. Regional bank stock prices are one example.
The odds for a recession have gone up, but no one can say now that the probability of one occurring now is at 100% or even much above or below 50%. To make even a more probable than not prediction of a recession or no recession this year, I would have to know how serious the COVID-19 pandemic will be in the U.S. and how long it will last.
Certain sectors of the economy, including the travel and energy related industries, will experience recessionary conditions for at least a few months.
I still expect the real U.S. GDP growth in the first quarter, but the March number may be negative in that 3 month period. The Atlanta Fed GDP model is currently predicting 3.1% real GDP growth in the current quarter. GDPNow-Federal Reserve Bank of Atlanta The New York Fed Model is more pessimistic at +1.6%. Nowcasting Report - FEDERAL RESERVE BANK of NEW YORK
I am investing based on an assumption that the first quarter GDP growth rate will be closer to the NY FED's current forecast of +1.6% than the Atlanta's FED's +3.1%.
The second quarter will likely have negative growth and the third quarter will be a crap shoot. So no predictions can be made now whether or not the 3rd quarter GDP numbers will be positive or negative.
To make that kind of forecast, it would be necessary to know how serious the pandemic will become and that is unknowable now.
After several days of buying common stock, and without checking, just making a guess, stocks are weighted at about 6% of my assets held at brokers and mutual fund companies.
I have a constant cash flow from interest and dividend payments + proceeds from maturing fixed coupon securities (generally over $100K per month now).
Even though I have been adding to my stock allocation during the volatility event, I have not funded any of those purchases from the cash allocation that existed prior to 2/24/20 which was large.
Instead, I am simply redirecting some of the proceeds received almost daily from fixed coupon securities into stocks and the uninvested amounts from those proceeds are simply increasing my cash balances held in money market funds for now.
The rally late Thursday smelled like program trading. It was not an all clear signal by any means IMO.
It can be claimed with certainty that stocks are more reasonably priced now than they were when the S & P 500 went over 330o which occurred by the way last month. Historical Prices
And, importantly for me, dividend yields do go up when the price goes down. I am certain of that as well.
The uncertainty still exists, however, whether the dividend penny rates will be sustained at current levels, cut, eliminated or increased and by how much.
I will continue to buy common stocks into the volatility spike using the small ball purchase restriction. Chart CBOE Volatility Index-St. Louis Fed When there is a return to below 20 movement in the VIX, and I am able to sell my highest cost shares profitably, I will likely sell the highest cost lots for whatever profit may be available.
The reasons for selling the highest cost lots first are (1) to reduce my income tax obligation resulting from a sell; (2) to generate a total return in excess of the dividend payments; (3) to increase my dividend yield on the remaining shares; (4) to take advantage of normal up and down volatility by selling the highest cost lots profitably and then by buying when the price falls below the lowest price paid in the chain; (5) to make it more likely that I will buy during a meltdown after selling higher cost shares (psychological); and (6) to mitigate risk through less at risk monetary exposure. Risk is also controlled through small odd lot trades.
I am not concerned about the dollar value of the profit provided I am in achieving the objectives set out above.
I did look at my extensive monitor portfolio at Yahoo Finance last Friday and started to buy some securities in that list including the two discussed in Item # 2.A. below: EPRPRC and EPR.
+++++++
It’s still way too soon to buy stocks, warns Deutsche Bank’s Torsten Slok - MarketWatch
Chip stocks dive after Broadcom rescinds guidance, questions second-half rebound amid coronavirus - MarketWatch
Hotel companies have withdrawn their guidance for the first quarter and 2020 due to the COVID-19 pandemic.
+++++++++++
Portfolio Management:
If I knew how serious the COVID-19 pandemic would become, I could make better investment decisions now. But, alas, I am not an omniscience being. I recognize that I do not know how serious the impact will be on the U.S. or the world economy. What's more, I know that no one else knows either. Everyone is making a wide range of guesses.
For stocks in several sectors, the current prices already reflect a valuation consistent with recessionary conditions with a slow recovery therefrom. Regional bank stock prices are one example.
The odds for a recession have gone up, but no one can say now that the probability of one occurring now is at 100% or even much above or below 50%. To make even a more probable than not prediction of a recession or no recession this year, I would have to know how serious the COVID-19 pandemic will be in the U.S. and how long it will last.
Certain sectors of the economy, including the travel and energy related industries, will experience recessionary conditions for at least a few months.
I still expect the real U.S. GDP growth in the first quarter, but the March number may be negative in that 3 month period. The Atlanta Fed GDP model is currently predicting 3.1% real GDP growth in the current quarter. GDPNow-Federal Reserve Bank of Atlanta The New York Fed Model is more pessimistic at +1.6%. Nowcasting Report - FEDERAL RESERVE BANK of NEW YORK
I am investing based on an assumption that the first quarter GDP growth rate will be closer to the NY FED's current forecast of +1.6% than the Atlanta's FED's +3.1%.
The second quarter will likely have negative growth and the third quarter will be a crap shoot. So no predictions can be made now whether or not the 3rd quarter GDP numbers will be positive or negative.
To make that kind of forecast, it would be necessary to know how serious the pandemic will become and that is unknowable now.
After several days of buying common stock, and without checking, just making a guess, stocks are weighted at about 6% of my assets held at brokers and mutual fund companies.
I have a constant cash flow from interest and dividend payments + proceeds from maturing fixed coupon securities (generally over $100K per month now).
Even though I have been adding to my stock allocation during the volatility event, I have not funded any of those purchases from the cash allocation that existed prior to 2/24/20 which was large.
Instead, I am simply redirecting some of the proceeds received almost daily from fixed coupon securities into stocks and the uninvested amounts from those proceeds are simply increasing my cash balances held in money market funds for now.
The rally late Thursday smelled like program trading. It was not an all clear signal by any means IMO.
It can be claimed with certainty that stocks are more reasonably priced now than they were when the S & P 500 went over 330o which occurred by the way last month. Historical Prices
And, importantly for me, dividend yields do go up when the price goes down. I am certain of that as well.
The uncertainty still exists, however, whether the dividend penny rates will be sustained at current levels, cut, eliminated or increased and by how much.
I will continue to buy common stocks into the volatility spike using the small ball purchase restriction. Chart CBOE Volatility Index-St. Louis Fed When there is a return to below 20 movement in the VIX, and I am able to sell my highest cost shares profitably, I will likely sell the highest cost lots for whatever profit may be available.
The reasons for selling the highest cost lots first are (1) to reduce my income tax obligation resulting from a sell; (2) to generate a total return in excess of the dividend payments; (3) to increase my dividend yield on the remaining shares; (4) to take advantage of normal up and down volatility by selling the highest cost lots profitably and then by buying when the price falls below the lowest price paid in the chain; (5) to make it more likely that I will buy during a meltdown after selling higher cost shares (psychological); and (6) to mitigate risk through less at risk monetary exposure. Risk is also controlled through small odd lot trades.
I am not concerned about the dollar value of the profit provided I am in achieving the objectives set out above.
I did look at my extensive monitor portfolio at Yahoo Finance last Friday and started to buy some securities in that list including the two discussed in Item # 2.A. below: EPRPRC and EPR.
+++++++
Trump:
Demagogue Don has claimed that the media has created a hoax involving the COVID-19 pandemic as part of a conspiracy to injure his reelection effort. Trump: 'Fake News Media,' Democrats working to 'inflame the CoronaVirus situation' | TheHill (3/9/20 article); Coronavirus Is Creating a Fake-News Nightmarescape | Vanity Fair
Donald is not claiming that the COVID-19 is a hoax, which was suggested by some Democrats, since that would be beyond the pale even for the Duck.
Donald is claiming that the media's accurate coverage of the epidemic is a hoax concocted by the Democrats and the media to injure him personally. Just another example of Donald's victimization complex that arises when anyone contradicts his reality creations with facts.
The conspirators, according to Delusional Don, are media organizations that are contradicting his reality creations with facts and the Democrats who are doing something in collusion with the media. That sounds coherent and believable to Donald's cult members.
The World Health Organization joined the conspiracy against the Duck last Wednesday when it labeled COVID-19 a "pandemic". Coronavirus: COVID-19 Is Now Officially A Pandemic, WHO Says- NPR The WHO, the Democrats and the media are now in a full blown conspiracy to injure Donald and to Make America UnGreat Again. America can achieve greatness in Trumpworld only when Donald is our Dear Leader.
Fox: Coronavirus Is a Liberal “Scam” to Hurt Trump | Vanity Fair
Doctor Don believes he can second guess infectious disease experts because "he has a natural ability" to know the truth. ‘Maybe I have a natural ability’: Trump plays medical expert on coronavirus by second-guessing the professionals - The Washington Post
Everything Trump says he knows "more about than anybody" - Axios
How Trump fuels confusion about coronavirus (A Trumpster is quoted as claiming that no one has died from the coronavirus because she does not "believe anything the Democrats do".)
Doctor Don, whose medical decree is in lies and B.S., has repeatedly played down the coronavirus pandemic, frequently comparing the infections rates with a normal, seasonal flu season. ‘Stay Calm, It Will Go Away:’ Trump Plays Down Coronavirus Threat - The New York Times (video)
PolitiFact | Fact-checking Donald Trump’s mistakes about European travel due to coronavirus; FactChecking Trump's Coronavirus Address - FactCheck.org It is impossible for Donald to be straight and factual.
Trump’s False Claims About His Response to the Coronavirus - The New York Times
PolitiFact | Donald Trump’s wrong claim that ‘anybody’ can get tested for coronavirus The Duck routinely makes ridiculous and patently false claims. This one was rated "Pants on Fire". Yet, a majority of republicans view him to be honest and a role model for their children.
Coronavirus: US is failing on testing, says Fauci - BBC News
Sick People Across the U.S. Say They Are Being Denied the Coronavirus Test When patients claim that they are being denied tests, those claims are just Fake News in TrumpWorld intended to poor, poor, pitiful Donald. Linda Ronstadt - Poor Poor Pitiful Me - May 6, 1996 at the White House - YouTube
Problems mount with coronavirus testing, limiting access and sowing confusion - Los Angeles Times
Heidi Klum Says She's Sick With a Fever and Cough But Can't Get a Coronavirus Test
The U.S. testing initiative so far has more in common with an impoverished third world country than a major country with abundant resources and medical personnel.
Donald Trump's appalling, blame-shifting Rose Garden news conference (Noting a line from the Office TV series where the Boss made the following statement: "I do want the credit, without any of the blame." President Truman had a sign on his desk saying "The BUCK STOPS here". "The Buck Stops Here" Desk sign For Don the Con, the buck stops anywhere but him.
Angela Merkel: Most people will get the coronavirus That remark caused the Stock Jocks to have a panic attack last Wednesday. The mind conjures up images of U.S. high school gyms and empty industrial warehouses being filled wall-to-wall cots, like the pictures that I have seen of treatment facilities during the 1918 Spanish Flu pandemic. (see photo -Amid 1918 Flu Pandemic, America Struggled to Bury the Dead-HISTORY )
The mind then jumps to the conclusion that Americans will go to die surrounded by strangers in a high school gym, without receiving adequate medical attention since the hospitals are full and the doctors no longer have the time to provide treatment. The image of cots filling a large room was the first image that popped into my mind, uncontrolled by any rational thought, when I read Merkel's statement. The rational mind has to control the lizard brain.
How the Trump administration squandered time and lost control of the coronavirus crisis - The Washington Post It is all Obama's fault in TrumpWorld. If it is not Obama's fault, then the default to position is blame Hillary, even if the blame is being assigned long after they are gone.
Trump Slams 'Nasty' Question As PBS Reporter Challenges Him On Shutdown Of Pandemic Unit
National Guard activated in six states to help fight coronavirus
Worst-Case Estimates for U.S. Coronavirus Deaths - The New York Times; How Much Worse the Coronavirus Could Get, in Charts - The New York Times; Congressional doctor expects 70 million-150 million U.S. coronavirus cases-Axios Pretty scary stuff.
The Institute for Disease Modeling has determined that COVID-19 is roughly equally transmissible as the 1918 Spanish Flu Pandemic that killed an estimated 675,000 Americans in 1918 but is slightly less clinically severe. 2019-nCoV: preliminary estimates of the confirmed-case-fatality-ratio and infection-fatality-ratio, and initial pandemic risk assessment Compared to 1918, there are 30 times more people over 85 and 10 times as many over 65. The COVID-19 death rates are far higher among the elderly and those with underling health issues or compromised immune systems.
Even if several hundred thousand die, it will still be for Donald all about how that impacts him personally.
Reading the infection and death rate predictions being made by experts suggests to me that more comprehensive closures for a few weeks now are necessary to be on the safe side. That would include churches, schools, or any mass meetings of any kind. Last Sunday, when driving down Franklin Road, the Church parking lots were full. Hopefully, people will be practice preventive care tomorrow rather than assembling in close proximity to each other.
++++
Erik Prince Recruits Ex-Spies to Help Infiltrate Liberal Groups - The New York Times
Donald routinely makes false statement about Obama. Some recent examples include the following: PolitiFact | Trump wrongly blames Obama for limits on coronavirus testing; PolitiFact | Donald Trump wrong saying Barack Obama did nothing about swine flu; Trump’s Misplaced Blame on Obama for Coronavirus Tests - FactCheck.org
FactChecking Trump's Scranton Town Hall-FactCheck.org Trump lies and the Trumpsters cheer. Lying all of the time about everything is one of the brand new Christian virtues. There Is No Christian Case for Trump-The Atlantic; Christians ‘have a moral obligation to enthusiastically back’ Trump in 2020, according to prominent evangelical - MarketWatch
Evangelicals view Trump as a born again Christian which is surprising to many: Trump Florida rally: My fellow evangelicals cheered his depraved words For a clear majority of U.S. evangelicals, opposing abortions, even when the opposition is politically motivated which is the case with Donald, is the sine qua non of being a Christian and the only one that matters.
Donald is not claiming that the COVID-19 is a hoax, which was suggested by some Democrats, since that would be beyond the pale even for the Duck.
Donald is claiming that the media's accurate coverage of the epidemic is a hoax concocted by the Democrats and the media to injure him personally. Just another example of Donald's victimization complex that arises when anyone contradicts his reality creations with facts.
The conspirators, according to Delusional Don, are media organizations that are contradicting his reality creations with facts and the Democrats who are doing something in collusion with the media. That sounds coherent and believable to Donald's cult members.
The World Health Organization joined the conspiracy against the Duck last Wednesday when it labeled COVID-19 a "pandemic". Coronavirus: COVID-19 Is Now Officially A Pandemic, WHO Says- NPR The WHO, the Democrats and the media are now in a full blown conspiracy to injure Donald and to Make America UnGreat Again. America can achieve greatness in Trumpworld only when Donald is our Dear Leader.
Fox: Coronavirus Is a Liberal “Scam” to Hurt Trump | Vanity Fair
Doctor Don believes he can second guess infectious disease experts because "he has a natural ability" to know the truth. ‘Maybe I have a natural ability’: Trump plays medical expert on coronavirus by second-guessing the professionals - The Washington Post
Everything Trump says he knows "more about than anybody" - Axios
How Trump fuels confusion about coronavirus (A Trumpster is quoted as claiming that no one has died from the coronavirus because she does not "believe anything the Democrats do".)
PolitiFact | Fact-checking Donald Trump’s mistakes about European travel due to coronavirus; FactChecking Trump's Coronavirus Address - FactCheck.org It is impossible for Donald to be straight and factual.
Trump’s False Claims About His Response to the Coronavirus - The New York Times
PolitiFact | Donald Trump’s wrong claim that ‘anybody’ can get tested for coronavirus The Duck routinely makes ridiculous and patently false claims. This one was rated "Pants on Fire". Yet, a majority of republicans view him to be honest and a role model for their children.
Coronavirus: US is failing on testing, says Fauci - BBC News
Sick People Across the U.S. Say They Are Being Denied the Coronavirus Test When patients claim that they are being denied tests, those claims are just Fake News in TrumpWorld intended to poor, poor, pitiful Donald. Linda Ronstadt - Poor Poor Pitiful Me - May 6, 1996 at the White House - YouTube
Problems mount with coronavirus testing, limiting access and sowing confusion - Los Angeles Times
Heidi Klum Says She's Sick With a Fever and Cough But Can't Get a Coronavirus Test
The U.S. testing initiative so far has more in common with an impoverished third world country than a major country with abundant resources and medical personnel.
Donald Trump's appalling, blame-shifting Rose Garden news conference (Noting a line from the Office TV series where the Boss made the following statement: "I do want the credit, without any of the blame." President Truman had a sign on his desk saying "The BUCK STOPS here". "The Buck Stops Here" Desk sign For Don the Con, the buck stops anywhere but him.
Angela Merkel: Most people will get the coronavirus That remark caused the Stock Jocks to have a panic attack last Wednesday. The mind conjures up images of U.S. high school gyms and empty industrial warehouses being filled wall-to-wall cots, like the pictures that I have seen of treatment facilities during the 1918 Spanish Flu pandemic. (see photo -Amid 1918 Flu Pandemic, America Struggled to Bury the Dead-HISTORY )
The mind then jumps to the conclusion that Americans will go to die surrounded by strangers in a high school gym, without receiving adequate medical attention since the hospitals are full and the doctors no longer have the time to provide treatment. The image of cots filling a large room was the first image that popped into my mind, uncontrolled by any rational thought, when I read Merkel's statement. The rational mind has to control the lizard brain.
How the Trump administration squandered time and lost control of the coronavirus crisis - The Washington Post It is all Obama's fault in TrumpWorld. If it is not Obama's fault, then the default to position is blame Hillary, even if the blame is being assigned long after they are gone.
Trump Slams 'Nasty' Question As PBS Reporter Challenges Him On Shutdown Of Pandemic Unit
National Guard activated in six states to help fight coronavirus
Worst-Case Estimates for U.S. Coronavirus Deaths - The New York Times; How Much Worse the Coronavirus Could Get, in Charts - The New York Times; Congressional doctor expects 70 million-150 million U.S. coronavirus cases-Axios Pretty scary stuff.
The Institute for Disease Modeling has determined that COVID-19 is roughly equally transmissible as the 1918 Spanish Flu Pandemic that killed an estimated 675,000 Americans in 1918 but is slightly less clinically severe. 2019-nCoV: preliminary estimates of the confirmed-case-fatality-ratio and infection-fatality-ratio, and initial pandemic risk assessment Compared to 1918, there are 30 times more people over 85 and 10 times as many over 65. The COVID-19 death rates are far higher among the elderly and those with underling health issues or compromised immune systems.
Even if several hundred thousand die, it will still be for Donald all about how that impacts him personally.
Reading the infection and death rate predictions being made by experts suggests to me that more comprehensive closures for a few weeks now are necessary to be on the safe side. That would include churches, schools, or any mass meetings of any kind. Last Sunday, when driving down Franklin Road, the Church parking lots were full. Hopefully, people will be practice preventive care tomorrow rather than assembling in close proximity to each other.
++++
Erik Prince Recruits Ex-Spies to Help Infiltrate Liberal Groups - The New York Times
Donald routinely makes false statement about Obama. Some recent examples include the following: PolitiFact | Trump wrongly blames Obama for limits on coronavirus testing; PolitiFact | Donald Trump wrong saying Barack Obama did nothing about swine flu; Trump’s Misplaced Blame on Obama for Coronavirus Tests - FactCheck.org
FactChecking Trump's Scranton Town Hall-FactCheck.org Trump lies and the Trumpsters cheer. Lying all of the time about everything is one of the brand new Christian virtues. There Is No Christian Case for Trump-The Atlantic; Christians ‘have a moral obligation to enthusiastically back’ Trump in 2020, according to prominent evangelical - MarketWatch
Evangelicals view Trump as a born again Christian which is surprising to many: Trump Florida rally: My fellow evangelicals cheered his depraved words For a clear majority of U.S. evangelicals, opposing abortions, even when the opposition is politically motivated which is the case with Donald, is the sine qua non of being a Christian and the only one that matters.
There can be no question that Trump's Attorney William Barr misled the public when summarizing the Mueller report. A federal judge, appointed by Bush, came to that conclusion in a recent opinion. Federal Judge Questions William Barr's 'Credibility' in Rollout of Mueller Report | National Law Journal; Court's Opinion Since Barr is intelligent enough to know that he misled the public, the only conclusion that is possible is that he deliberately did so in an effort to protect his client Donald Trump. The top echelon at the DOJ is now inhabited by Trumpsters.
