BOHPRA, BTZ, CALF, COWZ, EAI, ELC, JRI, NMFC, NYCBPRA, OKE, TY

Economy: 

Personal Income and Outlays, July 2023 | U.S. Bureau of Economic Analysis (BEA): 

Annual PCE Price Index: 3.3%, up from 3% through June

Annual Core PCE Price Index: 4.2%, up from 4.1%

Month-to-Month Increases: .2% for both indexes, unchanged from the prior month-to-month  

Shelter "Expense" Annual Increase: 7.6%, down from 7.8%. The consensus is that the annual increases in owners equivalent rent, a major "expense" category, will trend down in the coming months.  

The annual core PCE price still includes a core PCE price index month-to-month price gain of .5% in September 2022; Personal Income and Outlays, September 2022; .4% in November 2022; .6% in January 2023, Personal Income and Outlays, January 2023; .3% in February and March 2023,  Personal Income and Outlays, March 2023 and .4% and .3% in April and May 2023, Personal Income and Outlays, May 2023. 

A continuation of the current month-to-month PCE price increases will bring the core PCE price index closer to 2% when the higher numbers are no longer included in the annual increases. So, notwithstanding the annual increases in the PCE and core PCE price indexes in July compared to June, inflation is trending down.  The annual increase will likely look much better starting in February 2024. 

PCE: up .8%

Income: up .2%

Living paycheck to paycheck: Inflation is still squeezing budgets

** 

Jobs, Wages and GDP:

The BLS reported yesterday that economy added 187,000 jobs in August. Employment Situation Summary - 2023 M08 Results The unemployment rate increased to 3.8% from 3.5% in July. The labor participation rate rose .2%. The average work week increased .1 to 34.4. Average hourly earnings rose 8 cents to $33.82 or .2%. The annual increase was 4.3%. "The change in total nonfarm payroll employment for June was revised down by 80,000, from +185,000 to +105,000, and the change for July was revised down by 30,000, from +187,000 to +157,000. With these revisions, employment in June and July combined is 110,000 lower than previously reported."

The seasonally adjusted U-6 number increased to 7.1% from 6.7% in July. The non-seasonally adjusted U-6 number increased to 7.2% from 7.1%.  Table A-15. Alternative measures of labor underutilization - 2023 M08 Results

About 54,000 jobs were lost due to the Yellow freight bankruptcy which occurred in early August and the ongoing strikes in the entertainment industry. Yellow's Bankruptcy Dented August Job Growth. The Labor Market Still Is Cooling. | Barron's

Discussed at Jobs report August 2023. 

Overall, I would characterize the labor market as weakening. The downward revisions to the June and July reports are significant. Wage growth is slowing. Some economists believe that wage growth above 3.5% is not compatible with a 2% annual inflation rate.  

U.S. job growth slowed sharply to 177,000 in August according to ADP The consensus forecast was for 200,000. ADP® Employment Report

In the government's second estimate, annualized real GDP growth for the second quarter was revised down to 2.1% from 2.4% in the first estimate. Gross Domestic Product, Second Quarter 2023 (Second Estimate)-U.S. Bureau of Economic Analysis (BEA) Personal consumption expenditures increased by 1.7%, revised up from 1.6% in the first estimate.  

**

China

One estimate, described as conservative, is that China's property developers owe at least $390B to companies that supplied them with building products or furnished labor or other services in connection with their properties. In other words, the negative repercussions on China's economy go far beyond an inability to pay back debt. China’s Property Crisis Is Rippling Through the Economy - The New York Times 

How China's Debt Problem Could Trigger a Financial Crisis | Barron's An analyst noted that total credit outstanding has increased 8.5 times since 2008 while GDP is up 3.9.

More Trouble for China: Households Would Rather Save Than Spend | Barron's This is another problem given China's heavy reliance on exports, which are slowing, to fuel growth. China reports double-digit plunge in July exports and imports, missing expectations 

Much of China's GDP growth has been fueled by spending borrowed money. 