E.P.A. Updates Plan to Limit Science Used in Environmental Rules - The New York Times In TrumpWorld, all of the science that one needs to know can be found in Kentucky's Creation Museum. Adam and Eve in the Land of the Dinosaurs | WIRED
The War on Science - CBS News
+++++
The black major of Kansas City, MO., a state dominated by the GOP at every level, was turned away last Tuesday when he went to the precinct where he always voted. The reason was that he had been purged from the rolls. Kansas City mayor is turned away from polls, told he 'wasn't in the system'
Discriminatory voter laws have surged, federal panel finds That increase is just another naked power play that undermines the proper functioning of a democracy. The GOP will undermine the institutions necessary for a properly functioning democracy to maintain power.
Deadly viruses are no match for plain, old soap- here’s the science behind it - MarketWatch; Why Soap Works - The New York Times ;How to fight the Covid-19 coronavirus with soap and water. And why it works so well. - Vox The shelves at Kroger were empty this morning of antibacterial soap which works less well in breaking down the COVID-19 molecular structure than plain soap. Apparently, the panic buying has spread to toilet paper.
The War on Science - CBS News
+++++
The black major of Kansas City, MO., a state dominated by the GOP at every level, was turned away last Tuesday when he went to the precinct where he always voted. The reason was that he had been purged from the rolls. Kansas City mayor is turned away from polls, told he 'wasn't in the system'
Discriminatory voter laws have surged, federal panel finds That increase is just another naked power play that undermines the proper functioning of a democracy. The GOP will undermine the institutions necessary for a properly functioning democracy to maintain power.
Deadly viruses are no match for plain, old soap- here’s the science behind it - MarketWatch; Why Soap Works - The New York Times ;How to fight the Covid-19 coronavirus with soap and water. And why it works so well. - Vox The shelves at Kroger were empty this morning of antibacterial soap which works less well in breaking down the COVID-19 molecular structure than plain soap. Apparently, the panic buying has spread to toilet paper.
+++++
All trades are commission free except as otherwise noted.
1. Sold 100 RNW:CA at C$17.92 (C$ IB Commission):
Quotes:
CAD Priced Shares: TransAlta Renewables (RNW:CA)
USD Priced Shares U.S. Grey Market | TRSWF
Closing Price 3/13: RNW.TO C$13.40 +C$1.29 +10.65%
Website: TransAlta Renewables
This trade was made during the initial stage of the volatility spike.
Profit Snapshot: +C$511
Item # 2 Bought 100 RNW:CA at C$12.79 (9/14/19 Post)
Previous Round-Trip-Toronto Traded Shares: Item # 3. B. Sold 150 RNW:CA at C$13.97 (profit snapshot = C$165.4)
I have also bought the USD priced shares that trade on the dark Grey Market. Item # 3. B. Sold 100 TRSWF at US$10.36 (5/5/19 Post)-Item # 2.B. Bought 100 TRSWF at US$9.55-Used Commission Schwab Free Trade (6/18/18 Post); Item #2.A. Bought 50 RNW:CA at C$12.45 (7/12/18 Post)
Dividend: Monthly at C$.07833 per share
Dividend Information | TransAlta Renewables
Last Ex Dividend Date: 3/12/20
Last Earnings Report: TransAlta Renewables Reports Fourth Quarter and Full Year 2019 Results, Declares Dividends and Provides Outlook for 2020 | TransAlta Renewables
Current Position: None
All trades are commission free except as otherwise noted.
1. Sold 100 RNW:CA at C$17.92 (C$ IB Commission):
CAD Priced Shares: TransAlta Renewables (RNW:CA)
USD Priced Shares U.S. Grey Market | TRSWF
Closing Price 3/13: RNW.TO C$13.40 +C$1.29 +10.65%
Website: TransAlta Renewables
This trade was made during the initial stage of the volatility spike.
Profit Snapshot: +C$511
Previous Round-Trip-Toronto Traded Shares: Item # 3. B. Sold 150 RNW:CA at C$13.97 (profit snapshot = C$165.4)
I have also bought the USD priced shares that trade on the dark Grey Market. Item # 3. B. Sold 100 TRSWF at US$10.36 (5/5/19 Post)-Item # 2.B. Bought 100 TRSWF at US$9.55-Used Commission Schwab Free Trade (6/18/18 Post); Item #2.A. Bought 50 RNW:CA at C$12.45 (7/12/18 Post)
Dividend: Monthly at C$.07833 per share
Dividend Information | TransAlta Renewables
Last Ex Dividend Date: 3/12/20
Last Earnings Report: TransAlta Renewables Reports Fourth Quarter and Full Year 2019 Results, Declares Dividends and Provides Outlook for 2020 | TransAlta Renewables
Current Position: None
2. Small Ball Trades:
The slide in regional bank stocks is awe inspiring and reminiscent of the rapid declines during the Near Depression period. I have been moving up to 100 share positions, making mostly 5 or 10 share trades.
The current prices assume IMO that a U.S. recession is now inevitable which will cause a surge in non-performing loans and charge-offs. Regional bank stocks that I have been buying have returned to 2010 price levels, where the banks would still experiencing the negative aftershocks of the 2008 Near Depression.
Small Ball Rules
A. Bought 10 EPRPRC at $16.55 and 2 EPR at $27:
Portfolio Overview - EPR Properties
EPR Properties Reports Fourth Quarter and 2019 Year-end Results
When I was going through my monitor list last Friday, I noted that prices for EPR's common and preferred shares and decided to nibble really light in an instantaneous reaction.
I was already familiar with this company, but was too busy last Friday to do any new research.
And it was not difficult to understand why the prices for EPR's common and preferred stocks had plummeted in recent weeks.
EPR owns entertainment properties. EPR Properties defers $1.0B gaming investment, withdraws guidance-Seeking Alpha (3/12/20); EPR Properties Announces Deferral of Uncommitted Investment Spending (“With approximately $500.0 million in unrestricted cash, 100% availability under our $1.0 billion line of credit, low leverage and no near-term debt maturities, we believe the strength of our balance sheet will allow us to weather this period.”)
That sector is well within the investor panic sphere for rational reasons.
The question, as always, is whether the panic selling has gone too far based on what may actually happen. This sector will remain under selling pressure when and if the pandemic infection rates actually accelerate substantially. Some projections have the peak infection rate occurring in July.
Common Stock: EPR Properties (U.S.: NYSE)
Preferred Stock: EPR Properties 5.75% Cumulative Convertible Preferred Series C Overview
Chart EPRPRC:
Chart EPR:
As I said, I am currently at 2 shares of the common bought last Friday at $27.
EPR's preferred and common shares rallied strongly in to the close with the rest of the stock market. The company is not out of the woods.
Closing Prices Last Friday:
EPR $33.15 +$4.86 +17.18% I will not be buying a new home based on the appreciation in my 2 share buy.
EPR-PC +17.21 +1.34 +8.44% However, based on after hours trading last Friday, the price fell -4.56% to $16.97.
I would note the EPR can cut the common share dividend. EPR can not cut the preferred share dividend but can only defer payment after eliminating any cash dividend for the common shareholders.
I have traded EPRPRC in the past far more than the common shares. I will just drag and drop a discussion here from a prior post. It is currently a busted convertible preferred stock.
EPRPRC Trading Profits To Date: +$563.28
Prior Discussion Links: Item # 3 Sold 50 EPRPRC at $27.49 (10/21/18 Post)(profit snapshot = $178.58)-Item # 1 Bought 50 EPRPRC at $23.78-Used Commission Free Trade (4/23/18 Post)
Item # 1.B. Sold 50 EPRPRC at $28.48 (9/12/18 Post)(profit snapshot = $224.22)-Item # 1 Bought 50 EPRPRC at $24 and 50 at $23.78 (4/23/18)
Item # 3 Sold 50 EPRPRC-Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha (profit snapshot = $160.48)
Dividends: Quarterly and Cumulative
Prospectus
Coupon: 5.75% paid on the $25 par value
Dividend Yield at $16.55 = 8.69%
Next Ex Dividend Date: 3/30/20 according to Marketwatch EPR.PRC
The issuer has a right to call but the call price is so far above the current price that the optional call provision is not relevant now. "We may exercise the Company Conversion Option only if the Closing Sale Price of our common shares equals or exceeds 135% of then applicable conversion price of the Series C Preferred Shares for at least 20 Trading Days in a period of 30 consecutive Trading Days (including the last Trading Day of such period) ending on the Trading Day immediately" (the conversion price was at $61.74 as of 12/31/19 so the optional call price would have to be 130% of that number)
Conversion To Common: "The conversion rate will initially be 0.3504 common shares per $25.00 liquidation preference, which is equivalent to an initial conversion price of $71.34 per common share" The conversion rate is subject to adjustments as explained in the prospectus starting at page S-25, which are incomprehensible to me now.
Here is how the explanation starts:
It then goes on an on.
Perhaps I understood the conversion terms better when I was more compos mentis than now. In an earlier post, I claimed that the conversion rate is adjusted down by the amount the common share dividend exceeds a threshold amount.
The company calculates the conversion rate every quarter in this filing As of 12/31/19, the conversion price was at $61.74. So, if the common was selling at $80 now, EPRPRC would be near its all time high rather than all time low based just on it fixed rate coupon and the perceived credit risk.
When I sold the stock earlier, the conversion provision was causing the stock to sell significantly above its par value.
The conversion right to common shares is arguably having some minor impact on EPRPRC's price since it currently has a slight highly price than the regular fixed coupon preferred Series G which has having a 5.75% coupon. EPR.PRG closed last Friday at $16.07. So there is arguably some fleeting hope that the EPRPRC conversion right may someday cause a spike back above par value.
The common stock pays dividends monthly at $.375 per share or $4.5 annually. At a TC of $27 per share, the dividend yield is about 16.67%.
B. Added 5 FHN at $14.77; 10 at $13.7;5 at $12.73; 5 at $11.46; 5 at $10.8; 5 at 10.3 and 5 at $9.12:
Quote: First Horizon National Corp. (FHN)
Closing Price Last Friday: FHN $9.94 $1.09 12.32%
First Horizon National Corp. Analyst Estimates | MarketWatch
Investment Category: Regional Bank Basket Strategy
Last Purchase Discussion: Item # 1 Bought 50 FHN at $16.18 (1/18/20 Post) I discussed the last earnings report in this post and have nothing to add here.
Last Elimination: Item # 5.B. Sold 21+ FHN at $16.4 (9/28/19 Post)
Dividend: Quarterly at $.14 per share ($.56 annually)
First Horizon National Corporation Common Stock (FHN) Dividend History | Nasdaq
Dividend Yield at Average Cost of $14.06 = 3.98%
Last Ex Dividend Date: 3/12/20
Dividend Reinvestment: Yes.
Current Position: 110 shares
Maximum Position: Revised up to 150 shares provided each subsequent purchase is made pursuant to the small ball purchase restriction (next purchase has to be lower than $9.12)
Purchase Restriction: Small Ball Rule
10 Year Chart:
Last Earnings Report: First Horizon Releases 2019 Fourth Quarter and Full Year Financial Results discussed in Item # 1.
C. Added 5 PBCT at $14.52; 5 at $13.94 and 5 at $12.65:
Quote: People's United Financial Inc (PBCT)
Closing Price Last Friday: PBCT $12.86 +$1.65 +14.72%
PBCT Consensus Analyst E.P.S. Estimates
Investment Category: Regional Bank Basket Strategy
Last Buy Substantive Buy Discussion: Item # 1.D. Bought 10 PBCT at $16.03 (1/29/20 Post) I discussed the last earnings report in that post and nothing to add here.
Last Buy Discussion: Item # 1.E. Bought 10 PBCT at $15.82 and 10 at $15.48 (2/5/20 Post)
Last Eliminations: Item # 3.A. Eliminated PBCT-Sold 101+ at $17.57(5/22/19 Post)
Item # 4 Sold 100 PBCT at $14.61 (9/21/13 Post)- Item # 1 Bought 100 PBCT at $11.47 (6/14/12 Post)
Dividend: Quarterly at $.1775 per share ($.71 annually)
Dividend History | People's United Bank
Average Cost Current Chain: $15.09
Dividend Yield at Average Cost = 4.71%%
Dividend Reinvestment: Yes
Last Ex Dividend Date: 1/30/20
Current Position: 45+ Shares
Maximum Position: 100 Shares + shares purchased with dividends
In the past, I bought 100 shares in one trade. I am now moving slowing to a 100 share position with 5 share purchases. That change is based on a revised risk assessment. The closing price last Friday reflects a consensus opinion that a recession is imminent.
5 Year Chart as of 3/13/20:
Purchase Restriction: Small Ball Rules (each new purchase has to be at the lowest price in the current chain, a risk mitigation strategy)
Last Earnings Report: People's United Financial Reports Fourth Quarter Net Income of $137.5 Million, or $0.31 per Common Share, discussed in Item # 1.D.
The slide in regional bank stocks is awe inspiring and reminiscent of the rapid declines during the Near Depression period. I have been moving up to 100 share positions, making mostly 5 or 10 share trades.
The current prices assume IMO that a U.S. recession is now inevitable which will cause a surge in non-performing loans and charge-offs. Regional bank stocks that I have been buying have returned to 2010 price levels, where the banks would still experiencing the negative aftershocks of the 2008 Near Depression.
Small Ball Rules
A. Bought 10 EPRPRC at $16.55 and 2 EPR at $27:
 |
| EPRPRC |
 |
| EPR |
EPR Properties Reports Fourth Quarter and 2019 Year-end Results
When I was going through my monitor list last Friday, I noted that prices for EPR's common and preferred shares and decided to nibble really light in an instantaneous reaction.
I was already familiar with this company, but was too busy last Friday to do any new research.
And it was not difficult to understand why the prices for EPR's common and preferred stocks had plummeted in recent weeks.
EPR owns entertainment properties. EPR Properties defers $1.0B gaming investment, withdraws guidance-Seeking Alpha (3/12/20); EPR Properties Announces Deferral of Uncommitted Investment Spending (“With approximately $500.0 million in unrestricted cash, 100% availability under our $1.0 billion line of credit, low leverage and no near-term debt maturities, we believe the strength of our balance sheet will allow us to weather this period.”)
That sector is well within the investor panic sphere for rational reasons.
The question, as always, is whether the panic selling has gone too far based on what may actually happen. This sector will remain under selling pressure when and if the pandemic infection rates actually accelerate substantially. Some projections have the peak infection rate occurring in July.
Common Stock: EPR Properties (U.S.: NYSE)
Preferred Stock: EPR Properties 5.75% Cumulative Convertible Preferred Series C Overview
Chart EPRPRC:
EPR's preferred and common shares rallied strongly in to the close with the rest of the stock market. The company is not out of the woods.
Closing Prices Last Friday:
EPR $33.15 +$4.86 +17.18% I will not be buying a new home based on the appreciation in my 2 share buy.
EPR-PC +17.21 +1.34 +8.44% However, based on after hours trading last Friday, the price fell -4.56% to $16.97.
I would note the EPR can cut the common share dividend. EPR can not cut the preferred share dividend but can only defer payment after eliminating any cash dividend for the common shareholders.
I have traded EPRPRC in the past far more than the common shares. I will just drag and drop a discussion here from a prior post. It is currently a busted convertible preferred stock.
EPRPRC Trading Profits To Date: +$563.28
Prior Discussion Links: Item # 3 Sold 50 EPRPRC at $27.49 (10/21/18 Post)(profit snapshot = $178.58)-Item # 1 Bought 50 EPRPRC at $23.78-Used Commission Free Trade (4/23/18 Post)
Item # 1.B. Sold 50 EPRPRC at $28.48 (9/12/18 Post)(profit snapshot = $224.22)-Item # 1 Bought 50 EPRPRC at $24 and 50 at $23.78 (4/23/18)
Item # 3 Sold 50 EPRPRC-Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha (profit snapshot = $160.48)
Dividends: Quarterly and Cumulative
Prospectus
Coupon: 5.75% paid on the $25 par value
Dividend Yield at $16.55 = 8.69%
Next Ex Dividend Date: 3/30/20 according to Marketwatch EPR.PRC
The issuer has a right to call but the call price is so far above the current price that the optional call provision is not relevant now. "We may exercise the Company Conversion Option only if the Closing Sale Price of our common shares equals or exceeds 135% of then applicable conversion price of the Series C Preferred Shares for at least 20 Trading Days in a period of 30 consecutive Trading Days (including the last Trading Day of such period) ending on the Trading Day immediately" (the conversion price was at $61.74 as of 12/31/19 so the optional call price would have to be 130% of that number)
Conversion To Common: "The conversion rate will initially be 0.3504 common shares per $25.00 liquidation preference, which is equivalent to an initial conversion price of $71.34 per common share" The conversion rate is subject to adjustments as explained in the prospectus starting at page S-25, which are incomprehensible to me now.
Here is how the explanation starts:
Perhaps I understood the conversion terms better when I was more compos mentis than now. In an earlier post, I claimed that the conversion rate is adjusted down by the amount the common share dividend exceeds a threshold amount.
The company calculates the conversion rate every quarter in this filing As of 12/31/19, the conversion price was at $61.74. So, if the common was selling at $80 now, EPRPRC would be near its all time high rather than all time low based just on it fixed rate coupon and the perceived credit risk.
When I sold the stock earlier, the conversion provision was causing the stock to sell significantly above its par value.
The conversion right to common shares is arguably having some minor impact on EPRPRC's price since it currently has a slight highly price than the regular fixed coupon preferred Series G which has having a 5.75% coupon. EPR.PRG closed last Friday at $16.07. So there is arguably some fleeting hope that the EPRPRC conversion right may someday cause a spike back above par value.
The common stock pays dividends monthly at $.375 per share or $4.5 annually. At a TC of $27 per share, the dividend yield is about 16.67%.
Quote: First Horizon National Corp. (FHN)
Closing Price Last Friday: FHN $9.94 $1.09 12.32%
First Horizon National Corp. Analyst Estimates | MarketWatch
Investment Category: Regional Bank Basket Strategy
Last Purchase Discussion: Item # 1 Bought 50 FHN at $16.18 (1/18/20 Post) I discussed the last earnings report in this post and have nothing to add here.
Last Elimination: Item # 5.B. Sold 21+ FHN at $16.4 (9/28/19 Post)
Dividend: Quarterly at $.14 per share ($.56 annually)
First Horizon National Corporation Common Stock (FHN) Dividend History | Nasdaq
Dividend Yield at Average Cost of $14.06 = 3.98%
Last Ex Dividend Date: 3/12/20
Dividend Reinvestment: Yes.
Current Position: 110 shares
Maximum Position: Revised up to 150 shares provided each subsequent purchase is made pursuant to the small ball purchase restriction (next purchase has to be lower than $9.12)
Purchase Restriction: Small Ball Rule
10 Year Chart:
C. Added 5 PBCT at $14.52; 5 at $13.94 and 5 at $12.65:
Closing Price Last Friday: PBCT $12.86 +$1.65 +14.72%
PBCT Consensus Analyst E.P.S. Estimates
Investment Category: Regional Bank Basket Strategy
Last Buy Substantive Buy Discussion: Item # 1.D. Bought 10 PBCT at $16.03 (1/29/20 Post) I discussed the last earnings report in that post and nothing to add here.
Last Buy Discussion: Item # 1.E. Bought 10 PBCT at $15.82 and 10 at $15.48 (2/5/20 Post)
Last Eliminations: Item # 3.A. Eliminated PBCT-Sold 101+ at $17.57(5/22/19 Post)
Item # 4 Sold 100 PBCT at $14.61 (9/21/13 Post)- Item # 1 Bought 100 PBCT at $11.47 (6/14/12 Post)
Dividend History | People's United Bank
Average Cost Current Chain: $15.09
Dividend Yield at Average Cost = 4.71%%
Dividend Reinvestment: Yes
Last Ex Dividend Date: 1/30/20
Maximum Position: 100 Shares + shares purchased with dividends
In the past, I bought 100 shares in one trade. I am now moving slowing to a 100 share position with 5 share purchases. That change is based on a revised risk assessment. The closing price last Friday reflects a consensus opinion that a recession is imminent.
5 Year Chart as of 3/13/20:
Last Earnings Report: People's United Financial Reports Fourth Quarter Net Income of $137.5 Million, or $0.31 per Common Share, discussed in Item # 1.D.
D. Added 1 OXY at $36.35; 1 at $32.13; 1 at $31.29; 1 at $29.7; 1 at $28.11; 1 at $27.52; 1 at $26.65 and 1 at $13.78:
I would describe the rapid decline in OXY's price to reflect both credit risk and dividend cut fears, both of which were rational and flowed from anticipated low energy prices lasting for an extended period.
On the day that I bought 1 share at $13.78, OXY did in fact slash its quarterly dividend from $.79 per share to $.11 effective July 2020. OXY also "reduced its "2020 capital spending to between $3.5 billion and $3.7 billion from $5.2 billion to $5.4 billion and will implement additional operating and corporate cost reductions." Occidental Reduces Dividend and Capital Spending
Given the plunge in energy prices and the increased debt load resulting from the Anadarko acquisition, those changes were necessary IMO since OXY's survival as a going concern is a legitimate open question now.
Quote: Occidental Petroleum Corp.
OXY Analyst Estimates
2019 Annual Report (long term debt listed starting at page 83)
SEC Filings
OXY 5 Year Chart-Ongoing Major Bear Market
Current Position: 12+ shares
Maximum Position: 20 shares, lowered from 50 due to a revised risk assessment based on recent developments.
Purchase Restriction: Small Ball Rule (with each purchase limited to 1 or 2 share buys)
Average Cost Per Share: $31.93
Fortunately, I was being extremely cautious with OXY and my position is immaterial.
Credit Ratings as of 3/5/20:
The acquisition of Anadarko at a premium price was ridiculous when made and has only become more so with the passage of time.
Last Sell Discussion: Item # 3.A. Sold 10 OXY at $45.33 and 10 at $46.5 (1/18/20 Post)
5 Year Chart-Major as of 3/13/20- Major Bear Market:
Dividend: Quarterly at $.11 ($.44 annually). This dividend will provide no meaningful support to the price.
I will receive a $.79 per share dividend that went ex on 3/9/20.
It is my understanding that this will be the last payment at that rate.
That dividend will be paid 4/15/20.
While the next dividend normally goes ex in June, it is normally paid in July.
For now I am interpreting OXY's July 2020 effective date for the reduced dividend to mean the payment date rather than the ex dividend date.
I may be wrong in that assumption, but it does not matter to me one way or the other given my 12 share position.
Dividend Yield using $.44 and $31.93 cost = 1.38%
Last Earnings Report (Q/E 12/31/19): Bad and will get worse
SEC Filed Press Release
Adjusted net loss of $239M or $.3 per share vs. an adjusted profit of $922M or $1.22 in the 2018 4th quarter.
Brokerage Reports: Brokers have turned negative.
Credit Suisse (3/10): Neutral with a $37 price target (the neutral rate makes little sense based on the current price and the the $37 PT)
S & P: 2 stars with a $13 PT
Morningstar (3/9/20): under review which may change the star rating
Argus (3/5/20): Hold
E. Added 5 SKT at $11.72; 5 at $11; and 5 at $10.67:
This one is another crash and burn.
Quote: Tanger Factory Outlet Centers Inc.
Closing Price 3/13/20: SKT $8.95 +0.27 +3.11%
I hit my maximum limit of 100 shares with the 5 share purchase at $10.67. I decided to increase my limit to accommodate 1 and 2 share purchases using the small ball purchase restriction. So far I have bought 1 share at $8.36, 1 share at $8.51, and 1 share at $9.26.
SEC Filings
2019 Annual Report
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Last Purchase Discussion: Item # 1.E. Added 10 SKT at (2/22/20 Post)
Last Substantive Buy Discussion: Item # 1.D. Bought 10 SKT at $14.08 (1/11/20 Post)
Last Sell Discussions: Item # 1.C. Sold 10 SKT at $16.73 (1/29/20 Post); Item # 1.A. Sold 50 SKT at $16.85 (9/28/19 Post)
5 Year Chart: Major Bear Market-Widow Maker
Dividend: Quarterly at $.3575 per share ($1.43 annually)
Next Ex Dividend Date: 4/29/20
Current Position: 105+ shares
Average Cost Per Share This Account = $13.03
Dividend Yield at Average Cost = 10.97%
Dividend Reinvestment: Yes for this account and no for the 50 shares owned in my IB account.
Last Earnings Report (Q/E 12/31/19):
"Consolidated portfolio occupancy rate was 97.0% on December 31, 2019, compared to 95.9% on September 30, 2019 and 96.8% on December 31, 2018
4th Quarter FAD Payout Ratio = 66%
Full Year FAD Payout Ratio = 70%
Interest Coverage Ratio for 2019 = 4.3 times
Weighted Average Interest Rate: 3.5%
Approximately 94% of consolidated square footage unencumbered by mortgages
SEC Filed Press Release
Maximum Position This Account: 100 shares + shares purchased with dividends, amended to allow for 1 or 2 share purchases using the small ball purchase restriction.
Current Position This Account: 104+ shares
Purchase Restriction: Small Ball Rule
F. Restarted JRI-Bought 10 at $16.05; 10 at $15.62; 10 at $15.1; 10 at $14.5; 10 at $14.2; 10 at $11.9; 10 at $11.37; and 10 at $11:
Quote: JRI | Nuveen Real Asset Income & Growth Fund Overview-Leveraged CEF
Closing Price 3/13: JRI $11.97 d+$ 0.24 +2.05%
Sponsor's Website: JRI
SEC Filings
Current Position: 80 Shares
Average Cost Per Share = $13.7
This CEF's holdings include global equity REIT common stocks, U.S. equity REIT preferred stocks, energy infrastructure stocks, utility common stocks, and bonds issued by companies in those sectors.
REIT common and preferred stocks were trashed last week. The Vanguard Real Estate ETF (VNQ), which owns only common shares, closed at $91.55 on 3/3 and at $73.1 on 3/12, unadjusted for a quarterly dividend payment that wen ex during that period. Last Friday, VNQ closed at $79.48, up $6.38 but still well below its close 3/3 closing price.
Nuveen Real Asset Income & Growth Fund (last SEC filed shareholder report for the semi-annual period ending 6/30/19)
Holdings: 431 as of 1/31/20
Leveraged: Yes at near 29%
Dividends: Monthly at $.1170 (partial ROC support)
Dividend Yield at $13.7 = 10.25%
Last Sell Discussions: Item # 2.A. Sold 102+ JRI at $17.98 (12/22/19 Post)(profit snapshot = $140.67); Item # 4 Sold 100 JRI at $17.23 (10/2/19 Post)(profit snapshot $40.45)
Last Buy Discussions: Item # 5 Added 100 JRI at $16.83-Used Commission Free Trade (8/24/19 Post); Item # 4 Bought 100 JRI at $16.47 (IB Account) and 100 at $16.59-Used Fidelity Commission Free Trade Fidelity (6/26/19 Post)
Note that my prior buys were 100 share lots. I am now slowly building up to 100 shares with 10 lot buys. That kind of change results from a judgment that downside risks are higher now than when I bought the 100 share lots last year.
Note the Double Whammy in the following data series: As net asset value per share declines, the trend is for the discount to net asset value to expand with the carry over into Friday when net asset value per share went up and the discount hit its highest level.
Data Date 2/28/20 Trade:
Closing Net Asset Value Per Share = $18.4
Closing Market Price: $16.24
Discount: -11.74%
Data Date of 3/9/20 Trade:
Closing Net Asset Value Per Share = $16.67
Closing Market Price: $15.5
Discount: -8.22%
Data Date of 3/10/Trade:
Closing Net Asset Value Per Share = $16.8
Closing Market Price: $13.81
Discount: -10.89%
Data Date of 3/11/20 Trade:
Closing Net Asset Value Per Share: $15.89
Closing Market Price: $13.93
Discount: - 12.33%
Data Date of 3/12/20 Trade:
Closing Net Asset Value Per Share = $13.42
Closing Market Price: $11.73
Discount: - 12.59%
Data Date of 3/13/20 Trade:
Closing Net Asset Value Per Share = $14.14
Closing Market Price: $11.97
Discount: -15.35%
Average 1 Year Discount as of 3/23: -10.41%
Sourced: JRI: CEF Connect
Purchase Restriction: I will not be using the small ball purchase restriction. Instead, I am allowed to buy only when the purchase reduces my average cost per share.
Maximum Position: 200 shares
G. Added 10 HT at $11.6; 5 at $9.21;5 at $7.58 and 5 at $5.18:
Closing Price Last Friday: HT $5.32 -$0.02 -0.37%: Hersha Hospitality Trust
SEC Filings
2019 Annual Report (debt discussed starting at page 83; line of credit discussion discussion can be found at page 44)
That price reflects a near 100 probability that HT will slash or eliminated its common share dividend which is currently at $.28 per share. At $5.32, the dividend yield would be about 21.05%. That yield reflects the consensus opinion about its sustainability. At 21.05%, money will double in about 3.63 years. The Rule of 72 (with calculator) - Estimate Compound Interest
Hersha has declared its regular quarterly dividend of $.28 per share which goes ex dividend on 3/30/20. Hersha Hospitality Trust Announces Quarterly Dividends That announcement includes the dividend payable on HT's preferred stocks.
Hersha recently sold some hotels, pursuant to "binding sales contracts", that will raise approximately $140M and HT will reduce its debt by about $97M. Hersha Hospitality Trust Announces the Disposition of Mature Hotels The transactions are expected to close before the end of the second quarter.
Hotel REITs have been smashed in response to coronavirus epidemic. The first quarter results will be a disaster for this sector. The question is whether a recovery in bookings will occur during the Spring or early summer.
HT 2019 Dividend Classification:
Last Earnings Report (Q/E 12/31/2019):
Hersha Hospitality Trust Announces Full Year and Fourth Quarter 2019 Results or SEC Filed Press Release
In this release, HT notes that the pending hotel sales will result in a net gain of approximately $31M.
As of 12/31/19, HT stated it had "significant financial flexibility with approximately $27.0 million of cash and cash equivalents and ample capacity on the Company’s $250 million senior unsecured revolving line of credit." Of course, it is currently paying cash dividends to common and preferred shareholders.
HT's 2020 guidance does not take into account the negative economic impacts from the COVID-19 pandemic.
I would reasonably anticipate a negative FFO number for the first quarter. I would not hazard a guess about how large the cash flow deficit will be.
Hersha Hospitality Trust (HT) CEO Jay Shah on Q4 2019 Results - Earnings Call Transcript | Seeking Alpha
Current Position This Account: 86+ shares
Average Cost Per Share this Account: $12.56
Dividend Yield at $12.56: 8.92% (assumes no change in the current penny rate which is not an assumption the Stock Jocks are making)
Dividend Reinvestment: Yes, hoping for a rebound that will enable the disposition of shares bought with dividends at a profit.
Highest Cost Lot in current chain: 50 shares with a taxable cost basis of $14.06 on 11/20. There was no ROC adjustment to the tax cost basis since no dividend were paid on that lot last year. This lot will be sold when and if it becomes profitable to do so. This is not going to happen anytime soon.
Maximum Position this Account: 100 shares + share purchased with dividends (15 shares remaining)
Purchase Restriction: Small Ball Rule
Last Sell Discussions: Item # 2.B. Sold 50 HT at $19.02-In a Roth IRA Account (4/23/18 Post); Item # 2.C. Sold 10 HT at $19.11-Used Commission Free Trade (4/23/18 Post); Item # 2.B. Sold 50 HT at $18.58-Used Commission Free Trade (2/8/18 Post)
H. Restarted SCM-Bought 10 at $11.94; 10 at 10.85; 10 at $10.4 and 10 at $8.59:
Quote: Stellus Capital Investment Corp. (SCM)
All BDCs were in free fall last week until last Friday. And the explanation is not hard to understand. Their loans are made entirely or almost so to highly leveraged private companies that would be rated well in junk territory if a rating service was ever paid to rate one. Default rates will soar during a recession.
The other well understood issue is that Libor rates are coming down and floating rate BDC loans are tied to a spread over the Libor rate.
Consequently, net investment income will be trending down, though partially offset for many BDCs by declines in their interest costs.
The Libor floors will stop the decline in the floating rate loan coupon rates when they exceed the applicable Libor rate being used. The current Libor floors are generally around 1%, with some higher, so the spread to Libor can not go below the floor number for the loan even if Libor went to zero. Loan investors ask for higher minimum returns as Libor falls - Reuters (August 2019 article); A Guide to Understanding Floating Rate Securities - Fixed Income Strategies | Raymond James
The BDC prices last week reflected a consensus opinion that a recession was 100% probable and would be relatively deep.
The same forecast was embedded in regional bank stocks IMO.
I would just note here that a recession may certainly happen in the U.S. this year, but it is too early to know whether one will actually happen, nor is it possible to know know whether any recession will be short and relatively shallow due to the coronavirus pandemic or something similar to what happened in major recessions from the past. The BDC prices reflected a certain prediction on those issues that can not be certain now.
Closing Price 3/13: SCM $9.48 +$0.78 +8.97%
52 Week Range: $8.49 to $15.04
The new 52 week low was set intraday on 3/12/20.
At $9.48, the market cap is only around $180M. These mini cap BDCs can be jerked around pretty good when market volatility spikes.
Website: Stellus Capital
SEC Filings
2019 Annual Report (risk factor summary starts at page 31 and ends at page 59)
Current Position: 40 Shares
Average Cost Per Share = $10.44
5 Year Financial History (p. 62 Annual Report):
Last Elimination: Item # 3 Eliminated SCM - Sold 50 at $13.72 (9/21/19 Post)(noting again that I was displeased with the 2019 second quarter report, so selling at $13.72 and not buying back until the price fell below $12 was the right move)
Management: External
Net Asset Value Per Share History:
12/31/19: $14.14
12/31/18: $14.09
12/31/17: $13.81
12/31/16 $13.69
12/31/15: $13.19
12/31/14: $13.94
12/31/13: $14.54
November 2012: IPO at $15 ($14.46 after underwriters discount)
For an externally managed BDC, those numbers are good since net assets are not being destroyed yearly in a perpetual movement toward zero.
Dividend: Monthly at $.1133 ($1.36 annually rounded)
Stellus Capital Investment Corporation Declares First Quarter 2020 Regular Dividend of $0.34 Per Share
Next Ex Dividend Date: 3/30/20
Dividend Yield at $10.44: 13.03%
Last Earnings Report before purchase: Stellus Capital Investment Corporation Reports Results for its third fiscal quarter ended September 30, 2019
Last Earnings Report-Released after purchase (Q/E 12/31/19): Stellus Capital Investment Corporation Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2019
CEO Robert Ladd on Q4 2019 Results - Earnings Call Transcript | Seeking Alpha
2 loans were on non-accrual as of 12/31/19 comprising just under 1% of the loan portfolio's marked fair value.
The BDC has floating rate loans with Libor floors which average about 1% (p.2). The decline in Libor rates will negatively impact net investment income going forward. The company realized a $1.3M gain in the first quarter and expects to an additional $4M of realized gains this year.
Other Trade Discussions:
Item # 1.B. Sold 32+ SCM at $14.22-Used Commission Free Trade (2/2/19 Post)(profit snapshot = $78.09); Item # 1.A. Sold Highest Cost Lot-50 Shares at $12.63 (5/3/18 Post)(profit snapshot = $34.24); Item 2.B. Sold 100 SCM at $14.23 (2/27/17 Post)(profit snapshot=$285.96); Item # 2 Sold 100 SCM at $13.02 (1/12/17 Post)(profit snapshot= $141.96)
Goal: Total Return in excess of the dividend payments which has been accomplished so far for this BDC stock
SCM Trading Profits to Date = $543.99
I. Restarted PFXF-Bought 10 at $19.38; 10 at $19.3; 10 at $18.8; 10 at $18.4 and 10 at $16.5:
Quote: VanEck Vectors Preferred Securities ex Financials ETF
Closing Price Last Friday: PFXF $17.10 +$0.70 +4.27%
Last week was a bad one for preferred stocks and exchange traded bonds. This ETF owns both categories of fixed coupon securities.
Last Elimination: Item # 1.B. Eliminated PFXF-Sold 110 at $20.51 (1/29/20 Post)
Buy Discussions: Item # 2.C. Added 10 PFXF at $19.8 (12/7/19 Post); Item # 1: Bought 100 PFXF at $20.06 (12/4/19 Post) I have nothing substantively to add to those recent discussions.
Sponsor's Website: VanEck Vectors Preferred Securities ex Financials ETF
Expense Ratio: .41% after a current .05% waiver
Number of Holdings: 141
Credit Quality:
Current Position: 50 shares
Average Cost Per Share: $18.48
Dividends: Monthly
Dividend Reinvestment: Turn on for now given the price slide
I prefer to own individual equity preferred stocks and exchange traded bonds. I will trade the "preferred" ETFs which own both categories of securities. I am more likely to gravitate toward the ETFs when interest rates are declining and the prices for the ETFs are nonetheless in free fall which was the case when I bought the PFXF lots.
I have bought and sold the following "preferred" stock ETFs: PFXF, PFF, PGX and VRP. I currently own only PFXF.
J. Added 5 SRET at $13.75; 5 at $12.81; 5 at $12.4; 5 at $11.9; 5 at 10.3; 5 at $9.95 and 5 at $9.73:
Closing Price 3/13/20: SRET $10.25 +$0.51 +5.24%
Quote: SRET | Global X SuperDividend REIT ETF Overview
Last Sell Discussion: Item # 1.A. Sold 10 SRET at $15.56 (2/19/20 Post)(eliminated all shares bought with dividends at a profit)
Prior Sell Discussions: Item # 1.D. Eliminated SRET in Vanguard Taxable Account: Sold 112 at $15.28 (10/30/19 Post); Item # 1. B. Sold 50 SRET at $14.79-In A Roth IRA Account-Commission Free for Vanguard customers (4/3/19 Post)
Prior Buy Discussions: Item # 2. Bought 100 SRET at $14.81 and 10 at $14.35 (8/7/19 Post); Item # 3.C. Bought 50 SRET at $13.88-In a Roth IRA Account-Commission Free (1/27/19 Post)
Sponsor's Website: SuperDividend® REIT ETF
Dividends: Monthly
Dividend Reinvestment: Yes
Goal: Total return in excess of the dividend which is not likely to happen anytime soon with my current position.
Current Position: 93+ shares
Average Cost Per Share: $ 13.53
Dividend Yield at $13.75 = 8.87 % (using current monthly penny rate which may change)
Current Morningstar Rating: 3 stars
Purchase Restriction: None (will not buy much given the exposure to MREITs which had a bad week)
Maximum Position: Undecided given the recent share price decline
I will receive a $.79 per share dividend that went ex on 3/9/20.
It is my understanding that this will be the last payment at that rate.
That dividend will be paid 4/15/20.
While the next dividend normally goes ex in June, it is normally paid in July.
For now I am interpreting OXY's July 2020 effective date for the reduced dividend to mean the payment date rather than the ex dividend date.
I may be wrong in that assumption, but it does not matter to me one way or the other given my 12 share position.
Dividend Yield using $.44 and $31.93 cost = 1.38%
Last Earnings Report (Q/E 12/31/19): Bad and will get worse
SEC Filed Press Release
Adjusted net loss of $239M or $.3 per share vs. an adjusted profit of $922M or $1.22 in the 2018 4th quarter.
Brokerage Reports: Brokers have turned negative.
Credit Suisse (3/10): Neutral with a $37 price target (the neutral rate makes little sense based on the current price and the the $37 PT)
S & P: 2 stars with a $13 PT
Morningstar (3/9/20): under review which may change the star rating
Argus (3/5/20): Hold
E. Added 5 SKT at $11.72; 5 at $11; and 5 at $10.67:
This one is another crash and burn.
Quote: Tanger Factory Outlet Centers Inc.
Closing Price 3/13/20: SKT $8.95 +0.27 +3.11%
I hit my maximum limit of 100 shares with the 5 share purchase at $10.67. I decided to increase my limit to accommodate 1 and 2 share purchases using the small ball purchase restriction. So far I have bought 1 share at $8.36, 1 share at $8.51, and 1 share at $9.26.
SEC Filings
2019 Annual Report
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Last Purchase Discussion: Item # 1.E. Added 10 SKT at (2/22/20 Post)
Last Substantive Buy Discussion: Item # 1.D. Bought 10 SKT at $14.08 (1/11/20 Post)
Last Sell Discussions: Item # 1.C. Sold 10 SKT at $16.73 (1/29/20 Post); Item # 1.A. Sold 50 SKT at $16.85 (9/28/19 Post)
5 Year Chart: Major Bear Market-Widow Maker
Dividend: Quarterly at $.3575 per share ($1.43 annually)
Next Ex Dividend Date: 4/29/20
Current Position: 105+ shares
Average Cost Per Share This Account = $13.03
Dividend Yield at Average Cost = 10.97%
Dividend Reinvestment: Yes for this account and no for the 50 shares owned in my IB account.