China’s Debt Bomb, the title of a 2015 WSJ article, noted that the "McKinsey Global Institute report put total borrowing—by individuals, companies and government—at 282% of GDP in 2014." 

The problem has been simmering and becoming worse for over a decade. China's real estate bubble - YouTube (CBS 60 Minutes, originally aired over 10 years ago)  Why China's New Cities Are Still Empty - YouTube; Why China's New Cities Are Still Empty - YouTube; Inside The Ghost Cities Of China That Look Like A Futuristic Dystopia

Reference to the "Debt Bomb" was made in a July 2023 article published in the NYT. How Much Debt Does China Have? - The New York Times

China's woes are multiples worse than the U.S.'s were going into 2008: Hayman Capital's Kyle Bass

China's debt problem is aggravated IMO by the non-productive assets including vacant real estate that was financed with the debt. 

A core problem facing China now is that the debt and the economy has grown so large that even a $1T stimulus program, financed with more borrowed money, would barely move the needle. There comes a point when a nation can not dig itself out of a financial crisis caused by too much debt by issuing huge amounts of new debt. That was the cure when the last debt bomb exploded back in 2008.

New real estate construction, a main driver in China's GDP growth, will dry up. Building more ghost cities in order to spur GDP growth will only make the problem worse. The adverse economic repercussions from ill advised projects financed with borrowed cash, which has been incinerated, and made worse by failing to pay suppliers and other providing services for such projects, are only starting to negatively impact China's economy. 

Commerce secretary says US firms complain China is 'uninvestable' Russia is certainly univestable.

**

Labor

The UAW members have authorized a strike against Ford, GM and Stellantis (formerly known as Fiat Chrysler). The UAW wants a "fair" contract that includes "a 46% wage increase, restoration of traditional pensions, cost-of-living increases, reducing the workweek to 32 hours from 40 and increasing retiree benefits." UAW strike: Workers overwhelmingly vote to authorize work stoppage If the UAW sticks somewhere close to those demands, there will be a strike after a breakdown in negotiations. The strike would last a long time as have the strikes by SAG and WGA members that have brought the entertainment industry to a halt.  Writers and Actors Stay Resolved for Strike: 'Digging Our Heels in' - Variety; Writers Strike: Talks at a Standstill After Week of Trading Barbs – The Hollywood Reporter

Labor unions are pushing hard for better pay and hours — and winning

**

Regional banks face hit from new debt level requirements This FDIC proposal  will likely lead to more credit tightening when implemented. The FDIC claims that this proposal will result only in a 3 basis point decline in net interest margin, an absurd prediction using anywhere close to the long term borrowing costs for regional banks.  

Treasury Yield Curve August 2023: 

10 Year Breakeven inflation rate as of 9/1/23: 2.26%

CME FedWatch Tool - CME Group

As of 9/1/23: 

Odds of a .25% increase at 7%, 93% remains the same as now

Odds as of year end: 58.5%  same as now

++

I installed ChatGPT on my Apple IPad last Wednesday and asked the following question: What are the adverse  consequences of quantitative easing? A detailed answer came back in about 2 seconds which listed 8 adverse consequences. I gave an "A-" to the answer. 

++++

Allocation Shifts Discussed in this Post: 

Treasury Bills Purchased at Auction: $5,000 in principal amount. 

Corporate Bonds: $2,000 in principal amount 

CDs: $3,000

Common Stocks: -$289.29

(consisting of $803.24 in proceeds minus $513.95 in purchases) 

Weighted Average Yield of Common Stocks Purchases: 10.23%

Stock Funds: Net of +$496.88 

(consisting of $939.3 in purchases and $442.42 in proceeds)

Net Inflow Common Stocks/Stock Funds: +$179.59

Realized Gain Common Stocks/Stock Funds: +$455.96

Exchange Traded First Mortgage Bonds: +$214.7 (yield at 5.68%)

Equity Preferred Stocks: +$299.78 (weighted yield at 7.14%)

Leveraged Bond CEF:  $49.4 (yield at 10.22%)

2023 Net Outflow Common Stocks: -$36,854.25

The primary reason for the net outflow is the risk free rate of return in treasury bills. 