Last Earnings Report (Q/E 12/31/19):
"Consolidated portfolio occupancy rate was 97.0% on December 31, 2019, compared to 95.9% on September 30, 2019 and 96.8% on December 31, 2018
Blended average rental rates increased 2.7% on a straight-line basis and decreased 1.3% on a cash basis for all renewals and re-tenanted leases that commenced during the trailing twelve months ended December 31, 2019
Same center net operating income (“Same Center NOI”) for the consolidated portfolio decreased 0.4% for the quarter and 0.7% for the full year due primarily to the impact of tenant bankruptcies, lease modifications and store closures
Tanger recaptured approximately 198,000 square feet within its consolidated portfolio during 2019 related to bankruptcies and brand-wide restructurings by retailers, including 3,000 square feet in the fourth quarter. During 2018, approximately 126,000 square feet were recaptured, including 3,000 square feet during the fourth quarter."
 |
| GAAP Net Income to FFO |
 |
| Reconciliation from FFO to FAD |
Full Year FAD Payout Ratio = 70%
Interest Coverage Ratio for 2019 = 4.3 times
Weighted Average Interest Rate: 3.5%
Approximately 94% of consolidated square footage unencumbered by mortgages
SEC Filed Press Release
Maximum Position This Account: 100 shares + shares purchased with dividends, amended to allow for 1 or 2 share purchases using the small ball purchase restriction.
Current Position This Account: 104+ shares
Purchase Restriction: Small Ball Rule
F. Restarted JRI-Bought 10 at $16.05; 10 at $15.62; 10 at $15.1; 10 at $14.5; 10 at $14.2; 10 at $11.9; 10 at $11.37; and 10 at $11:
Quote: JRI | Nuveen Real Asset Income & Growth Fund Overview-Leveraged CEF
Closing Price 3/13: JRI $11.97 d+$ 0.24 +2.05%
Sponsor's Website: JRI
SEC Filings
Current Position: 80 Shares
Average Cost Per Share = $13.7
This CEF's holdings include global equity REIT common stocks, U.S. equity REIT preferred stocks, energy infrastructure stocks, utility common stocks, and bonds issued by companies in those sectors.
REIT common and preferred stocks were trashed last week. The Vanguard Real Estate ETF (VNQ), which owns only common shares, closed at $91.55 on 3/3 and at $73.1 on 3/12, unadjusted for a quarterly dividend payment that wen ex during that period. Last Friday, VNQ closed at $79.48, up $6.38 but still well below its close 3/3 closing price.
Nuveen Real Asset Income & Growth Fund (last SEC filed shareholder report for the semi-annual period ending 6/30/19)
Holdings: 431 as of 1/31/20
Leveraged: Yes at near 29%
Dividends: Monthly at $.1170 (partial ROC support)
Dividend Yield at $13.7 = 10.25%
Last Sell Discussions: Item # 2.A. Sold 102+ JRI at $17.98 (12/22/19 Post)(profit snapshot = $140.67); Item # 4 Sold 100 JRI at $17.23 (10/2/19 Post)(profit snapshot $40.45)
Last Buy Discussions: Item # 5 Added 100 JRI at $16.83-Used Commission Free Trade (8/24/19 Post); Item # 4 Bought 100 JRI at $16.47 (IB Account) and 100 at $16.59-Used Fidelity Commission Free Trade Fidelity (6/26/19 Post)
Note that my prior buys were 100 share lots. I am now slowly building up to 100 shares with 10 lot buys. That kind of change results from a judgment that downside risks are higher now than when I bought the 100 share lots last year.
Note the Double Whammy in the following data series: As net asset value per share declines, the trend is for the discount to net asset value to expand with the carry over into Friday when net asset value per share went up and the discount hit its highest level.
Data Date 2/28/20 Trade:
Closing Net Asset Value Per Share = $18.4
Closing Market Price: $16.24
Discount: -11.74%
Data Date of 3/9/20 Trade:
Closing Net Asset Value Per Share = $16.67
Closing Market Price: $15.5
Discount: -8.22%
Data Date of 3/10/Trade:
Closing Net Asset Value Per Share = $16.8
Closing Market Price: $13.81
Discount: -10.89%
Data Date of 3/11/20 Trade:
Closing Net Asset Value Per Share: $15.89
Closing Market Price: $13.93
Discount: - 12.33%
Data Date of 3/12/20 Trade:
Closing Net Asset Value Per Share = $13.42
Closing Market Price: $11.73
Discount: - 12.59%
Data Date of 3/13/20 Trade:
Closing Net Asset Value Per Share = $14.14
Closing Market Price: $11.97
Discount: -15.35%
Average 1 Year Discount as of 3/23: -10.41%
Sourced: JRI: CEF Connect
Purchase Restriction: I will not be using the small ball purchase restriction. Instead, I am allowed to buy only when the purchase reduces my average cost per share.
Maximum Position: 200 shares
G. Added 10 HT at $11.6; 5 at $9.21;5 at $7.58 and 5 at $5.18:
Closing Price Last Friday: HT $5.32 -$0.02 -0.37%: Hersha Hospitality Trust
SEC Filings
2019 Annual Report (debt discussed starting at page 83; line of credit discussion discussion can be found at page 44)
That price reflects a near 100 probability that HT will slash or eliminated its common share dividend which is currently at $.28 per share. At $5.32, the dividend yield would be about 21.05%. That yield reflects the consensus opinion about its sustainability. At 21.05%, money will double in about 3.63 years. The Rule of 72 (with calculator) - Estimate Compound Interest
Hersha has declared its regular quarterly dividend of $.28 per share which goes ex dividend on 3/30/20. Hersha Hospitality Trust Announces Quarterly Dividends That announcement includes the dividend payable on HT's preferred stocks.
Hersha recently sold some hotels, pursuant to "binding sales contracts", that will raise approximately $140M and HT will reduce its debt by about $97M. Hersha Hospitality Trust Announces the Disposition of Mature Hotels The transactions are expected to close before the end of the second quarter.
Hotel REITs have been smashed in response to coronavirus epidemic. The first quarter results will be a disaster for this sector. The question is whether a recovery in bookings will occur during the Spring or early summer.
HT 2019 Dividend Classification:
Last Earnings Report (Q/E 12/31/2019):
Hersha Hospitality Trust Announces Full Year and Fourth Quarter 2019 Results or SEC Filed Press Release
As of 12/31/19, HT stated it had "significant financial flexibility with approximately $27.0 million of cash and cash equivalents and ample capacity on the Company’s $250 million senior unsecured revolving line of credit." Of course, it is currently paying cash dividends to common and preferred shareholders.
HT's 2020 guidance does not take into account the negative economic impacts from the COVID-19 pandemic.
I would reasonably anticipate a negative FFO number for the first quarter. I would not hazard a guess about how large the cash flow deficit will be.
Hersha Hospitality Trust (HT) CEO Jay Shah on Q4 2019 Results - Earnings Call Transcript | Seeking Alpha
Current Position This Account: 86+ shares
Average Cost Per Share this Account: $12.56
Dividend Yield at $12.56: 8.92% (assumes no change in the current penny rate which is not an assumption the Stock Jocks are making)
Dividend Reinvestment: Yes, hoping for a rebound that will enable the disposition of shares bought with dividends at a profit.
Highest Cost Lot in current chain: 50 shares with a taxable cost basis of $14.06 on 11/20. There was no ROC adjustment to the tax cost basis since no dividend were paid on that lot last year. This lot will be sold when and if it becomes profitable to do so. This is not going to happen anytime soon.
Maximum Position this Account: 100 shares + share purchased with dividends (15 shares remaining)
Purchase Restriction: Small Ball Rule
Last Sell Discussions: Item # 2.B. Sold 50 HT at $19.02-In a Roth IRA Account (4/23/18 Post); Item # 2.C. Sold 10 HT at $19.11-Used Commission Free Trade (4/23/18 Post); Item # 2.B. Sold 50 HT at $18.58-Used Commission Free Trade (2/8/18 Post)
H. Restarted SCM-Bought 10 at $11.94; 10 at 10.85; 10 at $10.4 and 10 at $8.59:
All BDCs were in free fall last week until last Friday. And the explanation is not hard to understand. Their loans are made entirely or almost so to highly leveraged private companies that would be rated well in junk territory if a rating service was ever paid to rate one. Default rates will soar during a recession.
The other well understood issue is that Libor rates are coming down and floating rate BDC loans are tied to a spread over the Libor rate.
Consequently, net investment income will be trending down, though partially offset for many BDCs by declines in their interest costs.
The Libor floors will stop the decline in the floating rate loan coupon rates when they exceed the applicable Libor rate being used. The current Libor floors are generally around 1%, with some higher, so the spread to Libor can not go below the floor number for the loan even if Libor went to zero. Loan investors ask for higher minimum returns as Libor falls - Reuters (August 2019 article); A Guide to Understanding Floating Rate Securities - Fixed Income Strategies | Raymond James
The BDC prices last week reflected a consensus opinion that a recession was 100% probable and would be relatively deep.
The same forecast was embedded in regional bank stocks IMO.
I would just note here that a recession may certainly happen in the U.S. this year, but it is too early to know whether one will actually happen, nor is it possible to know know whether any recession will be short and relatively shallow due to the coronavirus pandemic or something similar to what happened in major recessions from the past. The BDC prices reflected a certain prediction on those issues that can not be certain now.
Closing Price 3/13: SCM $9.48 +$0.78 +8.97%
52 Week Range: $8.49 to $15.04
The new 52 week low was set intraday on 3/12/20.
At $9.48, the market cap is only around $180M. These mini cap BDCs can be jerked around pretty good when market volatility spikes.
Website: Stellus Capital
SEC Filings
2019 Annual Report (risk factor summary starts at page 31 and ends at page 59)
Current Position: 40 Shares
Average Cost Per Share = $10.44
5 Year Financial History (p. 62 Annual Report):
Management: External
Net Asset Value Per Share History:
12/31/19: $14.14
12/31/18: $14.09
12/31/17: $13.81
12/31/16 $13.69
12/31/15: $13.19
12/31/14: $13.94
12/31/13: $14.54
November 2012: IPO at $15 ($14.46 after underwriters discount)
For an externally managed BDC, those numbers are good since net assets are not being destroyed yearly in a perpetual movement toward zero.
Dividend: Monthly at $.1133 ($1.36 annually rounded)
Stellus Capital Investment Corporation Declares First Quarter 2020 Regular Dividend of $0.34 Per Share
Next Ex Dividend Date: 3/30/20
Dividend Yield at $10.44: 13.03%
Last Earnings Report before purchase: Stellus Capital Investment Corporation Reports Results for its third fiscal quarter ended September 30, 2019
Last Earnings Report-Released after purchase (Q/E 12/31/19): Stellus Capital Investment Corporation Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2019
2 loans were on non-accrual as of 12/31/19 comprising just under 1% of the loan portfolio's marked fair value.
The BDC has floating rate loans with Libor floors which average about 1% (p.2). The decline in Libor rates will negatively impact net investment income going forward. The company realized a $1.3M gain in the first quarter and expects to an additional $4M of realized gains this year.
Other Trade Discussions:
Item # 1.B. Sold 32+ SCM at $14.22-Used Commission Free Trade (2/2/19 Post)(profit snapshot = $78.09); Item # 1.A. Sold Highest Cost Lot-50 Shares at $12.63 (5/3/18 Post)(profit snapshot = $34.24); Item 2.B. Sold 100 SCM at $14.23 (2/27/17 Post)(profit snapshot=$285.96); Item # 2 Sold 100 SCM at $13.02 (1/12/17 Post)(profit snapshot= $141.96)
Goal: Total Return in excess of the dividend payments which has been accomplished so far for this BDC stock
SCM Trading Profits to Date = $543.99
I. Restarted PFXF-Bought 10 at $19.38; 10 at $19.3; 10 at $18.8; 10 at $18.4 and 10 at $16.5:
Quote: VanEck Vectors Preferred Securities ex Financials ETF
Closing Price Last Friday: PFXF $17.10 +$0.70 +4.27%
Last week was a bad one for preferred stocks and exchange traded bonds. This ETF owns both categories of fixed coupon securities.
Last Elimination: Item # 1.B. Eliminated PFXF-Sold 110 at $20.51 (1/29/20 Post)
Buy Discussions: Item # 2.C. Added 10 PFXF at $19.8 (12/7/19 Post); Item # 1: Bought 100 PFXF at $20.06 (12/4/19 Post) I have nothing substantively to add to those recent discussions.
Sponsor's Website: VanEck Vectors Preferred Securities ex Financials ETF
Expense Ratio: .41% after a current .05% waiver
Number of Holdings: 141
Credit Quality:
 |
| Many of the investment grade securities are actually exchange traded bonds |
Average Cost Per Share: $18.48
Dividends: Monthly
I prefer to own individual equity preferred stocks and exchange traded bonds. I will trade the "preferred" ETFs which own both categories of securities. I am more likely to gravitate toward the ETFs when interest rates are declining and the prices for the ETFs are nonetheless in free fall which was the case when I bought the PFXF lots.
I have bought and sold the following "preferred" stock ETFs: PFXF, PFF, PGX and VRP. I currently own only PFXF.
J. Added 5 SRET at $13.75; 5 at $12.81; 5 at $12.4; 5 at $11.9; 5 at 10.3; 5 at $9.95 and 5 at $9.73:
Closing Price 3/13/20: SRET $10.25 +$0.51 +5.24%
Quote: SRET | Global X SuperDividend REIT ETF Overview
Last Sell Discussion: Item # 1.A. Sold 10 SRET at $15.56 (2/19/20 Post)(eliminated all shares bought with dividends at a profit)
Prior Sell Discussions: Item # 1.D. Eliminated SRET in Vanguard Taxable Account: Sold 112 at $15.28 (10/30/19 Post); Item # 1. B. Sold 50 SRET at $14.79-In A Roth IRA Account-Commission Free for Vanguard customers (4/3/19 Post)
Prior Buy Discussions: Item # 2. Bought 100 SRET at $14.81 and 10 at $14.35 (8/7/19 Post); Item # 3.C. Bought 50 SRET at $13.88-In a Roth IRA Account-Commission Free (1/27/19 Post)
Sponsor's Website: SuperDividend® REIT ETF
Dividends: Monthly
Dividend Reinvestment: Yes
Goal: Total return in excess of the dividend which is not likely to happen anytime soon with my current position.
Current Position: 93+ shares
Average Cost Per Share: $ 13.53
Dividend Yield at $13.75 = 8.87 % (using current monthly penny rate which may change)
Current Morningstar Rating: 3 stars
Purchase Restriction: None (will not buy much given the exposure to MREITs which had a bad week)
Maximum Position: Undecided given the recent share price decline
2. Issuer Optional Redemption:
I lost 3 Liberty Property 3.375% SU bonds to an issuer early redemption. To exercise that right, a make whole payment of $51.52 was made for each $1K in principal amount.
Profit Snapshots: +$160.81
Item # 3.A. Bought 2 Liberty Property 3.375% SU Maturing on 6/15/23 in a Roth IRA Account at a Total Cost of 99.741 (3/17/19 Post)(cost includes a $4 commission)
Item # 1.E. Bought 1 Liberty SU Maturing on 6/15/23 at a Total Cost of 99.892 (4/8/17 Post)(cost includes a $1 commission)
3. Canadian Reset Equity Preferred Stocks:
A. Added 50 FTSPRM at C$16.28 (C$1 Commission):
Quote: FTS-PM.TO
I now own 100 shares.
The other 50 share lot was bought at $17.55: Item # 2. A. Bought 50 FTSPRM at C$17.55(11/23/19 Post)
Par Value: C$25
Dividends: Quarterly and Cumulative
I lost 3 Liberty Property 3.375% SU bonds to an issuer early redemption. To exercise that right, a make whole payment of $51.52 was made for each $1K in principal amount.
Profit Snapshots: +$160.81
Item # 1.E. Bought 1 Liberty SU Maturing on 6/15/23 at a Total Cost of 99.892 (4/8/17 Post)(cost includes a $1 commission)
3. Canadian Reset Equity Preferred Stocks:
A. Added 50 FTSPRM at C$16.28 (C$1 Commission):
Quote: FTS-PM.TO
Issuer: USD priced Fortis Inc (FTS)
Fortis Inc. Reports Third Quarter 2019 Earnings
Canadian preferred stocks have been mauled more than their U.S. counterparts. I am adding to my positions during the latest downdraft.
Closing Price Last Friday: FTS-PM.TO C$13.80 +C$0.37 +2.76%
Website: Home
The issuer is an electric and gas utility based in Canada that also has utility operations in the U.S. The U.S. operations consist of UNS Energy and Central Hudson.
The company also owns the ITC U.S. transmission network.
Canadian utilities include FortisBC, FortisAlberta, Newfoundland Power, Maritime Electric, and FortisOntario
Canadian preferred stocks have been mauled more than their U.S. counterparts. I am adding to my positions during the latest downdraft.
Closing Price Last Friday: FTS-PM.TO C$13.80 +C$0.37 +2.76%
Website: Home
The issuer is an electric and gas utility based in Canada that also has utility operations in the U.S. The U.S. operations consist of UNS Energy and Central Hudson.
The company also owns the ITC U.S. transmission network.
Canadian utilities include FortisBC, FortisAlberta, Newfoundland Power, Maritime Electric, and FortisOntario
I now own 100 shares.
The other 50 share lot was bought at $17.55: Item # 2. A. Bought 50 FTSPRM at C$17.55(11/23/19 Post)
Par Value: C$25
Dividends: Quarterly and Cumulative
Coupon: Resets Every 5 years at a 2.48% spread to the five year Canadian government bond
Last Reset: Effective starting on 12/1/19 to and excluding 12/1/2024
Fortis has an option to redeem at par value on the reset dates.
Fortis has an option to redeem at par value on the reset dates.
New Penny rate per share: C$.2445625 (C$.97825 annually)
At C$16.28, the yield is about 6%.
At C$16.28, the yield is about 6%.
The sole reason for buying more was the rapid decline in interest rates. This reset's coupon will last to 12/1/2024. Who knows what the reset rate will be then? For now, 6% from this issuer looks good compared to other alternatives.
4. Leveraged Bond CEFs:
A. Added 90 to BTZ at $13.75; 10 at $13.41; 5 at $12.95; 5 at $12.57; and 5 at $11.5:
Closing Price 3/13: BTZ $12.07 +$0.53 +$4.63%
Until yesterday, the corporate bond had been unsettled driven in part by a lack of liquidity which apparently caused unusual and unwarranted price swings. The investment grade bond ETF LQD settled down last Friday: $123.05 $5.11 +4.33%
The third party service used by Fidelity to price bonds that I own went bananas with the alleged fair value numbers from last Thursday's close. My thinking was that the service was using Chimps since the humans were in self quarantine. I would have bought every bond that I own at the price shown in my account this morning. The prices were just ridiculous. Would you buy municipal bonds rated AA+ that have 3% coupons, double tax free, at less than par value now, where the bond is likely to be called at par value within five years.
This leveraged bond CEF has become a falling knife. A normal position for me would be about 300 shares. I am now working my way up to that level with 5 share lot purchases.
Quote: BlackRock Credit Allocation Income Trust Overview
Sponsor's Website: BlackRock Credit Allocation Income Trust | BTZ
SEC Filings
I discussed this bond CEF in my last post. Item # 1.H. Bought 10 BTZ at $13.57 (3/7/20 Post)
Dividends: Monthly, currently at $.0839 per share (variable over time; assuming same penny rate for 1 year, the annual payment would be about $1.01 per share)
Average Cost Per Share: $ 13.5
Dividend Yield at $13.5 and $1.01 annual dividend = 7.48 %
Current position: 130 shares
Dividend Reinvestment: Turned on for now, may continue for as long as the discount remains above 5%.
Data Date of Trade (3/9/2020):
Closing Net Asset Value Per Share: 14.79
Closing Market Price: $13.79
Discount: -6.76%
Data Date of Trade (3/10/20)
Closing Net Asset Value Per Share: $14.67
Closing Market Price: $13.42
Discount: -8.52%
Data Date of Trade (3/11/20)
Closing Net Asset Value Per Share: $14.45
Closing Market Price: $12.63
Discount: -12.6%
Date Date of Trade (3/12/20)
Closing Net Asset Value Per Share: $13.85
Closing Market Price: $11.62
Discount: -16.1%
Average Discount 1 Year as of 3/12 = -8.97%
BTZ BlackRock Credit Allocation Income Trust-CEF Connect
On 3/9, the day that the DJIA declined by 2,013 points or 7.79%, the BTZ net asset value per share declined by 58 cents even though U.S. treasuries declined in yield and rose in price. The problem was that other bond sectors, including investment grade corporate bonds, declined significantly in price that day.
LQD $131.01 -$3.26 -2.43%: iShares Investment Grade Corporate Bonds
Even higher quality corporate bonds rated A or better declined in value on 3/9:
QLTA $56.78 -0.64 -1.12%: iShares Aaa A Rated Corporate Bond ETF
This kind of decoupling between U.S. treasuries higher quality corporate bonds has occurred in the past when fears about credit risk surge. The price of the corporate bonds reflect a credit risk component that is not present in treasury yields.
On a day like 3/9, the junk corporate bond sector will fare the worst:
JNK $100.72 -$4.92 -4.66%: SPDR Bloomberg Barclays High Yield Bond ETF
For novice bond investors, "high yield" is a pleasant description for junk.