+++

Psychopath Putin and His Pathological Orwellian State- The Russian Empire of Misery: 

Putin Ally Issues Ominous Warning on Threat of New World War Russia's former President Dmitry Medvedev, a major beneficiary of Russia's Kleptocracy, has been threatening the U.S. and other democracies with nuclear war, unless those democracies acquiesce in Russia's imperialistic ambitions and forced absorption of Ukraine into the Russian Federation.  

Russia Ramps Up Nuclear Threats Amid Ukraine's Counteroffensive Advances

Inside the Russian effort to build 6,000 attack drones with Iran’s help - The Washington Post

Russian propagandist Solovyov rages about massive drone attack inside Russia - YouTube He specifically mentioned wiping the Baltic states off the map. He also wants Russia to nuke Ukrainian troops. Furious propagandists want to nuke Robotyne - YouTube

Russian propagandists, including Margarita Simonyan, claim the West is forcing them to kill Ukrainians - YouTube  

The Russian propagandists are outraged that Ukraine launched a drone attack deep inside Russia that destroyed 2 Russian aircraft and damaged 5 others including including a Tupolev Tu-22 supersonic bomber. Six Russian Il-76 Planes, Tu-22 Bomber Hit in Night Drone Raid on Pskov; Ukraine launches far-reaching drone attack inside Russia - YouTube

Ukraine says attacks at Russian airbase were launched from inside Russia - YouTube

Knowingly false Russian propaganda does work. Lying all the time about almost everything will work on tens of millions even when there is a free press and easily accessible accurate information that rebuts the false information and narratives. It is impossible for a rational person to understand why anyone would accept any statement by either Simonyan or Solovyov as accurate or to view them as anything other than a couple of buffoons trying to do a comedic version of Goebbels.   

The Global Expansion of Authoritarian Rule | Freedom House Democracy is an historical aberration.  

Ukraine is not and has never been a security threat to Russia. 

Assuming there is a Russian who has not been thoroughly brainwashed by knowingly false propaganda, that person might ask themselves how Putin has improved the Motherland's security by launching the unprovoked aggression against Ukraine which has (1) severed long term economic ties beneficial to Russia; (2) will have profound and long term negative impacts on Russia's economy and currency; (3) has caused some of the best and brightest Russians to flee in droves; (4) has substantially increased the military equipment available to Ukraine's army, which is now battle hardened and far more professional and competent than Russia's army; (5) led to more NATO spending on defense and to Finland joining NATO; (6) resulted in substantial losses in Russia's military equipment that will be costly to replace and will divert large sums  to replace from more productive civilian uses; (7) increased the actual and potential instability inside Russia; (8) rendered a large number of Russian soldiers to psychological trauma and long term care resulting from battlefield wounds, rendering many incapable of providing useful services to Russia's economy going forward; and (9) resulted in well over 100,000 Russian soldiers killed in action who will no longer be able to support their families and make useful contributions to Russia's economy. 

The current estimate for Russian soldiers killed in action is 120,000 with another 170,000 to 180,000 wounded. Ukraine War Casualties Near Half a Million, U.S. Officials Say - The New York Times

+++

Trump and His Cult: 

Trump Is Top Choice for Nearly 60% of GOP Voters, WSJ Poll Shows - WSJ

Judge Aileen Cannon Continues to Make a Mess in the Documents Criminal Case - MeidasTouch Network

The anti-democracy party is strong in Wisconsin. Wisconsin Elections Official Targeted - The New York Times The general approach by the authoritarians, who call themselves "conservatives", is to replace election officials who uphold the law and do not accept fact free conspiracy theories that would nullify the election results when a republican loses an election.  

Georgia Republicans Say They'll Move to Remove Fulton County DA Fani Willis From Office With New State Law This would be what authoritarians would do. The authoritarian party in Georgia, which controls the state in part due to gerrymandering, has already passed a law that will allow them to remove a democratically elected DA. GOP Moves to Oust Georgia Prosecutor Who Indicted Trump Fani Willis, who is black, will be their first target. 

State Senator Clint Dixon (R-GA) stated that the republicans needed to remove Fani Willis from her post because she indicted Donald and other republicans  to become "some sort of leftist celebrity" and that was her "unabashed goal". The remedy for Georgia republicans is to declare that all of the Georgia defendants are innocent in effect, a conclusion reached without a trial by jury or any rebuttal of evidence.  

Sarah Palin, the Republican Candidate for VP in 2008, Urges Trump Supporters To 'Rise Up' Over Arrest; On Newsmax, Sarah Palin calls for civil war | Media Matters for America (Palin referring to the Trump's last indictment: "Do you want us to be in civil war? Because that’s what’s going to happen.")

Trump aide told police to 'go hang yourself' at Jan. 6 riot

Fact-checking the GOP debate, first for 2024 election cycle - The Washington Post 

Vivek Ramaswamy probably gained more support among republicans than the other candidates. He has surged past Pence in the 2024 republican presidential polling. He is a smiley face and certainly slicker than Pence or DeSantis. 

His policies and adoptions of fact free conspiracy theories will resonant with many republicans but will be soundly rejected by a majority of voters. Those policies include (1) abolishing the IRS, the Department of Education and the FBI; (2) firing 75% of the U.S. government employees; (3) eliminating aid to Ukraine and adopting Putin's position to freeze the territorial lines where they are now; (4) using the military to attack cartels in Mexico (a position also advocated by DeSantis); (5) refusing to accept climate change science referring to the evidence as a "hoax"; (6) raising the voting age to 25 but allowing 18 to 25 year olds vote provided they pass a citizenship test that most of their elders would flunk; and (7) summarizing the current state of America in dark and foreboding terms which is commonplace among GOP politicians. Vivek Ramaswamy, the Millennial 2024 Candidate, Emphasizes His Generation - The New York Times He would not have certified the results of the 2020 election. Vivek Ramaswamy says he would've certified the 2020 election results; 

Fact check: Audio debunks Vivek Ramaswamy's false claim that he was misquoted about 9/11 | CNN Politics

Here’s the Recording of Vivek Ramaswamy Implying 9/11 Was an Inside Job | The New Republic

Tapper In Disbelief After Ramaswamy Spews Conspiracy Theory

Ramaswamy defends White supremacy & KKK comments In Ramaswamy's alternate reality, racism exists only among liberals; Jacksonville, Florida shooting: What we know about the racially motivated attack at Dollar General that killed 3 

Ramaswamy claims that climate policies are more deadly than climate change. PolitiFact | More deaths from climate policies than climate change? Scientists say Ramaswamy’s claim is baseless (rated as "Pants on Fire") He defended that fact free claim in an interview with Andrea Mitchell.  Ramaswamy, Andrea Mitchell spar in testy interview | The Hill

Fact check: Ramaswamy makes two false claims about what he wrote in his own book 

Vivek Ramaswamy's Foreign Policy Makes Headlines, Not Sense | National Review

Republicans are turning against aid to Ukraine | Brookings (only 28% of republicans support more aid)

Rudy Giuliani (R) liable for defaming Georgia election workers Judge Finds Giuliani Liable for Defamation - The Atlantic; Court Order.pdf Giuliani admitted in an earlier court filing that he defamed two black election workers. A federal district court entered a default judgment against Giuliani on the liability issue for repeated failures to respond to discovery and also imposed on him and two of his companies $133,000 in sanctions for refusing to turn over documents requested by the plaintiffs. 

Among the defamatory statements made by Giuliani were that the two election workers brought with them suitcases full of fraudulent ballots, passed between themselves USB drives like they were "vials of cocaine", and it was "obvious to anyone who’s a criminal investigator or prosecutor that they are engaged in surreptitious, illegal activity." 

Giuliani will appeal the default judgment. Even if he wins on appeal, he is going to lose on the liability issue on remand given his admission that his statements were false and actionable, something that I discussed more fully in an earlier post. Contrary to Giuliani's claim, legally defamatory statements are not protected speech under the First Amendment which has been the case for several hundred years now. 