The best performing sector among treasury ETFs that day was ZROZ:
ZROZ $189.98 +$9.91 +5.50%: PIMCO 25 Year Zero Coupon U.S. Treasury ETF
Zero coupon treasuries will be extremely sensitive to interest rate movements. The treasury strips increase the duration in years. As of 3/9/20, the duration was 27.31 years and the net asset value total return YTD was +40.87%. PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund - ZROZ - ETFs | PIMCO The 20+ year treasury ETF TLT, which owns treasuries that actually pay cash interest, has an effective duration of 19.02 years and was up +30.31% YTD through 3/9/20. Duration: Understanding the Relationship Between Bond Prices and Interest Rates - Fidelity
Maximum Position: 300 shares
Purchase Restriction: Each subsequent purchase must lower my average cost per share. I am not using the small ball restriction.
4. Leveraged Bond CEFs:
A. Added 90 to BTZ at $13.75; 10 at $13.41; 5 at $12.95; 5 at $12.57; and 5 at $11.5:
Closing Price 3/13: BTZ $12.07 +$0.53 +$4.63%
Until yesterday, the corporate bond had been unsettled driven in part by a lack of liquidity which apparently caused unusual and unwarranted price swings. The investment grade bond ETF LQD settled down last Friday: $123.05 $5.11 +4.33%
The third party service used by Fidelity to price bonds that I own went bananas with the alleged fair value numbers from last Thursday's close. My thinking was that the service was using Chimps since the humans were in self quarantine. I would have bought every bond that I own at the price shown in my account this morning. The prices were just ridiculous. Would you buy municipal bonds rated AA+ that have 3% coupons, double tax free, at less than par value now, where the bond is likely to be called at par value within five years.
This leveraged bond CEF has become a falling knife. A normal position for me would be about 300 shares. I am now working my way up to that level with 5 share lot purchases.
Quote: BlackRock Credit Allocation Income Trust Overview
Sponsor's Website: BlackRock Credit Allocation Income Trust | BTZ
SEC Filings
I discussed this bond CEF in my last post. Item # 1.H. Bought 10 BTZ at $13.57 (3/7/20 Post)
Dividends: Monthly, currently at $.0839 per share (variable over time; assuming same penny rate for 1 year, the annual payment would be about $1.01 per share)
Average Cost Per Share: $ 13.5
Dividend Yield at $13.5 and $1.01 annual dividend = 7.48 %
Current position: 130 shares
Dividend Reinvestment: Turned on for now, may continue for as long as the discount remains above 5%.
Data Date of Trade (3/9/2020):
Closing Net Asset Value Per Share: 14.79
Closing Market Price: $13.79
Discount: -6.76%
Data Date of Trade (3/10/20)
Closing Net Asset Value Per Share: $14.67
Closing Market Price: $13.42
Discount: -8.52%
Data Date of Trade (3/11/20)
Closing Net Asset Value Per Share: $14.45
Closing Market Price: $12.63
Discount: -12.6%
Date Date of Trade (3/12/20)
Closing Net Asset Value Per Share: $13.85
Closing Market Price: $11.62
Discount: -16.1%
Average Discount 1 Year as of 3/12 = -8.97%
BTZ BlackRock Credit Allocation Income Trust-CEF Connect
On 3/9, the day that the DJIA declined by 2,013 points or 7.79%, the BTZ net asset value per share declined by 58 cents even though U.S. treasuries declined in yield and rose in price. The problem was that other bond sectors, including investment grade corporate bonds, declined significantly in price that day.
LQD $131.01 -$3.26 -2.43%: iShares Investment Grade Corporate Bonds
Even higher quality corporate bonds rated A or better declined in value on 3/9:
QLTA $56.78 -0.64 -1.12%: iShares Aaa A Rated Corporate Bond ETF
This kind of decoupling between U.S. treasuries higher quality corporate bonds has occurred in the past when fears about credit risk surge. The price of the corporate bonds reflect a credit risk component that is not present in treasury yields.
On a day like 3/9, the junk corporate bond sector will fare the worst:
JNK $100.72 -$4.92 -4.66%: SPDR Bloomberg Barclays High Yield Bond ETF
For novice bond investors, "high yield" is a pleasant description for junk.
The best performing sector among treasury ETFs that day was ZROZ:
ZROZ $189.98 +$9.91 +5.50%: PIMCO 25 Year Zero Coupon U.S. Treasury ETF
Zero coupon treasuries will be extremely sensitive to interest rate movements. The treasury strips increase the duration in years. As of 3/9/20, the duration was 27.31 years and the net asset value total return YTD was +40.87%. PIMCO 25+ Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund - ZROZ - ETFs | PIMCO The 20+ year treasury ETF TLT, which owns treasuries that actually pay cash interest, has an effective duration of 19.02 years and was up +30.31% YTD through 3/9/20. Duration: Understanding the Relationship Between Bond Prices and Interest Rates - Fidelity
Maximum Position: 300 shares
Purchase Restriction: Each subsequent purchase must lower my average cost per share. I am not using the small ball restriction.
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.
It looks like France and Spain have joined the global conspiracy, originally hatched by the far left Democrats and their Fake News Media allies, to harm Donald's reelection chances.
ReplyDeleteSpain initially took the Trumpster approach which unfortunately for Spaniards led to a rapid escalation in infection rates and deaths.
The Trumpster approach, broadly defined, is to deny that anything is really happening or whatever is happening is overblown so everyone just needs to go on as if nothing is really happening that could endanger the health of American citizens.
https://www.washingtonpost.com/politics/2020/03/12/weeks-conservative-media-joined-trump-downplaying-threat-coronavirus/
https://newrepublic.com/article/156727/conservatives-coronavirus-denial-going-get-people-killed
Spain continued to allow mass gatherings including a 120,000 women's day March last Sunday and other mass gatherings that facilitated the current rapid infection rates.
The result was today's announcement that Spain was going on lockdown.
"Closures of bars, restaurants and hotels — already in place in certain regions — were extended to the entire country, while gatherings and religious services were halted. Schools and universities were also closed."
https://www.washingtonpost.com/world/europe/coronavirus-spain-nationwide-lockdown/2020/03/14/3bec8690-6619-11ea-8a8e-5c5336b32760_story.html
In France, all nonessential businesses were ordered closed. That government order does not apply to banks, gas stations, supermarkets and pharmacies.
The only reason IMO that the U.S. has not reported far more cases is that testing is not widely available and infected persons without symptoms are spreading it. Given the incubation rate time period, infections are liking to start spiking in the coming weeks and months that will be confirmed by more widespread testing than available now.
I doubt that these developments in Europe will lead to more Stock Jock exuberance when the market opens on Monday.
Normally I go out early for breakfast on Saturday morning and then stop at Krogers on my way home, usually arriving at around 7:30A.M. The store may have a few shoppers at that time. Today, the parking lot was full so I went inside to see what was happening. Shopping carts were filled to the brim. Kroger's manager only had one person doing checkout and only 1 of 2 self check out lanes open. The lines for those two checkouts had at least 40 people in them, many with full carts. Entire shelves were empty. All of the bread was gone. Other items were gone or soon would be before afternoon. I have never seen anything like it.
What adds to the scary, is how unprepared this country is emotionally for an emergency that *requires* stockpiling and even more cooperation and following of gov't instructions.
ReplyDeleteThe irrationality reaction to this makes it a big question, what would people do?
I'm dieting and running out of fruit and veggies. I hope my diet isn't impacted, when I go to the store on Monday (I'm skipping the trip this weekend.)
Visa and Mastercard may not suffer too badly after all. As people max out on groceries.
ReplyDeleteThe Federal Reserve just implemented ZIRP again and a launched a new QE program.
ReplyDeleteThe Federal Funds rate was slashed to a 0-25% range.
The QE program is huge, consisting of$500B in U.S. treasury and $200B of agency mortgage backed securities.
https://www.cnbc.com/2020/03/15/federal-reserve-cuts-rates-to-zero-and-launches-massive-700-billion-quantitative-easing-program.html
So we're almost at 0 interest rate? Not sure how a range of 0-25 plays out.
ReplyDeleteLikely the market will rally from here.
The economy is going to be a mess. I don't see how throwing money at buying bonds which banks use to buy stocks, does anything but help Trump's stock market.
The money's needed for citizens who own small businesses, and will be out of work. Direct loans to THEM.
Will banks lend more easily to all of them? Is that the idea? But banks had liquidity already? The rates I heard quoted were in 4% range, so enough to put them out of business even if they take a loan.
How do you think this will play out for stocks... and separately the economy. (You've said already how it won't work, and doesn't help consumer spending & may reduce it by reducing saving account rates.)
Land: The zero to .25% FF range was in effect for several years after the Near Depression. ZIRP will take short term rates including the bank prime down. This action will lower the interest rates for bank loans tied to the prime rate or loans priced at a spread to a 1 month or 3 month Libor rate.
ReplyDeleteDuring the last ZIRP period, which lasted about 7 years and started in December 2008 as I recall, the prime rate stayed steady at around 3.25% and I would anticipate that it will quickly fall back to that level. After the FED's earlier cuts in the FF, the prime rate had already fallen to 4.25%. So that is not going to be a big difference.
The Bond Ghouls were already expecting at least a 50 basis point cut and a likely restart of ZIRP. Some of the FED's action today was priced into the 3 month treasury bill last Friday when it closed at a .277% yield. However, during the prior ZIRP period, the 3 month treasury bill fluctuated in a .02% to .13% range or not worth the effort to buy.
3 month treasury bill
https://fred.stlouisfed.org/series/TB3MS
Prime Rate:
https://fred.stlouisfed.org/series/MPRIME
Effective Federal Funds Rate
https://fred.stlouisfed.org/series/FEDFUNDS
The action does provide some monetary relief to businesses who who are now under financial duress. It will not compensate them for lost revenues.
For savers, it is a major negative. Almost no interest will be paid on CDs and treasury bills bought after this action.
The Fed's action will not cure the problems that are coming.
The Stock Jocks generally react positively to QE programs and free money.
I mentioned in a March 2009 post, when QE1 was initiated, that the first QE program started in January 1933 sparked a huge stock market rally after the over 80% decline that started with the October 1929 crash. The rally in U.S. stocks started in March 2009.
Several CEFs borrow money at spreads to short term rates. I bought one last Friday before the rally, JTD at $11.38, that I have not owned for a long time. It borrows at a .65% spread to the 1 month Libor rate:
Pages 42-43 Note 8
https://www.sec.gov/Archives/edgar/data/1397173/000119312520064810/d621322dncsr.htm
CEF Connect Page:
https://www.cefconnect.com/fund/JTD
Borrowing money to buy assets that go down in price is not good.
Borrowing money at a lower cost to buy assets that go up in price is good for as long as it lasts.
I made another visit to Kroger's this morning as an observational field trip on how panic was spreading. There was no meat whatsoever and none coming anytime soon. The store was understaffed and no one was restocking the empty shelves.
ReplyDeleteI went to Dunkin Donuts to load up on health food and it was closed. I understand that a lot of employees have called in sick.
I have not seen anything remotely close to what is happening now in my locality.
Maybe it is a good thing the federal government has kept secret that the 1978 film "Invasion of the Body Snatchers" was actually a documentary that had been leaked to movie theaters.
https://en.wikipedia.org/wiki/Invasion_of_the_Body_Snatchers_(1978_film)
Now that would cause a panic even greater than what I am seeing now.
S & P futures are currently down 4.78% at 2,555.5. The S & P 500 closed last Friday at 2,711. That decline is about 1/2 of what I would have expected with no Fed action. I was anticipating yesterday that the U.S. stock indexes would lose the entire gain from last Friday and then some based on developments this weekend.
I am currently anticipating negative real GDP growth in the second quarter of -2% to -4%. That is based on what looks like demand falling off the cliff.
"Dunkin Donuts to load up on health food "
ReplyDeleteLol.
Lack of staff is notable.
Thanks for the update. I have not yet ventured to stores. I did promise my sister that I would mail toilet paper if they run out. I bought a large bag of rolls on sale late last year. I didn't know to wait until right before a crisis to panic buy a two week's supply.
I am trying to watch the debate. My face keeps scrunching up, like it has a mind of it's own.
A reasonably popular tweet of mind (among my jewish twitter contacts) is that Bernie is like that guy on the synagogue board that's always angry, always criticizing whatever, never wants to do the actual work with details, always blaming someone, making up stuff. You just listen and ignore him. Except Bernie wouldn't even visit the Vermont synagogue for the last 30 years of invites according to the Rabbi and congregant (in The Forward articles.)
Thanks for the economic update at the top. It sounds like there's a set of investor pundits who think market's going to 30% down or a little more, and very possibly into a recession. Another set that think the market's going down some more, but wouldn't go into a recession.
It also looks to me like the ZIRP has worked. Futures are down 5%, not the full 10% plus some more.
My instinct is to be patient and try to wait to buy in, until it feels like blood. It's described as that now, but it doesn't feel that way yet to me. Valuations are - some fair - but plenty still seem high. I hope I'm not being "greedy" and not setting myself up to be "missing out."
So much is being shut down.
The mayor being turned away for voting is stunning. I need to check I'm still registered.
I'd asked about your comment of market moving to a 1-2% turn during a bear. I asked whether that might mean that what's been bought higher or on the way down, might wind up dead money. When for a walk and realized.... this is what you've been describing all along. It's not that the market gets flat and low. It's that in the bear or unstable phase it gyrates, looking like it's going somewhere, then over a long time, doesn't make much. So okay, I got that finally!
Fear&Greed has said this week that the market's moved into bear mode.
I have a couple investment questions, if you have an opinion.
Citibank looks like a buy. I want it to go down a little. But decent div 4%, ok debt, payout ratio, and PE.
Is there anything about it to be leery about that I should make sure to check into?
On Regional Banks, and Hotel Reits, they are
down plenty. If bought carefully, low and into quality ones, can they be done as long term buy and holds? I don't have the sophistication to judge them continuously and jump in and out. So I'd want to buy, only if they can be done decently as long term buy and holds. But they sure look like opportunity.
The VIX high numbers match what's described in the model as Unstable Phase 2. What do you think about calling this a phase 2, and investing with the expectation that a big crash may very well be coming? It kind of sounds like you're saying that in your write up, already.
Land: Irrespective of the terminology being used to describe the current state of affairs, the super high VIX readings are consistent with the prelude to a more substantial decline. The three closes above 50 and 1 close over 70 are not consistent with past Trigger Event numbers.
Deletehttps://finance.yahoo.com/quote/%5EVIX/history?p=%5EVIX
So rather than calling it a Phase 2, I would just say that a Trigger Event may contain a Catastrophic Event which has not been the case since the volatility numbers were first introduced in 1986 for the S & P 100 and and 1990 for the S & P 500.
So this is something new. The numbers are more consistent with periods where the market was so unstable and volatile that the sell and flee response was the only way for humans to deal with it.
You can see a spike in volatility numbers starting after Lehman's failure in September 2008. The numbers were in the mid-20s in mid-September, spiked from 34.73 to 46.72. Then the numbers went over 50 on 10/6, over 60 on 10/9, and over 80 on 10/27
Before this spike started, the VIX closed at 25.66 on 9/12/2008. The S & P 500 closed that day at 1,251.7 and at 848.92 on 10/27/2008 or a 32.18% decline. The 1,251 close on 9/12 was already down almost 300 points from the early October 2007 highs.
I am not saying that the economic conditions are similar . The underlying fundamentals and problems were far greater in 2008 compared to now. I am saying that sustained periods of extremely high volatility numbers can lead to a quick and significant decline in U.S. stocks.
Stock futures triggered a circuit break after falling 5%.
ReplyDeletehttps://www.cnbc.com/2020/03/15/traders-await-futures-open-after-fed-cuts-rates-launches-easing-program.html
So no telling what will happen tomorrow.
The ten year treasury bond is currently trading at .667%, down .316%.
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page
The 3 month treasury bill is at .12% which was in the range I outlined in a previous comment.
https://www.marketwatch.com/investing/bond/tmubmusd03m?countrycode=bx
Tomorrow, I will be focusing on any bonds or preferred stocks that may be getting clobbered. During the VIX spike in October 2008, treasuries were the only bonds that went up in price. Investment grade corporate bonds declined significantly in price due to heightened credit concerns.
The exchange trade bond universe performed worse than similarly rated $1K par value bonds since individual investors dominate their trading at least at the margin.
You can see that happening in this chart of AA corporate bond prices:
https://fred.stlouisfed.org/series/BAMLC0A2CAAEY
Asia is holding up relatively well, though the Hang Seng index is currently down 2.24%.
Maybe more market participants during regular trading hours will cause a change in direction.
That's clearly said. Thank you.
ReplyDeleteI guess one way to look at it, is if toilet paper is getting this big a run for a RESPIRATORY illness, people's, which includes investor's, fear factor is high.
I didn't realize the circuit breaker tripped. Didn't know it could for futures.
ReplyDeleteOn Citigroup, I'd looked at your comment from Jan on some bonds.
Land: I do not own Citigroup. I am prejudiced on that one. I have viewed Citigroup over the years as infected by Masters of Disasters which may or may not be true now.
DeleteFor a snapshot of that infection, see the following article that appeared in the NYT's Reckoning series in 2008:
" Citigroup Saw No Red Flags Even as It Made Bolder Bets"
https://www.nytimes.com/2008/11/23/business/23citi.html
I have owned in the past Citigroup senior unsecured bonds that are called "principal protected notes" even though principal is not protected. Those bonds traded on the stock exchange and had $10 par values. As I recall, all of them had a 2% minimum coupon and relatively short maturity dates. The coupon could be increased by the performance of some stock index, commodity index or the price of gold.
In several cases, the annual coupon was increased to over 20%.
see, e.g.
https://tennesseeindependent.blogspot.com/2014/03/received-mou-redemption-proceeds-this.html
All of the ones that I owned matured in 2014 or possibly shortly thereafter.
When evaluating the multinational U.S. banks, it is important to keep in mind that they periodically blow themselves up. So there may be times when a P/E multiple does not properly reflect the downside risk.
Citigroup would have collapsed during the Near Depression period without government bailouts. Of the major financial institutions that survived, it came the closest to bankruptcy.
The stock is currently at -$8.29 (-16.24%) in
Pre-Market: 8:04AM EDT
https://finance.yahoo.com/quote/C?p=C&.tsrc=fin-srch
The stock future's decline was stopped at a 5% limit down.
SPY is trading in pre-market:
SPDR S&P 500 ETF Trust
$243.87 -$25.82 -9.59%
Before Hours Volume: 4.4M
Last Updated: Mar 16, 2020 at 8:08 a.m. EDT
Well I was looking for something that could survive a recession or extended downturn. Will have to re-think this.
DeleteSouth Gent,
ReplyDeleteRe. "... Some highly leveraged producers may file for bankruptcy during the latest price slide" there will be collateral damage in the high yielding MLP sector. I read some horror account of the tax impact of Cancellation of Debt Income (CODI) in a MLP structure bankrupcy. Do you have any insight?
Y: I do not own any individual MLPs and have avoided them altogether for at least a decade. I did own a UBS ETN that tracked the MLP Alerian index but eliminated it when there was a rally and I came close to breakeven.
DeleteDeep in my memory bank, I have a very fuzzy recall of the issue that you raised. When an investor is an equity partner rather than the owners of stock issued by a regular corporation, there are tax issues which arise that can be adverse.
There's something where you an individual can become responsible for their debt on bankruptcy. One I was in restructured, and the point was to remove individuals from that line of fire, in anticipation. I don't know how often that's done to prevent the problem.
DeleteLand: The tax issue for MLP limited partners is whether taxable income is created for them when MLP debt is cancelled. I am not versed in this subject. I religiously avoid these issues by not owning individual MLPs.
DeleteFor these high volatility days with significant stock declines, I simply look at the development as providing better buys than I had a few weeks ago. My dividend income is going up as my average cost per share goes down. I am also certain that almost zero percent yields from treasury bills and similar short term "safe" as to capital return only securities do not look attractive since real return losses will be significant before taxes.
The problem is that I do not know how much lower stocks will go. Knowing that is unknowable causes me to buy on all of these big down days even though every buy is at a meaningfully lower price than earlier in the day, the last trading day or particularly a week or so ago.
The economy may not have a V shape recovery from the trauma, and that may also be true for the stock market.
I do suspect that the lows from Christmas Eve 2018 need to hold. The S & P closed that day at 2,351.10, the precise low for that day. Today, the S & P 500 fell to 2,401.57 and is currently at 2,519.30-191.72 (-7.07%)
As of 12:16PM EDT.
The VIX is at 77.81+19.98 (+34.55%)
As of 12:02PM EDT. (16 minute delayed quote at YF)
https://finance.yahoo.com/quote/%5EVIX/?p=%5EVIX
Today seems a bit more crazy than some of the other wild days over the past 2 weeks.