Representative Cory Mills (R-FL), who has filed articles of impeachment against the Defense Secretary Lloyd Austin, claimed that the family of Sgt. Nicole Gray, a marine killed in Afghanistan, had to pay $60,000 to bring back her body to the U.S. 

There was no truth of course to the claim.   

The U.S. Marine Corps went to the highest levels at Fox "news" who published that claim demanding a retraction.  

Fox "news" has not apologized or corrected the obviously false statements made by Mills that were reported in a Fox "news" article. When confronted with the facts, Mills seemed to blame the Pentagon and Gray's family for his statements. Pentagon protested false Fox News report about fallen Marine, emails show - The Washington Post; Inside the Marine Corps' Fight with Fox News over a False Gold Star Family Story | Military.com 

GOP Rep. Cory Mills (R-FL) hands out dummy grenades to House members - The Washington Post; Congressman Sends Inert Grenades to Colleagues at House Offices - The New York Times 

Republican politicians make a continuous stream of false statements that will appeal to republican core voters. The path to success in that party is to lie and misrepresent, which works on the intended audience who are both unreachable with accurate information and extremely easy to manipulate with false information. The similarities in that regard to Putin supporters are striking. 

McCarthy starts to plot Biden impeachment strategy while GOP skeptics remain 

Trump, campaign lash out at trial date in Jan. 6 federal case | The Hill In addition to attacking the Judge, Trump called Jack Smith "evil", "sinister" and "deranged" and  the prosecutors working with Smith as a "team of Thugs". Trump: "The Security Tapes from Mar-a-Lago that evil and sinister prosecutor, Deranged Jack Smith, “leaked” or otherwise stated were deleted or altered were, in fact, NOT deleted or altered. It was a Fake Story put out by the government THUGS. Those tapes were openly handed over, without protest or litigation, and then the “Deranged One” makes me look as bad as possible. The whole case is FAKE because I come under the Presidential Records Act. Biden or Pence did not!" Trump was not charge with actually deleting the surveillance tape but entering into a conspiracy to delete them in response to a grand jury subpoena. Trump valet's lawyer Stanley Woodward claims he received threats after special counsel bombshell court filing 

Ken Burns clearly recognizes, as I do, the clear and present danger to America's democracy. Ken Burns on why the Republican Party completely changed - YouTube Even if Trump loses by 20 million votes in 2024, and losses key battleground states by more than 5%, he will still claim that the election was stolen from him and his party will make every effort to nullify the vote counts. In some cases, I would expect compliant election officials to buckle in 2024 to Trump's pressure to change the outcome. 

I agree with David Frum that the best way to end the ongoing threat to America's Democracy is to crush Trump at the ballot box assuming the republicans nominate him in 2024, which now appears very likely.  The Fourteenth Amendment Fantasy - The Atlantic I discussed in my last post the difficulties associated with removing Trump under §3 of that Amendment, even assuming he is convicted in the insurrection criminal trial. 

In addition to beating Trump by a wide margin in competitive states, I would add that republicans need to lose at least 30 House Seats and 2 Senate seats in 2024 to drive the point home that craziness, authoritarianism,  conspiracy theories and lies consistent with Orwellianism will not be tolerated any longer. American democracy is on the ballot in 2024.  

+++

1. Small Ball Buys: 

I eliminated my duplicate positions in CALF and COWZ held in my Schwab account. I then bought the same number of shares sold in my Fidelity account.  

I will be adding to those ETFs whenever the spirit moves me, notwithstanding the low dividend yields, since I view the stock selection method favorably. The two ETFs buy stocks with high free cash flow yields. The holdings are reconstituted and rebalanced quarterly. 

A. Added 8 CALF at $41.95 - Fidelity Account: 

Quote: Pacer US Small Cap Cash Cows 100 ETF Overview

Cost: $335.56

The fund selects the 100 highest free cash flow yielding stocks in the S&P 600 Small Cap Index. 

Summary Prospectus Excerpt: 

Sponsor's website: CALF | Pacer ETFs

Expense ratio: .59%

Top 10 Holdings as of 8/29/23: 

Item # 2.H. Bought 1 CALF at $33.5 (6/22/22 Post); Item # 2.O.  Bought 1 CALF at $37.52; 2 at $36.48 (5/26/22 Post)

New Average cost per share: $41.22 (23 shares)

Dividends: Paid quarterly at a variable rate

Last Ex Dividend: 6/22/23 at $.123+ per share 

One large distribution has been paid to date. The dividend was $.986+ per share that went ex dividend on 12/23/21. 

Pacer US Small Cap Cash Cows 100 ETF-Morningstar (currently rated 4 stars)

CALF Portfolio -Morningstar (lists 25 top holdings)

While using high free cash flow yield as an investment criteria is important and useful, some stocks will pass the screen when the current high free cash flow yields are only transitory (e.g. energy companies benefiting from high prices). 

I view a high cash free cash flow yield as being far more relevant to value investors than momentum or growth/high P/E multiple investors.  

Small caps have been underperforming the S&P 500 over the past year using data through 8/28/23. Compare the historical performance numbers for the S&P 600 Small Cap ETF (SPSM) with the S&P 500 ETF (SPY). SPSM has the higher annual average total return over a 3 year period (11.4% vs. 9.74%). 

SPSM v. CALF Performance Numbers Through 8/28/23. 

1 Year TR: SPSM at .19%; CALF at 11.22%

3 Year Annual Average Total Return: SPSM at 11.4%; CALF at 18.44%

B. Added 2 COWZ at $50.27 - Fidelity Account: 

Quote: Pacer U.S. Cash Cows 100 ETF Overview

Cost: $100.54

This fund selects the highest free cash flow yielding stocks in the Russell 1000. 

Excerpt Summary Prospectus: 

Last Discussed: Item 2.A. Bought 2 COWZ at $43.03 (7/13/22 Post) 

Sponsor's Website: COWZ | Pacer ETFs

Expense Ratio: .49%

Top 10 Holdings as of 8/29/23: 

New average cost per share:  $46.28 (8 shares)

Dividends: Paid Quarterly at a variable rate. 

Last 4 Dividends: $.947 per share

Yield Using $.947 and $46.28 AC = 2.05%

Last Ex Dividend: 6/22/23 at $.191+ per share

COWZ-Pacer US Cash Cows 100 ETF | Morningstar (currently rated 5 stars) 

COWZ-Portfolio| Morningstar

I compared COWZ returns with those of the Russell 1000 ETF (IWB) in a comment published yesterday. 

 C. Added 5 SAR at $25.75: 

Quote: Saratoga Investment Corp. - Externally managed BDC

Cost: $128.75

SEC Filings

I discussed the last earnings report in a recent post. Item # 2.G Started SAR - Bought 5 at $26.45 (8/19/23 Post); SEC Filed Press Release

New average cost per share: $26.05 (15 shares)

Dividend: Quarterly at $.71 per share 

SAR Dividend History | Seeking Alpha

Yield at New AC: 10.9% 

Next Ex Dividend: 9/13/23

D. Added 5 BTZ at $9.88: 

Quote: BlackRock Credit Allocation Income Trust (BTZ)

Cost: $49.4

BTZ SEC Filings

SEC Filing: Holdings as of 3/31/23

BTZ-Morningstar (currently rated 3 stars)

Sponsor's website: BlackRock Credit Allocation Income Trust | BTZ

Number of Holdings as of 7/31/23: 1,610

Credit Ratings: This fund will have a substantial weighting in junk rated bonds. 

Effective Duration as of 7/31/23: 6.18 years

Last Discussed: Item 2.B. Added 5 BTZ at $10.09 (6/17/23 Post) 

Leveraged: Yes, substantial at 37.39% as of 7/31/23. There is no way that buying bonds with money borrowed at short term rates would have worked over the past year or so. Leverage would only increase the decline in net asset value per share. The 2022 annual total return for BTZ, based on price, was -27.06%. The question is whether the worst is over, which can not be answered with any certainty.   