ReplyDeleteI entered a bunch of 1 and 2 share orders well below the then existing bid prices and received a number of fills.
For example, I entered a limit order to buy 1 IBM at $95 and it was filled.
International Business Machines Corp.
$100.03 -$7.9207 -7.34%
DAY RANGE
95.00 - 100.86
at 10:58 a.m. EDT
There is also disarray in the exchange traded bond and preferred stock markets.
This is one dangerous market for individual investors. Just about everything is a falling knife. I am treading carefully while continuing to buy.
Thanks for the update. I'm watching the market indices climb higher and having FOMO, and "it's too late."
DeleteHowever with the VIX up another 30%, and it's general height I started the day figuring I would simply wait for a while. ...with expectation that there will be better opportunities coming up. Or a recovery will be obvious when it starts, and I'll get in then.
I imagine some of this is a bounce off the 2018 and 30% down supports. But it wasn't quite down to those levels yet.
At any rate, your post is informative and interesting. It makes it easier to stay calm. Also knowing the market is erratic makes it easier to stick to my plan, of being patient.
The news isn't mattering so far today. McConnell announced he's delaying vote on the relief package. Tom Cotton says there isn't agreement on it.
DeleteLol ""BIGGEST POINT LOSS IN STOCK MARKET HISTORY". "
Delete"The Greatest, the best, the biggliest ever!"
It is good to know that past research shows slowdown measure being used have worked in the past.
I had my first outing. It's to my new internist. I'm a little concerned that she didn't cancel. Then again, I am somewhat of a risk patient. I have washed my hands, face, and removed the clothes that I wore (that got touched). I am fully emphasizing my new state of paranoia.
While in that appt I got a call that my genetics test appt will be done via video. My ultrasound isn't cancelled, so a little more risk exposure.
My doctor gave me stats. The Sars virus had about 8000 confirmed cases in the world. About 800 died. And that we are well beyond 8000 cases. I haven't checked her accuracy.
I put in a very slow order on SPY before leaving the house. 238.85 & 240.25. For a nice conservative 3 shares each. They were filled, by the time I got home.
VIX closed at 82.69
I have never been in a Catastrophic Event while paying attention to the VIX.
Is the amount of down movement consistent YET with a Catastrophic Event?
Or is it still a little "light" compared to what has happened in prior Catastrophic Event periods?
For that high a VIX, I just have a sense of expecting more. The only real stopper and it may be one, is the 2018 support.
Land: Doctor Don has recommended that we shelter in place for 15 days. I can do that. If I run out of food, I still have some left over halloween candy that has mucho nutrition.
DeleteI did eat out tonight. The restaurant was empty when I arrived.
The closest historical analogy to the VIX movement since 2/24/20, and the other index volatility stock index numbers, is to the late September 2008 through the next month, which I described in an earlier comment.
The second closest period would be the numbers leading up to the October 1987 and for several days thereafter using the VXO, the only one that was in existence at that time. The VIX would have had a similar movement if it had existed then.
The Catastrophic Event can be a fast 30% or so percent decline from a recent high or a 45+% decline over a longer period lasting several that will have an acceleration period (January 1973 through August 1974 with the acceleration period starting in February 1974; or November 2007 through early March 2008 with the acceleration period starting in last September 2008 and ending on March 9, 2009)
Uncheck Inflation Adjusted Box:
https://www.macrotrends.net/2324/sp-500-historical-chart-data
That is an interactive chart. If you scroll starting in March 2000 through February 2009, that is what a long term secular bear market looks like. Or another long term bear started around 1/1/1966 and lasted until early August 1982. The 1974 decline was the catastrophic event. The March 2000 to March 2009 had two catastrophic declines (2000-2002 and November 2007 through early March 2009)
I did eliminate my position in GIS today at $54.86, but my small ball buys went over 50. I was down to only 27+ GIS shares after several pares and realized a $418.02 gain.
I am now doing small ball buys in exchange traded bonds and preferred stocks, buying several new ones today.
The preferred stock market is in disarray. I have bought during similar period in the past, which worked out fine but then this time may be different. I ask the Lord tonight and hope for an answer before the market opens tomorrow.
That chart on a visual look, looks like the market has a lot farther to react to this. Depends if this is a temporary cyclic bear. Or triggers those type of long term bear images that you point out.
DeleteI'd be confident that this will pop out in a year or 1 1/2 years. Except for the starting point of mega deficit, so little left in the toolbox. Lots of political damage to stop and undo.
Donald represented that the Stock Jocks would be thrilled with the FED's desperate action over the weekend.
ReplyDeleteS&P 500 Index
2,386.13 -324.89 -11.98%
The DJIA fell 2,997.1 points. I am waiting for Donald to tweet "BIGGEST POINT LOSS IN STOCK MARKET HISTORY".
https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average
The Duck tweeted the other day that Friday (3/13) was the largest DJIA point increase. He must have forgot to inform the Trumpsters that the largest point loss before 3/16 was on 3/12- That one is now at # 2 and the other point losses from last week are now bumped down a notch to the 3rd and 4th largest point losses.
Donald apparently found religion on the coronavirus after repeatedly downplaying it, assuring everyone in late February that he had it under control with only 15 confirmed cases and soon there would be none, and comparing COVID-19 as far less worrisome than the seasonal flu.
About the only asset class that worked today was U.S. Treasuries and my weighting in them is close to my tally in Tennessee Municipal bonds. The problem is that they all mature within the next year, so I need to do something other than burying the proceeds in the back yard.
The FED's actions only smelled over panic rather than some magic elixir that was going to make things better.
I earlier predicted that U.S. second quarter real GDP growth would be -2% to -4%. The G.S. chief economist is at -4% but is hopeful in guessing that there will be a strong snapback in the 3rd and 4th quarters with 3% and 4% growth respectively.
https://www.cnbc.com/2020/03/15/goldman-sachs-sees-zero-us-economic-growth-as-the-coronavirus-spreads.html
The Stock Jocks are not predicting a sharp rally in the second and third quarters IMO, judging from the recent price action over the past 6 trading days.
The Stock Jocks have reluctantly come to conclusion that a recession is inevitable or so close to one that there is no reason to quibble about a possible squeak by.
BDCs are certainly being priced now as if a serious recession and a rapid increase in defaults are on the near horizon. They are not being priced correctly IMO if the G.S. economists has correctly predicted the snapback growth rally and the strength of it.
ARCC closed at $12.37 today, about where it was in December 2009.
The actions being taken by the federal governments, individuals and companies now will slow the spread of COVID-10 and make a return to normalcy quicker.
There was a study of 1918 Spanish Flu epidemic that compared what happened in St. Louis and Philadelphia. The mayor of St. Louis quickly followed the advice of the Surgeon General who had recommended social distancing, while Philadelphia did not. The infection rates soared in Philly and only rose modestly in St. Louis.
The Surgeon General in 1918, Dr. Rupert Blue, urged local authorities to "close all public gathering places" such as schools, churches and theaters.
The VIX is following the late September 2008 through October 2008 pattern which is not a good sign.
CBOE Volatility Index (^VIX)
82.69+24.86 (+42.99%)
https://finance.yahoo.com/quote/%5EVIX?p=^VIX&.tsrc=fin-srch
I would now classify the VIX movement as a Catastrophic Event during an ongoing Trigger Event, a first.
I am glad that trump is a germophobe. It took him this long to get religion. How long would have taken if he didn't believe germs?
ReplyDeleteI discovered tonight that all libraries are closed. Also a run on electronic books.
ReplyDeleteFutures have been frozen for hours. Green at 3-4%.
ReplyDelete1.08% for Russell.
I see nothing about them hitting 5% and freezing?
Land: S & P 500 futures are currently up .04%
DeleteE-Mini S&P 500
2,406.25 +1 +.04%
As of 8:09AM EDT. Market open.
I do not anticipate that the low from 12/24/18 will hold.
One reason for that opinion is that I keep reading the most dire predictions about what may happen soon.
The epidemic modeling group at Imperial College London released an estimate that 2.2 million people could die in the U.S. without drastic action. The peak is estimated to occur in 3 months.
See pages 6-7
https://www.imperial.ac.uk/media/imperial-college/medicine/sph/ide/gida-fellowships/Imperial-College-COVID19-NPI-modelling-16-03-2020.pdf
The shutdowns that are now occurring in March will probably drag 1st quarter GDP growth down close to zero or slightly below.
If peak infection rates occur in June or July, which is what the models are currently predicting, then second quarter GDP will be a disaster. Unemployment will start to spike soon.
I see these numbers with fear. As a Doctor, the number of death seem trivial, but the virus is still in its infancy. There seem to be a lot of startups which are going to go out of business in the entertainment alcohol restaurants etc. The job losses will be massive. The healthcare system will be overwhelmed.
DeleteI believe the death rates to be true although they are trivial at the moment while tragic
MY question to you assomeone who understands finance and the economy, could we be headed for some time of long-term partial permanent impairment of the economy, i.e. a long recession or depression and that stocks as an asset class will only go down for say a long period of time?
Can you give me a rough estimate of how dangerous the market is presently?
I see most people sitting tight but I have been selling
Thank you
G: I am a net buyer, though I eliminated GIS yesterday and Kellogg (K) today. I have probably had somewhere close to 30 buy orders filled today.
DeleteI do not see a depression even if the models are correctly predicting future infection and death rates. There was no depression flowing from the 1918 Spanish flu pandemic, partly due to WWI defense related spending. The economic effects were short lived:
See Page 21
https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf
I do anticipate that the S & P 500 will produce a negative E.P.S. growth year. Any rebound in the second half will not be sufficient to offset the declines in the first 6 months.
I do expect a second half rebound in the economy, but most of that may be the 4th quarter, particularly if peak infection rates do not occur until June-July. The third quarter may have slightly positive GDP growth.
Based on current stock pricing, the prediction being made by the Stock Jocks is that leveraged loan defaults will soar and a number of publicly traded companies in the leisure/travel sectors will be severely financially stressed with some unlikely to make it. Many of these companies, like airlines, are highly leveraged and have high labor and routine capital costs.
thank you!
ReplyDeleteI just got home and then out of my video medical appt, so adjusting. First thing I see is the market going down... so turn on MSNBC... and it's Mnuchin talking.
ReplyDeleteThis admin should stop talking. Every time they do, the market goes...belly up. And not to get a nice belly rub.
Land: Lots of loose talk today about a $1 trillion fiscal stimulus bill which may include free money sent directly to Americans.
DeleteI viewed that talk as the reason for today's stock rally and a huge spike in interest rates. By huge, I am referring to the 10 year treasury going up .35% to 1.08%.
In the past, when the market has experienced a major volatility event like the current one, it has taken a long time for the VIX to return to below 20 movement. People are just anxious, nervous and too unsettled for a quick recovery.
CBOE Volatility Index
75.91-6.78 (-8.20%)
That is a super high number and very rare.
After the numbers skyrocketed in October 2008 it took until December 2009 for a close below 20.
Using the volatility index for the S & P 100 (VXO), it took about a year for the volatility numbers to back below 20 have spiking in October 1987.
These kind of events create psychological trauma or what I was call investor PTSD.
The VIX model does use the VWO data, which signalled a Trigger Event in the 1987 spring, followed by a Recovery Period during July-August 1987, and then the crash.
1987 Trigger Event
May 4 27.18
May 1 28.22
Ap 30 28.45
Ap29 29.22
Ap 28 31.2
Ap 27 31.46
Ap 23 29.13
Ap 22 27.95
Ap 21 27.22
Ap 20 27.18
Ap 16 27.48
Ap 15 27.59
Ap 14 28.97
Catastrophic Volatility Event: October 1987
see the numbers in this post
https://seekingalpha.com/instablog/434935-south-gent/4308586-trigger-event-in-vix-asset-allocation-model-8-31-15
That makes sense that the relief efforts were the reason for that rally Monday.
DeleteGood to know - so can store in mind, expectation that return to under 20 can take quite a long time.
I'm considering my prior buys, dead money for a while. Unless I find trades I want to make such as a somewhat down index for a really depressed individual stock.
Too bad I hadn't gotten out of F & CVX & RDS & TOT & TCRD for the duration. Not sure the last will survive. I assume the others will. Boy are they down.
I'm seeing that bi-fication where the weaker stocks are down by 10-20%, and the other stocks are down 5-6%. A few names are up. Walmart at 26% up for me. Wonder if I should sell, or wait it out.
The current prices of BDC stocks reflect a dire forecast for loan defaults. That does not mean that the forecast will turn out to be correct.
ReplyDeleteAres Capital (ARCC) is probably the best externally managed BDC.
ARCC closed at $19.23 on 2/07/20. Today the price closed at $11.76. Unadjusted for the ex dividend, that decline comes to 38.85%.
A $.4 per share dividend did go ex dividend on 3/12.
Normally, without a recession on the horizon, ARCC would normally trade near its net asset value per share, and prices earlier this year were at a premium.
The last reported net asset value per share was $17.32 as of 12/31/19.
Page 58 Annual Report:
https://www.sec.gov/Archives/edgar/data/1287750/000128775020000008/arccq4-201910k.htm
The closing price is $5.56 per share lower than the last reported net asset value per share or 32% of net assets.
BDCs will have an acceleration of loan losses during a recession that just about everyone is predicting. The question is whether the forecasted losses embedded in the stock now is too little, about right or way too high for any reasonable scenario based on what is known now.
My approach is to average down in small lots, since I can not with certainty or confidence answer that question. My feeling is that the worst case scenario predicted in the closing price today is not based on a reasonable future scenario but on fear that the worst imagined scenario will come to pass.
So, given my capital preservation objectives, I added 5 ARCC today at $12 and 5 at $11.74. I am catching a falling knife but it was not until a few days ago that I was even allowed to buy shares in over a year using the small ball purchase restriction.
The regular quarterly dividend is currently at $.4 per share. Ares is currently distributing a special quarterly dividend of 2 cents per share.
At today's closing price of $11.76, the dividend yield using only the $.4 per share regular dividend is 13.61%.
There is nothing in the recent price action that indicates IMO that the slaughter of BDC stocks has ended.
I'm not even looking at my two BDCs. TCRD & TCAP.
DeleteSouth Gent,
ReplyDeleteRe "The current prices of BDC stocks reflect a dire forecast for loan defaults." for example, TPVG closed at $5.32 today, down 69% from its 52 week high. I think the low price might also reflect some concerns on their own liquidity as a result of loan defaults in their portfolios.
Y : I threw caution to the wind and bought 2 TPVG at $5.35 and 2 at $5.61 using the small ball purchase restriction. The last earnings report was okay. Net asset value per share was reported at $13.34 as of 12/31/2020.
DeleteSEC Filed Earnings Press Release:
https://www.sec.gov/Archives/edgar/data/1580345/000158034520000004/tpvgq42019earningsreleas.htm
When I last discussed this one, I had sold my position down to 20+ shares.
The closing price today was at $5.32, down $1.62% or -23.34%.
https://www.marketwatch.com/investing/fund/tpvg
The discount to the 12/31/19 net asset value per share
at that $5.32 price is 60.57%.
The dividend yield, based on the current regular quarterly rate at $5.32, is 27.07%. The penny rate per share is $.36 per quarter, with the last ex dividend on 3/13.
I have a hard time imagining a scenario that makes those numbers reasonable.
The BDC can cut the dividend when and if it has liquidity issues which have not yet arisen.
TPVG and other BDCs have issue senior unsecured baby bonds. TPVG has a 5.75% SU note outstanding that matures in July 2022. That bond trades under the TPVY symbol and closed at $20.15 today, down 12.39% on volume of 8.6K. Par value is $25. It is on my monitor list:
https://www.marketwatch.com/investing/stock/TPVY
The volume indicates only individual trades.
The initial principal amount was $65M.
https://www.sec.gov/Archives/edgar/data/1580345/000119312517226958/d419861d497.htm
There have been a lot of margin calls that have gone out recently and individual without margin outstanding tend to panic in this kind of market.
There is also borrowings under a credit facility:
See page 102-103
https://www.sec.gov/Archives/edgar/data/1580345/000158034520000006/tpvg-20191231x10k.htm
The company had borrowed $262M as of 12/31/19. At that borrowing level, the interest is 2.8% over a short term rate. Note the covenants made.
There is always a possibility that loan defaults will be so severe that TPVG is forced to deleverage at the worst possible time under those covenants. You can not rule anything out. Maybe the Sun goes supernova tomorrow or maybe I have a heart attack tonight in my sleep and am no longer concerned about what may happen in the future.
So are we receiving a rational or irrational signal in the pricing of that bond and the common shares?
TPVG redeemed early a 6.75% note that would have matured this year.
Y: My last TPVG was a sell that brought my position down to 20.454 shares:
DeleteItem # 2.A. Pared Highest Cost 14 TPVG Shares at $15.61-Used Commission Free Trade:
https://tennesseeindependent.blogspot.com/2019/09/observations-and-sample-of-recent.html
Realized TPVG Gains to Date: +$699.27
Using the small ball purchase restriction, I was not allowed to buy until the price went below $11.2 which was when I restarted the small ball "buying program". I am now up to 54+ shares.
I have have an oxy bond maturing feb 2021; do you think OXY is a viable entity till then; given the massive leverage created by the purchase of Anadarko, oil price , etc. thanks
ReplyDeleteG: I am not sure and that would be enough to keep me on the sidelines for now.
DeleteI may gamble by buying a few more common shares but the OXY senior unsecured bonds are being priced as if they had a CCC+ rating rather than a Baa3/BBB. So I am thinking about buying 1 share of $11 stock rather than 1 $1K par value bond.
There are several that mature in 2021. This 4.85% coupon matures on 3/15/21 and closed today at 93.64, creating a 11.851% yield to maturity:
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C851021&symbol=APC4875632
I have observed the OXY bonds being slashed in price by the Bond Ghouls.The proper rating for OXY SU bonds according to the Bond Ghouls rather than Moody's and S & P is deep into junk.
If I did buy, I would buy only 1 and would be cognizant going into the purchase that I might end up with 10 cents on the dollar.
Things are likely to get worse before they get any better IMO. My best guess is that the aforementioned bond may be closer to 70 than 100 by June or July.
There are people who believe that a global depression is on the table now without a massive federal government stimulus. Scott Minerd sees a 10% to 20 chance.
https://www.marketwatch.com/story/us-businesses-need-a-2-trillion-bailout-to-avoid-a-possible-global-depression-says-guggenheims-minerd-2020-03-17
https://www.bloomberg.com/news/articles/2020-03-16/guggenheim-s-minerd-sees-10-20-chance-of-global-depression
I do not see that and would currently assign it no more than zero to 5%, but that may change in the near future.
I noticed that Nevada has ordered casinos and other non-essential businesses to close for 30 days.
ReplyDeletehttps://www.fox5vegas.com/coronavirus/covid--nevada-gov-sisolak-orders-all-nonessential-business-casinos/article_45071de2-68a5-11ea-b794-7b1e919e3440.html
Casinos are debt heavy.
I owned briefly a REIT that owns casinos.
VICI Properties Inc. (VICI)
$13.02 +$0.46 +3.66%
52 WEEK RANGE
10.37 - 28.75
https://www.marketwatch.com/investing/stock/vici
I do not have a position now.
I noticed that Chatham Lodging Trust (CLDT), a hotel REIT, suspended its monthly dividend this evening.
https://www.businesswire.com/news/home/20200317005709/en/
I expect other Hotel REITs to do the same. Those who have declared quarterly dividends that go ex dividend between now and April may not rescind that declaration but will not be declaring one for the second quarter IMO. That would include PK and HT.
It is an open question whether those hotel REITs with preferred stocks will defer dividend payments when they suspend their cash dividends.
Park Hotels (PK) has a 29.46% dividend yield at today's closing price of $6.11 and has announced that this dividend will be paid. In after hours the price closed at $5.56. However, PK will suspend any remaining dividends until " an appropriate year-end dividend can be determined by its Board of Directors." I interpret that to mean at least the dividend amount, if any, that is required to maintain its tax status as a REIT.
https://www.businesswire.com/news/home/20200316005218/en/
52 Week Range 4.66 - 33.02
https://finance.yahoo.com/quote/PK/?p=PK
Management is doing what they can but this is all unprecedented, a black swan event.
Preservation of cash is paramount now for all Hotel REITs and understandable under the circumstances.
Seems like the pain in Hotel REITS and Casinos, can't be fully priced in yet. Same for most of the entertainment & travel industries.
DeleteAll that dividend moves are helpful to know to look at before jumping in. They're basically saying that they don't know what their own value is at the moment.