New average cost per share: $10.14 (30+ shares)

Dividend: Monthly at $.0839 per share ($1.01 annually, rounded up)

ROC supported. 

I am reinvesting the dividend. 

Yield at New AC = 9.93%

Last Ex Dividend Date: 8/14/23

Data Date of 8/25/23 Purchase: 

Closing Net Asset Value per share = $11.01

Closing Market Price: $9.88

Discount: -10.26%

Average 3 year discount: -6.05% 

Sourced:  BTZ - CEF Connect (currently rated 3 stars)

E. Bought 25 NMFC at $12.85; 5 at $12.79 - Schwab Account: 

Quote: New Mountain Finance Corp. (NMFC) - Externally Managed BDC

Cost: $385.2

NMFC SEC Filings 

2022 SEC Filed Annual Report (Risk factor summary starts at page 11 and ends at page 55)

I discuss in Item # 2.D. below eliminating my duplicate NMFC positions by selling 30 shares. 

Last Buy Discussions: Item # 3.M Added to NMFC-Bought 5 at $9.48 (11/7/20 Post); Item # 1.J. Started NMFC (Schwab Taxable Account)-Bought 10 at $9.61; 5 at $9 (10/31/20 Post); Item #4.F. Restarted NMFC; Bought 10 at $11.45; 10 at $11.15; 10 at $11.15; 10 at $9.85; 5 at $8.3; 2 at $7.36; 3 at $5.96; 1 at $5.94; 2 at $4.95 (4/4/20 Post)

New Average cost per share: $11.64 (40 shares)

Regular Dividend: Quarterly at $.32 ($1.28 annually), last raised from $.30 effective for the 2023 first quarter payment. I am not reinvesting the dividend. 

NMFC Dividend History | Seeking Alpha

Two special dividends, totalling $.07 per share, have been paid so far this year. 

Yield at AC of $11.5: 11% (regular dividend only, and assumes continuation of the current penny rate) 

Next ex dividend: 9/14/23

Net Asset Value per share history: 

6/30/23:   $13.14

12/31/22:  $13.02

6/30/21:   $13.33

03/31/21:  $12.85

12/31/20:  $12.62

12/31/19:   $13.26

12/31/18:   $13.22

12/31/17:   $13.63 

12/31/16:   $13.46

12/31/15:   $13.08

12/31/14:   $13.83

12/31/13:   $14.38 

12/31/12:   $14.06

IPO May 2011-Prospectus: Public Offering Price at $13.75 (all expenses including the sales load paid by the management company) 

Last Earnings Report (Q/E 6/30/23): SEC Filed Press Release 

NII per share: $.39

NAV per share: $13.14

Company Credit Risk Ratings:  

Investment Portfolio Composition: 

I would prefer seeing more first lien loans. Given the risky loans being made, even first lien loans can end up a near total losses and second lien loans frequently attach to nothing more than air. 

10-Q for the Q/E 6/30/23 (investments summarized starting at page 7; NMFC estimate impact of interest rate changes on net investment income at page 135; )

Discussion of Nonaccrual Loans at p. 118.

Sell Discussions: Item # 2.G. Pared NMFC in Fidelity Account - Sold 3 at $13.39 (8/6/21 Post); Item # 2.H. Sold All Fractional NMFC Shares Bought with Dividends in Fidelity Account at $13.69 (6/25/21 Post); Item # 3.G. Pared NMFC in Fidelity Taxable-Sold 20 at $12.27 (1/1/21 Post); Item # 2 Eliminated NMFC-Sold 102+ at $14.2 (1/25/20 Post); Item  # 2.A. Sold 50 NMFC at $13.95 (1/15/20 Post); Item # 1.B. Eliminated NMFC-Sold 60 at $13.96 and 50 at $13.94  (2/9/19 Post); Item # 1 A. Sold 50 NMFC at $14.06 (8/19/18 Post); Item # 1 Sold Remaining 50 Shares of NMFC at $14.63 (11/1/14 Post); Sold 100 of 150 NMFC at $14.4773 (10/23/14 Post); Item # 8 Sold Highest Cost NMFC Lot at $15.37 (9/14/2014 Post)

Goal: Any total return before any ROC adjustments to the tax cost basis in excess of the dividend received. 