Stock futures hit limit down again and trading was halted:
ReplyDeletehttps://www.cnbc.com/2020/03/17/stock-futures-fall-slightly-after-market-rebounds-on-hopes-for-1-trillion-stimulus.html
SPY is trading in pre-market and is currently down 6.37%:
SPDR S&P 500 ETF Trust
$236.70 -$16.10 -6.37%
Before Hours Volume: 3.3M
Last Updated: Mar 18, 2020 at 8:45 a.m. EDT
https://www.marketwatch.com/investing/fund/spy
Silver price have cratered over the past several days.
ReplyDeleteSLV, which I have traded in the past, closed yesterday at $11.88 and is trading down 4.04% in pre-market trading as of 7:50 C.S.T.
https://finance.yahoo.com/quote/SLV?p=SLV&.tsrc=fin-srch
On 2/24/20, the price closed at $17.4:
https://finance.yahoo.com/quote/SLV/history?p=SLV
The volatility event started on 2/24:
https://finance.yahoo.com/quote/%5EVIX/history?p=%5EVIX
I looked around to see whether online dealers had any silver eagles to sell and none did.
Individual investors have bought out their inventories.
E.G.
https://online.kitco.com/silver?utm_source=kitco.com&utm_medium=referral&utm_content=submenu-buy-silver&utm_campaign=2017-03-23_kitcoweb
In the data overload I haven't paid attention to why gold and silver are going down.
DeleteUsually it means the end of the downturn. Here it seems to mean there's even reduced manufacturing demand for the metals. Also something to do with dollar vs the rest of the fiat world.
Is there an indicator for the equities market here or not something that can be sorted out for that...
Preferred stocks and exchange traded bonds are having their most chaotic day since the Near Depression period.
ReplyDeleteREIT preferred stocks are especially being whacked.
I am buying but only in 5 or 10 share lots.
There is no shortage of stocks down more than 50% within the past month. For owners of those securities, the crash is already here.
VTR is an example:
Ventas Inc.
$16.07 -$4.95 -23.55%
52 WEEK RANGE
16.01 - 75.40
Last Updated: Mar 18, 2020 12:24 p.m. EDT
For that one, I have gone to 1 share buys.
My 2 share orders to buy TPVG have not yet stabilized the price.
ReplyDeleteTriplePoint Venture Growth BDC Corp.
$3.30 -$2.02 -37.97%
Last Updated: Mar 18, 2020 EDT
https://www.marketwatch.com/investing/fund/tpvg
The BDCs are just one sector that is pricing a deeper financial crisis than 2008. How much of that turns out to pure panic/margin selling at any price/short selling, or something prescient, remains for the future to decide.
This is just 1 example of carnage in the REIT preferred sector:
Vornado Realty Trust 5.25% Cumulative Preferred Series M
$13.15 -$5.92 -31.04%
Par Value $25
Last Updated: Mar 18, 2020 12:27 p.m. EDT
https://www.marketwatch.com/investing/stock/vno.prm
This is an example of what is happening in exchange trade bonds:
Argo Group International Holdings Ltd. 6.5% Sr. Notes Due 2042
$14.07 -$7.426 -34.54%
Last Updated: Mar 18, 2020 12:17 p.m. EDT
https://www.marketwatch.com/investing/stock/argd
Glad to see you're trying to stabliize the price. Hopefully your next buy of 1 of some share will do it for that stock :).
DeleteOutside of Reit and BDCs which are falling knives... are their any other sectors that seem beaten down but might have value pickups?
DeleteLand: My last 2 share buy of TPVG was at $2.99, which failed to send the shorts scurrying for cover. But the stock is over $3 in after hours trading so the word is out now that I am buying with gusto. Tomorrow, I intend on defending the $2.7 line with another 2 share buy.
DeleteTriplePoint Venture Growth BDC Corp.
$2.90 -$2.42 -45.49%
https://www.marketwatch.com/investing/fund/tpvg
That price, along with several hundred others, reflects an opinion that another financial crisis is just around the corner and that the BDCs will implode.
Both the Stock Jocks and the Bond Ghouls sent a distress call to the D.C. politicians today.
The preferred stock and exchange traded bond market was in total disarray, bringing back déjà vu from 2008-2009.
The Beatles' song "Help" kept running through my mind so I played the song on my computer:
https://www.youtube.com/watch?v=2Q_ZzBGPdqE
That led to a mistake. I wanted to buy 10 MSPRA and ended up buying 100 at $16.57. It has been a long time since I owned that equity preferred floating rate stock. I may sell 90 when I can do so profitably.
My trades went over 100 trades today including several $1K par value bonds that mature in 3 or 4 months.
The corporate bond market appears to me to be in a mini meltdown that goes far beyond the troubled sectors.
It is rare to see this big of a move in the ETF LQD:
iShares Investment Grade Corporate Bond ETF
$110.51 -$5.82 -5.00%
https://www.marketwatch.com/investing/fund/lqd
Most of that move is due to increasing credit risk concerns. Some is due to a rise in treasury yields today.
iShares 7-10 Year Treasury Bond ETF (IEF)
$115.80 -1.63 -1.39%
I would just ball park an estimate that 3.3% of LQD's decline today was due to credit risk fears and 1.7% to the treasury yield increase for a duration similar to LQD.
I answer the only questions after I take a break.
I liked a twitter followee's posting of
Delete"Don't stand so close to me" by the Police. It goes nicely with "Help"
https://www.bloomberg.com//news/articles/2020-03-19/bank-bailout-conditions-prompt-massive-indian-short-squeeze?srnd=markets-vp
Yes bank in India is up 274% over a short squeeze. So apparently the shorts did scuttle on your intense buying!
The decline today just triggered another circuit breaker. Once triggered, there will be a 15 minute market wide trading halt.
ReplyDeleteI have a number of bids in for $1K par value bonds that mature in about 3 or 4 months that have investment grade ratings. The bids were generally at 99.4 or 99.5.
So far, I have a fill on two orders.
I bought two Dominion Energy 2.579% junior bond that mature on 7/1/20. The order was filled at 99.5. That one is rated Baa3/BBB. The YTM at my total cost number of 99.6 is 3.988%. I now own 6 of those bonds in that account.
FINRA Page
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C688531&symbol=D4497254
If Dominion is about to go belly up before that bond comes due someone needs to tell the Stock Jocks:
https://www.marketwatch.com/investing/stock/D
The other fill was 2 senior unsecured At & T 2.45% bonds that mature on 6/30/20. That fill was at 99.5 with the total cost at at 99.6. The YTM at the total cost number is 3.884%.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C629789&symbol=T4237446
Sitting at a desk in Brentwood, Tennessee, it looks to me that liquidity has disappeared in corporate bond market which is causing prices to drop even for bonds that about to mature.
For quality long term hold until the mess is over, I'm thinking any thing with an A. But not with a B. Unless that's being too fussy to stick with only AAs? Well maybe a high BBB.
DeleteWhile I'll buy common shares, the credit rating can help indicate how solid the company's finances are.
Land: I view the credit ratings as an opinion about credit quality. Another opinion is expressed by how the Bond Ghoul's price the bond compared to other similarly rated bonds. The Occidental bonds have a Baa3 rating, for example, but are being priced closer to CCC and arguably CCC-.
DeleteCorporate Credit Rating Scales: S & P, Moody's and Fitch
https://wolfstreet.com/credit-rating-scales-by-moodys-sp-and-fitch/
I bought yesterday some short term investment grade corporate bonds ($1K par values) that mature within a few months. I did not focus much on that sector since I was busy wave buying in common stocks, preferred stocks, CEFs, and exchange traded bonds.
I woke up at 4:00 A.M. this morning, wide awake with the adrenaline pumping at full capacity. The first order of business was to look for investment grade corporate bonds maturing within 1 year that can be bought with yields-to-maturity of around 4%. I was not having any trouble finding potential buys today.
After I posted the comment about buying the Dominion Energy junior bond, someone bought that one at 95.49, creating a YTM of 19.404%, which is so far beyond ridiculous for that bond that I would not have thought it conceivable even in the Alternate Universe of TrumpWorld.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C688531&symbol=D4497254
Dominion is one of the largest electric and gas utilities in the nation. The odds of it going bankrupt on or before 7/1/20 is nil.
I have continued to try for patience. So far haven't bought. I haven't sold into any of the rallies either - so may regret that.
ReplyDeleteI'm trying to remember the support numbers.
2341 or 2350 was the 30% from top SnP last high.
I think you posted the 2018 supports (I thought I made a note) but I'm not figuring that out. I never know if the support is supposed to be the top before the break out, or the lowest point.
So I'm trying to figure out if market has gone below for the moment.
------
My instinct had said and is now saying again, market will retest the 2013 breakout. But that point will hold. I'm not investing by counting on this though. It's just that I remember IWM being at $99 around then. The major indices aren't down anywhere near that range.
Land: I do not believe the market has a major support line anywhere close to today's close. I would say that the next major support area is in the 1900-2100 range, which was where the S & P 500 was moving roughly between May 2014 and October 2016.
DeleteThere seems to be some support at or near the 2351 close on 12/24/18. The intraday low for that down cycle was 2346 on 12/26.
I am being very cautious with my buying now. Regional bank stocks are forecasting another Financial Armageddon or something close to it. There will be nowhere to hide in Stock Land if that happens, which has been the case for more than 2 weeks now.
They started to turn over in 2006 and were a leading indicator of the economic meltdown in 2008.
I blame today's debacle on Mnuchin who told GOP senators yesterday that unemployment could hit 20% without a huge stimulus package passed soon. That sent shivers into the Stock Jocks that no amount of weed and chill juice could relieve.
As to what to buy, I would emphasize that it is dangerous out there now. I would recommend sticking with small lot orders in index funds like SPY.
For individual stocks, I would emphasize the importance of very strong balance sheets with lots of cash that goes not come from a recent drawdown of a bank credit facility which several companies are doing now which also scares the Stock Jocks and to a lesser extent the Bond Ghouls.
I noticed that CSCO rallied today:
Cisco Systems, Inc. (CSCO)
37.12+1.62 (+4.56%)
At close: 4:00PM EDT
https://finance.yahoo.com/quote/CSCO?p=CSCO&.tsrc=fin-srch
I no longer have a position but may look at harder when and if it goes back below $30.
Life insurance stocks are being priced as if their insureds are going to die within the next few weeks-engaging somewhat in hyperbole there.
I bought today MFC at $9.3 ant $8.9 today, which I recently eliminated at $20.63:
Sunday, February 2, 2020
Item # 1.A. Eliminated MFC-Sold 32 at $20.63:
https://tennesseeindependent.blogspot.com/2020/02/hban-htprd-mfc-rdsb-rlj-xom.html
Manulife Financial Corporation (MFC)
$9.26 -$0.82 (-8.13%)
https://finance.yahoo.com/quote/MFC?p=MFC&.tsrc=fin-srch
50%+ declines from recent highs are common place now.
I am looking at several stocks that I eliminated in January or February as possible restarts for small ball buying programs, though some are in scary sectors now.
I sold 100 PBA at $38.69:
2. Eliminated PBA-Sold 100 at $38.69
https://tennesseeindependent.blogspot.com/2020/01/axpra-enb-fhn-oxy-pba-rlj-tef.html
Saturday, January 18, 2020
https://tennesseeindependent.blogspot.com/2020/01/axpra-enb-fhn-oxy-pba-rlj-tef.html
And this is how it goes now. Today I bought 5 at $14.7, 1 at $13.3 and 1 at $11.19:
Pembina Pipeline Corp.
$11.66 -$4.25 -26.71%
https://www.marketwatch.com/investing/stock/pba
I am being not only cautious but realistic about my buys now. I do not know when they will work. Optimistically, I am hoping for decent positive total returns somewhere in the 1 to 2 year time frame.
A key will be that most of common and preferred stocks continue to pay dividends at current levels. I have turned on dividend reinvestment for virtually every common stock that I own now, which allows for random averaging down.
I am buying a number of exchange traded bonds and preferred stocks, but it is too wild now for most investors.
Okay, So the next area of support is that 2014-2016 cycle.
DeleteI bought my F right before that 2014 downturn at $17. It was in a dip. The nice div has not made up for that. But I digress.
By my calculations (which should always be checked):
The end of 2018 low was 2346 inter-day and 2351 close.
The recent top was 3386.15. So 30% down is 2370.31.
Today's midday went below. But close was 2398.10.
So the two support calculations weren't broken. The algos are still buying into them.
"Regional bank stocks are forecasting another Financial Armageddon"
So you're seeing even more of a shift. I am trying to keep waiting.
I don't think any big collapse will take nearly as long as in 2006-2008. I wonder if individual investors are moving to cash.
I am going to sell into any rally. At this point, I may not be alone, which means a rally will keep getting decapitated. So far the rally days have barely touched my last buys.
My dad has this internal instinct in life. Last summer he insisted they move out of the market all together. They are not panicking. I am much younger, and need to keep growing my principle. I am waiting to help my niece move her tiny saving (under $300) into ETFs or mutual funds.
I will have to step through the individual stocks, and their sectors to see what I can manage. It's time consuming, and takes being careful.
The bonds & prefers sounds like great deal. It's hard to do when not all that familiar with their ins & outs. It gives of sense of how the market is moving.
I heard that Mnuchin comment about 20% and wondered, I thought he liked Trump?
DeleteLand: I viewed Mnuchin's comment as irresponsible.
DeleteThere is no way to know now whether unemployment will come anywhere close to 10%, let along 20%, from the last reported
The most important news so far today is not that the ECB's QE announcement but China's report that there were no new loCAL coronavirus infections yesterday.
https://www.msn.com/en-us/news/world/china-hits-a-coronavirus-milestone-no-new-local-infections/ar-BB11o18h?li=BBnb7Kz
I would describe what has happened so far as a market crash. It remains to be seen whether a line can be drawn in the sand, somewhere near current levels, that can be defended as a bottom.
For some sectors, like BDCs and Hotel REITs, it is a Great Depression kind of crash already. Regional bank stocks are not far behind.
Price reflects an opinion.
The opinion being expressed is that loans made by banks and BDCs will suffer rapid increases in defaults with low recovery rates. That is part of the broader opinion that companies with high levels of debt will be under severe distress over the next several months. Many will not survive until year end. The survival issue is particularly acute in travel/leisure related companies with high debt levels and other fixed costs including employee compensation and retirement benefits.
I would say that Boeing is in danger without a federal bailout. BA's pre-existing problems before the coronavirus pandemic severely weakened the company.
The company has already drawn down its full $13.8B credit facility.
https://www.reuters.com/article/boeing-drawdown/boeing-to-draw-down-full-us13-8bn-loan-idUSL1N2B41A8
The question now is whether republicans in the Senate will save the U.S. commercial aerospace industry after a majority opposed the auto industry bailout during the Obama administration. (the exceptions were GOP senators in states with heavy auto related jobs). Hypocrisy is a dominant feature of their DNA so I would not rule out their willingness to go along with Trump who is seeking a bailout.
https://www.cnn.com/2020/03/17/business/boeing-bailout-trump/index.html
http://www.nbcnews.com/id/28108346/ns/business-autos/t/gop-senators-voice-opposition-auto-bailout/#.XnNj4ZNKjuQ
Irresponsible seems like a good term for Mnuchin's comment. Like he's nervous so he used hyperbole to pressure congress reps.
DeleteThat is good news from China. They seemed to have gotten it under control in a matter of months. Maybe that's why the middle of night 4% downs, are now 2% downs.
I'm not in BA. We need rules for airlines saving for rainy days. And CEO's not getting huge salaries when they don't. Some of the airlines need to be saved for the sake of us all after this. Can't start the whole industry from scratch.
BA's been talked about so much. I avoid stocks that media thinks need lots of attention. I'm never quite sure what all the drama is about, but I know I want drama-less stocks. I bought LMT on a dip, which in part was caused by BA news. It's doing fine (relative to the market).
There is the question of accuracy of info out of China.
DeleteLand: There is a question of accuracy when the Duck puts a noun and a verb together.
DeleteSingapore and Hong Kong responded competently to the outbreak and are getting back to normal. The infection rate in the U.S. under the Duck's leadership is moving at the same pace as Iran's.
I ended up receiving fills on several more corporate bond orders. With one exception, all mature in June or July 2020 and have YTMs close to 4%. Besides AT & T and Dominion, I received fills on a 2.75% Southern bond maturing on 6/15/20 bought at 99.9 and a Morgan Stanley 2.8% SU maturing on 6/16/2000 bought at a 100 total cost.
ReplyDeleteThe exception was a Federal Reality 2.55% SU maturing on 1/15/21 that was bought at 99.3 total cost (priced at 99.2). At the total cost number, the YTM is about 3.42%.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C639827&symbol=FRT4291190
All of those purchases simply add to existing positions. Given treasury yields near zero for similar maturities, I view those prices as indicating serious dysfunction in corporate bond trading. I did my part today to provide liquidity for sellers.
U.S. 3 Month Treasury Bill 0.02% -0.165
Last Updated: Mar 18, 2020 4:56 p.m. EDT
https://www.marketwatch.com/investing/bond/tmubmusd03m?countrycode=bx
J P Morgan's economist is now forecasting a 4% decline in U.S. GDP growth this quarter and a horrific 14% decline in the next quarter, assuming Congress soon delivers on at least a $1B fiscal stimulus. That is as bad as I have seen so far.
ReplyDeletehttps://www.investing.com/news/economic-indicators/jp-morgan-slashes-forecast-for-us-gdp-sees-14-secondquarter-drop-2114567
I wouldn't bank on 14%, but I wouldn't rule out something pretty steep.
DeleteIt's a question of how much is a shift in where the money is used economically, vs. how much stops all together.
The ECB has just announced a €750 billion QE program that will include both private and public debt. The ECB has under consideration the removal of a rule that limited purchases to 33% of a member country's debt. Maybe they need to acquire all of the debt in Europe and then burn it.
ReplyDeletehttps://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200318_1~3949d6f266.en.html
I bought .8% of my investable funds into IWM at the close. (My 401k).
DeleteIf that index recovers in multiple years, I can wait. Figured it's easiest to wait in a 401k.
I know it's too soon to buy, but hard not to.
So I thought, Okay, with the QE program there'll be a rally. I'll be glad I bought. That color reddish-brown on futures is NOT A RALLY.
Thanks for the information. I didn't know about it.
It's still so strange. It's a fullblown crash, and probably partial recession... all in very fast motion.
ReplyDeleteFord became the latest company to draw down its credit facility ($15.4B). Ford also suspended its dividend.
ReplyDeletehttps://www.businesswire.com/news/home/20200319005396/en/
The rush by several companies to draw down credit facilities is not a positive development.
Sigh. I wasn't faster than algos. My F is now down over 75%, 7% of that today.
DeleteAt this point, I'm thinking to hold and see if any bounce happens, to get out at (at a loss, but out).
Maybe I'd be better getting out now? I have about $1500 left in value, that I could deploy somewhere else.
If I live long enough, I'll learn enough - but I'm not young enough to afford to wait till I learn. I'm realizing that with the news of all the US auto's closing shop yesterday, I should have rushed to sell.
Land: I do not own Ford's common stock. I do own a Ford Motor Credit bond that matures tomorrow.
DeleteToday, I have been buying bonds.
The largest expenditure came when I bought 5 Wisconsin Electric 2.45% senior unsecured bonds maturing on 6/15/20 at 99.696. The total cost with a $1 per bond commission was at 99.796. The yield to maturity at the total cost number is 3.33%. The $1 per bond commission adds .1 to what I paid.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?symbol=WEC4255724&ticker=C632231
I am just parking some money for a short period as an alternative to keeping it in a MM fund whose yield is going down and is currently at .69%. It will be near zero relatively soon since the weighted average maturity is currently about 28 days and Fidelity charges a .42% expense ratio.
The Wisconsin Electric bond is rated Baa1 and BBB+.
Corporate bond market conditions are chaotic. That bond, which will be paid off in June, had a trade at 85.32 on 3/17 creating a yield to maturity at that price of 74.338%.
The preferred stock and exchange traded bond market is even more chaotic resembling volatility last seen by me in 2008 and briefly in the 2011 summer. The REIT preferred stock sector has been smashed in price.
This morning I've noticed that QQQ is not matching Nasdaq's %. Now IWM isn't matching it's Russell 2000 index.
ReplyDeleteSnP and DOW are similar to SPY and DIA's values.
The QQQ difference earlier was 1$. IWM's is about .4% right now.
I don't know why the mismatch. Also wondering if there's a way to take advantage of it?
I've seen this type of thing before in this "crisis."
It's the strangest sensation. If the market suddenly climbed by 6%, I wouldn't react.
ReplyDeleteThe SPX rally earlier today was sold intraday but that index has just pushed back into the green.
ReplyDeleteS&P 500
2,403.80+5.70 (+0.24%)
Day's Range 2,319.78 - 2,456.76
As of 12:30PM EDT.
Since the volatility event started on 2/24, the major market indexes have not put together two consecutive plus days. Intraday trading ranges remain volatile, and are still in a bungee jumping phase.
I made one of my largest corporate bond trades in awhile a few minutes ago.
ReplyDeleteI bought 10 American Electric Power 2.95% senior unsecured bonds maturing on 12/13/22. That brings me up to 12.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C585149&symbol=AEP3938366
The purchase was made in my Schwab taxable account where over 50% of total assets are in treasury bills maturing within a year. So I figured that I needed to do something.
I paid 96.728. The total cost number was 96.828. At that total cost, the yield to maturity is 4.191% and the current yield is about 3.05%. The bond is rated Baa1/BBB+.
Electric utility stocks are getting whacked today after posting decent gains earlier in the week. AEP is now trading at $80.34 and has a common stock yield of 3.42% at that price according to Marketwatch:
https://www.marketwatch.com/investing/stock/aep
Thank you for keeping the market liquid.
DeleteElectric utility is down? Maybe related to why a few of my stocks surged.
TCRD 13% up
CVX now 1.7% but earlier 4% up.
IWM up 3%, earlier 4%
I assume based on announcement of bailing out small oil. I think Trump said it, so no idea if it's sticking.
Glad I didn't bail on F at 7% down. It's now .66% down.
IWM went much higher than SPY or DIA did today. I didn't sell my recent buys. I'm assuming it's based on the same oil gossip.
Land: Small caps are domestic oriented businesses which has been in their favor until the coronavirus epidemic washed ashore. Now their businesses and stock are feeling the full brunt.
DeleteYear-to-date and prior to today, IWM had a -39.66% total return:
https://www.morningstar.com/etfs/arcx/iwm/quote
SPY was down -25.43% YTD through 3/18:
https://www.morningstar.com/etfs/arcx/spy/quote
QQQ was down -16.94%.
Another problem for the small caps now is they generally have far less ability to tap the capital markets compared to the large caps and they will generally be hit harder during a U.S. centric recession. All of those factors have combined to contribute to their underperformance this year.
https://www.morningstar.com/etfs/xnas/qqq/quote
Small caps normally do worse during draw downs and better after. I've used them a lot over the years.
DeleteI was glad to see life today. Makes it easier to keep buying.
The reason for the rally wasn't stated in anything I glanced through. I'm pretty sure it was about statements Trump et al made about small energy stocks getting support. But I'll want to verify or figure out the reason.
While spy & dia were -1 to +2% most of the day. IWM was up 4-6% a lot of today. Till now in the drawdown, it's been down more each day.
TriplePoint Venture Growth BDC Corp.
ReplyDelete$7.96 +$5.06 +174.48%
https://www.marketwatch.com/investing/fund/tpvg
BDC stocks perform well off of crash levels.
TPVG received an added lift after selling $70M in a 4.5% senior unsecured note that matures in 2025.
https://www.sec.gov/Archives/edgar/data/1580345/000119312520078653/d883199d8k.htm
Today was my heaviest corporate bond buying in awhile, probably approaching $50K
Another 10 bond lot was the Ebay 3.25% senior unsecured bond that matures on 10/15/20.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C533903
My YTM number at total cost is 4.112%.
This one was trading at over 100 until 3/17 when the corporate bond market became dysfunctional.
The 6 month treasury bill closed today at a .06% yield. There is a period before the zero for those who need glasses.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
I was also more aggressive in buying preferred stocks and exchange traded bonds. I ventured out today gingerly into first mortgage baby bonds issued by Entergy subsidiaries that I have avoided since they were selling over par value and have significant interest rate risk which is now diminished for the time being. The prices were generally around $20.5 that created current yields over 5%. I do not recall all that I bought but I do have sort of have a memory buying ELC, EMP and EAI.
I also bought back HTA that I recently eliminated. This time, I bought 100 shares rather than 50 since the price ($22.79) was significantly lower than my last purchase.
Regarding the purchase of 10 EBAY 3.25% SU bonds that mature on 10/15/20, I would note that the redemption proceeds are already in the EBAY's coffers.
DeleteEarlier this month, EBAY sold $1B in bonds:
https://www.sec.gov/Archives/edgar/data/1065088/000119312520065223/d885913d424b5.htm#supprom885913_5
In the use of proceeds section, found at page S-14, EBAY makes the following statement:
"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."
Another relevant point is that the 3.25% 2020 note can be redeemed early, without a make whole payment, on or after 7/15/20:
"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
https://www.sec.gov/Archives/edgar/data/1065088/000119312510234062/d424b5.htm
So it is unlikely that EBAY will wait until 10/15/20 to pay off the bond. The more likely redemption date will by 7/15/20.
There are a large number of squirrelly things happening in bond land now. Under the circumstances, buying this bond at 99.425, what I paid, is just odd.
According to FINRA, and there may be an error in the data, this bond closed at 96.4 which created a 10% YTM.
So you bought at one price but the sale then lists a lower price?
DeleteFor the YTM, if I remember from looking at bonds, that's on the page with info about the bond?
Land: I am not sure whether the later purchase was correctly reported to FINRA. Due to chaotic bond market conditions, there can be large variations in price. I simply make decisions on what price is acceptable to me, either through a limit order or simply hitting an ask price.
DeleteYield-to-maturity (YTM) is different from current yield. YTM adjusts the yield to include a profit or loss on the bond when it is held to maturity. My YTM on the 10 EBAY bonds will be the 3.25% coupon from the day of purchase until the maturity + the profit on the 10 bonds which will be $47.5. The yield-to-worst is the appropriate total return number for this purchase since I anticipate a full redemption on 7/15/20 rather than the maturity date of 10/15/20.
The investment decision with this kind of purchase simply compares the yield for this bond with keeping the purchase amount in a money market fund.
U.S. multinationals and exporters have another problem other than recessionary conditions and an increase in expenses due to COVID-19 pandemic.
ReplyDeleteThe U.S.D. is soaring in value.
U.S. Dollar Index (DXY)
102.68 +1.52 +1.50%
Last Updated: Mar 19, 2020 at 5:07 p.m. EDT
That is also a headwind for precious metals.
CBOE Volatility Index
72.00 -4.45 -5.82%
Overall, the Stock Jocks could not be pleased with today. A number of key stocks faded into the close and finished down for the day including Apple:
$244.78 -$1.89 -0.77%
242.61 - 252.84
https://www.marketwatch.com/investing/stock/aapl
AAPL was over $250 about 90 minutes before the close. The low for the day was in the early morning trading.
Stock futures are down, wiping out today's gain and more.
E-Mini S&P 500 Future Continuous Contract
2,355.00 -46.40 -1.93%
Last Updated: Mar 19, 2020 3:59 p.m. CDT
Regarding HTA, I view it as a victory when I buy back a stock significantly below my last purchase price after eliminating the position, regardless of what happens next.
My last HTA round-trip started with a 50 share buy at $26.88.
Item # 4. (7/13/2009 Post)
https://tennesseeindependent.blogspot.com/2019/07/observations-and-sample-of-recent_13.html
I then sold 10 shares at $30.81 and 10 at $31.31 before selling the remaining 30 shares at $32.51:
Item # 2.D.
https://tennesseeindependent.blogspot.com/2020/02/fitb-hta-ivz-jcap-prosy-sjr.html
I view this medical office REIT to be a blue chip but it tends to become overvalued. FFO and dividend growth is minimal.
I received the last quarterly dividend that went ex on 12/31/19. I will now receive the next quarterly dividend which will go ex on 4/1/20 and that is also viewed as a victory. I did not miss a dividend; my cost basis is much lower and I harvested gains.
https://www.marketwatch.com/investing/stock/hta
Duke Energy (DUK) drew down a $1.5B credit facility today:
ReplyDeletehttps://www.sec.gov/ix?doc=/Archives/edgar/data/1326160/000110465920035742/tm2013158-1_8k.htm
This may have led to electric utility stocks having a down day since DUK is one of the biggest ones.
The stock was volatile with a downside bias.
Duke Energy Corp.
$75.05 -$4.23 -5.34%
https://www.marketwatch.com/investing/stock/duk
Some investors are probably becoming increasingly antsy about all of the credit facility drawdowns that are happening now.
So that goes with the earlier observation that electric unities were down.
DeleteBrokers use third party services to value $1K par value bonds held in their customer's accounts.
ReplyDeleteThe values for my bonds shown this morning are delusional and so wildly inaccurate that they serve no purpose other than to scare individual investors unfamiliar with this abomination.
By way of example, I own 3 Entergy Mississippi 3.1% FIRST MORTGAGE bonds maturing on 7/1/23 in my Fidelity account. Fidelity's third party pricing service claimed that the market value of those bonds went down $6.702 yesterday, representing that the market value as of yesterday's close was 94.955. Moody's rates that bond at A2.
Just for kicks, I tried to enter an order at Fidelity to buy at that price. The Fidelity computer refused to accept the limit, instructing me that I had to enter an order between 100.761 and 103.344 which was the current ask price.
The yield for a 3 year treasury closed yesterday at .53% yield.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
The YTM for that A2 rated First Mortgage maturing on 7/1/23 bond at Fidelity's price of 94.955 is about 4.9%.
The pricing services used by brokers are worst than worthless.
I mentioned yesterday that I was buying some first mortgage exchange traded bonds. One of those is a Entergy Mississippi LLC 4.9% First Mortgage Bonds (EMP), which closed at $20.92 yesterday.
https://www.marketwatch.com/investing/stock/emp
This company is a large electric utility operating in Mississippi that is wholly owned by Entergy (ETR). The first lien attaches to substantially all assets.
The first mortgage bonds may have several series with a limit on the total amount. For Entergy subsidiaries, there will be both exchange traded first mortgage baby bonds ($25 par value) and $1K par value first mortgage bonds traded in the bond market.
I prefer owning the ones traded in the bond market for 2 reasons.
First, I can substantially reduce interest rate risk by picking those with relatively short maturities, whereas the exchange traded versions frequently have maturity dates in the distant future. EMP for example will mature on 10/1/2066 unless the issuer exercises it optional redemption right at par value. That right can be exercised for EMP on or after 10/1/2021.
https://www.sec.gov/Archives/edgar/data/66901/000006598416000696/d245113d424b2.htm
Second, the optional redemption at par value creates asymmetric interest rate risk in favor of the issuer compared to a $1K par value bond that requires a make whole payment. I would not be surprised to see Entergy Mississippi redeem EMP at par value on 10/1/2021 while the $1K FM bond maturing in 2023 will keep on trucking, pumping out interest payments at the 3.1% coupon rate.
The baby bonds, which are now being priced well below par value and have higher coupons, are better options near term when the likelihood of an early redemption within a few years is likely. The reason is obvious. A buy of EMP at $21 and a redemption at $25 on 10/1/21 would generate a $4 per share profit or a 19% return on the investment plus the coupon.
The problem is that the issuer will be happy to let you keep EMP until 2066 when interest rates are rising and the bond price is falling, and the company is unable to refinance at a lower coupon rate.The alternatives for the owner then are (1) sell at a loss or (2) lose the opportunity to reinvest the funds invested in a higher yielding similarly rated bond.
That's nuts. The big benefit of computers is their ... computations.
DeleteI had been wondering where you got the YTM - whether you were self-calculating, or whether it was from the broker screen.
I've seen it on the screen, and thought it was useful. But that was during regular old times.
Land: Generally, the order book for a bond will show the YTM number as will the FINRA page for the bond.
DeleteMy confirmations will generally show both the current yield and the yield-to-maturity. Some bond order books will also show yield-to-worst.
I will include a confirmation from a recent bond buy in this weekend's post that has a bunch of information. When I take a snapshot of a bond trade, it comes from my account history rather than the next day's confirmation.
The values of bonds shown in my portfolio holdings are provided by a third party service. Generally, I would buy every bond at the price shown. There is a deliberate effort to underprice them, possibly related to margin requirements and forced liquidations due to margin calls. When I want to sell, I have no difficulty selling at a price higher than the fair market value provided by that third party service.
The current yield is a straight forward calculation. I bought a First Horizon 3.5% senior unsecured bond that matures on 12/15/20 at a total cost of 97.1.
The current yield of that bond is 3.6045% ($3.5 annual interest ÷ $971 cost). The YTM includes the profit of $29 per bond assuming FHN pays off the bond when it matures. Since the bond matures in about 9 months, the impact of that $29 per bond profit on the YTM calculation will be significant compared to a say $29 profit on a bond that matures in 20 years where the profit amount would make a negligible contribution to YTM and most of the yield would be in the current yield number. For the FHN bond maturing next December, the important yield number is the YTM or the yield-to-worst when the issuer can redeem early without a make whole payment and would likely do so.
In an earlier comment, I maintained that the December 2018 SPX low was not much of a support. That has now turned out to be an accurate prediction.
ReplyDeleteThe Stock Jocks euphoria and blue skies scenario until the end of days has quickly turned to there is no hope for any of us. Psychologists have a diagnosis for those mood swings.It used to be called manic depression. The correct PC name now is bipolar disorder.
Crude oil took the market down, with WTI crashing below $20 per barrel.
The VIX actually declined today indicating that SPX move down was not confirmed by the VIX.
CBOE Volatility Index
66.04 -5.96 -8.28%
Treasuries proved once again to be a haven from stock market losses.
iShares 20+ Year Treasury Bond ETF
$159.43 +11.15 +7.52%
https://www.marketwatch.com/investing/fund/tlt
The 30 year treasury bond closed today at a 1.55% yield:
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
Investment grade corporate bonds were doing better today until the stock market turned south in a big way.
The Vanguard Intermediate-Term Corporate Bond ETF (VCIT) has a .05% expense ratio or about .1% lower than LQD.
https://investor.vanguard.com/etf/profile/VCIT
Both VCIT and LQD have over 50% of their respective portfolios in "BBB" rated debt, and do no specify how much is in BBB+, BBB, or BBB-. That is material information to know.
Vanguard Intermediate-Term Corporate Bond (VCIT)
$78.83 -0.95 -1.19%
Price Range: 78.83 - 81.55 (high volatility)
https://www.marketwatch.com/investing/fund/vcit
I did a few small ball wave buy programs in commons stocks but most of activity was providing liquidity for the Bond Ghouls who had to sell.
There have been massive redemptions out of bonds funds, with the brunt being felt by investment grade corporate bond funds. The funds are being moved to money market funds that will soon have near zero rates.
When I look an order book, even for a short maturity, there may be 10 or more separate asks and no bids.
If the issuers of the bonds that I am buying go bankrupt within the next few months, then I will need to learn about farming and maybe raising some chickens if the neighbors do not object.
I low balled most of my bond orders and received about 5 fills.
Keeping in mind that MM rates are moving to zero rapidly and treasury bills are already there, I am able to buy BBB+ or higher rated corporate debt maturing in 2 to 12 months with YTMs ranging from 4% to 6% with BBB- going up to 8%. (see the following example)
While investors are really nervous about regional banks now, I would not view it as rational to price into First Horizon (FHN)senior unsecured bonds a chance of bankruptcy within 1 year. But some odds are being reflected in the yields now.
For example, I bought today 2 FHN 3.5% SU bonds maturing on 12/15/20 at a total cost of 97.1. The YTM at that total cost number is about 7.677%. Needless to say, that speaks volumes when six month treasury bills are near zero.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C641369
The bond is currently rated at Baa3/BBB- which is the riskiest one that I bought today. My buy was the last trade today. This SU note may not be redeemed by the issuer prior to maturity.
I am not currently worried about the FHN credit risk but some people are which is reflected in the price.
I did go to Kroger's this afternoon. There is some food available. Restaurants were closed. Traffic would be like I would see at 7:00 A.M on Saturday morning or less than 5% of the normal flow from a Friday afternoon.
Correction: I was looking at the wrong FHN bond prospectus. The 3.5% SU maturing on 12/15/20 can be called on or after 11/15/20 without FHN at par + accrued and unpaid interest:
Deletehttps://www.sec.gov/Archives/edgar/data/36966/000093041315004121/c82712_424b2.htm
I pay no attention to bonds. What does it say that MM & treasury are at 0%, but corporate bonds are selling at prices well below what they should so that YTM is quite high? Are investors really that scared that they won't buy a 4% yielding A rated bond, because of fear of the company going bankrupt or reduced it's finances enough (to lower ratings like B-,C) to not be able to get the bond cost back again?
DeleteI supposed it's possible. It seems hard to believe, when various stocks are getting bought such as groceries & zoom.
With market down this much, a 4% yield is great for a portfolio aiming for capital preservation. But for younger people looking for growth, stocks should be down enough to be the better total return bet?
Land: Corporate bond yields reflect a credit risk spread to treasuries that mature at about the same time.
DeleteThe treasury yield is view as a credit risk free yield whereas the yield of corporate bonds will add credit risk as a component of current yield and yield-to-maturity.
The treasury yield will take into account a large number of factors including inflation expectations until the maturity dates, at least during normal times when central banks are not manipulating rates throughout the maturity spectrum.
The corporate bond yield spreads can also be impacted by temporary dislocations in demand. Currently corporate bond funds are facing redemptions that are requiring bond fund managers to sell, whereas the demand for treasuries is increasing even as rates fall.
The Bond Ghouls are expressing concerns in many corporate bond yields, currently rated as investment grade, that the economic downturn will or may cause financial distress that threatens debt refinancings.
For investment grade corporate bonds that mature in a few months, I believe the concerns are irrational if based on credit default concerns, but the prices may reflect more temporary dislocations in supply and demand as bond managers are forced to sell whatever in order to meet redemptions. So I am now focusing my attention on those short term maturities.
I forgot to mention that if they manage to get through bankrupcy court in the next few months... and you need info about raising chickens... I may be able to help, since my sister has kept a menagerie over the years. I will give her the urgent alert and be prepared for your soon to arrive questions.
DeleteThe Department of Motor Vehicles just sent out a note that they are closed.
DeleteI'm wondering why 7pm on a Saturday is when this email is going out.
What a busy day. Family thought they might have the virus. Which took multiple calls. (To convince to make one of them to a doctor, not me.)
ReplyDeleteWasn't a virus. A relatively small adjustment to treatment is probably what's needed.
I've been not buying. Be nice to figure out how to take advantage of interday... not even that, inter 3 min... changes of 1-2%.
I've never seen anything like it. Then again, i wasn't watching in 2008 or 2000.
Couldn't resist the down at the end of day in Spy. Bought at 229.10. With .5% of my investment funds.
After hours it went down more. I picked up another smaller batch at 226.55 so another .5% of funds. I have a sell order out for the more expensive batch... see if by 8pm the market moves that way. (Why not have it?)
Today Spy went down near to it's interday low from yesterday or day before that was the recent low. But this time at the close with that 229-228 move.
IWM went down at the close but it's gotten a lift from yesterday, and is staying -relative- to the others, 1-2% up from before. Still don't know what triggered that.
IWM was again 1% off from Russell 2000 so something in the ETF's stocks is doing better than the Russell weighting.
The big notable seems like the 2,304.91 close that's below both 30% down and 2018 lows support. Especially on a Friday end of day.
The two states closing down, appear to be the trigger each time.
My stocks are very red. Wish I'd had conviction to sell out when I thought there was much more coming. The weak ones don't always recover much when everything finally does.
"The VIX actually declined today indicating that SPX move down was not confirmed by the VIX.
ReplyDelete"
Hadn't noticed that. Could be start of a bottom?
On Cascovvi's charts he points out that each time the market continued down another 4-5% after VIX had topped.
That doesn't mean of course that VIX is topping.
My big oil stocks were up today.
Land: Without a depression forming, I see the SPX decline near maxing out, maybe another 200 to 300 points under it steadies in the 1900 to 2200 range. The recent high was at 3,393.52 on 2/19/20. The close today was at 2,304.92. The decline from the recent top to today is 1,088.6 points or 32.1% since 2/19. Another 300 points would be a about a 41% decline.
DeleteThe VIX does not have negative correlation with SPX every trading day. Sometimes there is positive correlation as today. My memory is foggy but the negative correlation holds somewhere around 70-75% of the time.
But most of those cases where the correlation is positive are when there are minor changes (e.g. SPX up .2%; VIX up .1%) It is highly unusual to see the VIX go down significantly with the SPX declined by 4.34%. For now, I would simply classify it as an anomaly.
It'd be fun to go back and see if the VIX did that size declines at the same time as the market before, even once.
DeleteI keep expecting a rally here. I think the algos and big money investors are too. But the bad news keeps coming, with shutdowns of whole states.
Certainly room for an anomaly. The whole country is one right now.
Another 10% to around 40% feels right.
With a depression forming, can you see this going even further down?
The economy is in an effective depression. It's not being reported in the economics numbers yet. But the actions and spending are already moving into depression levels -style-, because we'll all hiding in our houses from a microscope bug.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2020/03/aresf-ddt-duk-fax-gis-igr-k-mspra-opini.html