F. Bought 20 JRI at $11.3 in my Vanguard Taxable Account:

Quote: Nuveen Real Asset Income & Growth Fund Overview - A Leveraged CEF

Cost: $226

Leverage as of 7/31/23 = 29.63%

JRI SEC Filings

Asset Allocation Categories as of 7/31/23: 

2022 SEC Filed Annual Report: Nuveen Real Asset Income and Growth Fund (JRI informations starts at page 22; "During July 2022, JRI renewed its borrowings through July 2023 and changed its interest on Borrowings to 1-Month Term Secured Overnight Financing Rate (SOFR) plus 0.750% per annum on the amount borrowed. All other terms remained unchanged. During December 2022, JRS amended its borrowings and changed its interest on Borrowings to 1-Month Term SOFR plus 0.610% per annum on the amount borrowed. All other terms remained unchanged.", emphasis added, page 52)

Sponsor's Website: JRI - Nuveen Real Asset Income and Growth Fund | Closed-End Fund | Nuveen

Number of Holdings: 413

I previously eliminated my duplicate taxable account position. Item # 3.A. Eliminated JRI in my Fidelity Taxable Account - Sold 130 at $12.13 (3/11/23 Post)(profit snapshot = $184.6) 

Last Buy Discussion: Item # 6.A. Bought 10 JRI at $10.98 in Vanguard Taxable Account  (11/1/22 Post)

Nuveen Real Asset Income and Growth (JRI) Portfolio | Morningstar (currently rated 1 star)

New Average cost per share = $11.02 (88+ shares)

Dividend: Monthly at $.087 per share ($1.158), reduced from $.0965 effective for the April 2023 payment, which was reduced from $.117 per month effective for the April 2020 payment.    

(JRI) Dividend History | Nasdaq 

To reduce ROC supported dividends, a CEF needs IMO to cut the dividend rate when leverage costs are in a strong uptrend and the dividend can not be supported by prudent harvesting of capital gains. 

The dividend currently has significant ROC support, click distribution tab at JRI-CEF Connect. Capital gains are needed to support the current payout. The common stocks owned are mostly what I characterize as bond substitutes which include electric utility, REIT, and energy infrastructure stocks. The fund will also own bonds and preferred stocks issued by companies in those sectors. 

The issues are  (1) whether borrowing costs have peaked and will decline next year and (2) whether the common stocks owned will do better when bond yields come down, allowing for more capital gain harvesting to support a higher payout. 

Dividend Yield at New AC (using the current monthly rate) = 10.51%

Data Date of 8/30/23 Trade: 

Closing Net Asset Value per share: $13.11

Closing Market Price: $11.26

Discount: -14.11%

Average 3 Year Discount: -11.76%

Sourced: JRI-CEF Connect (Click "Pricing Information" Tab)

Some Prior Sell Discussions: Item # 1.I. Pared JRI Again-Sold 12.661 shares at $16.31-Remaining Shares Bought With Dividends in Fidelity Taxable Account (10/1/21 Post)(profit snapshot = $53.03); Item # 2.C. Pared JRI-Sold 22.235 at $16.11(8/6/21 Post)(profit snapshot = $42.31); Item # 2.A. Pared JRI-Sold 30 at $15.9-highest cost shares (6/19/21 Post)(profit snapshot = $14.73); Item # 1.K Eliminated JRI in Schwab Taxable Account-Sold 100 at $11.48  (6/6/20 Post)(profit snapshot = $69.35); Item # 2.A. Sold 102+ JRI at $17.98 (12/22/19 Post)(profit snapshot = $140.67); Item # 1.A. Sold 100 JRI at $17.51(10/30/19 Post )(profit snapshot = $100.41); Item # 4 Sold 100 JRI at $17.23 (10/2/19 Post)(profit snapshot = $40.45)   

JRI Realized Gains to Date = $665.52 (includes $19.97 realized gain from selling 9 shares in my Vanguard account in July 2021 that was not discussed in posts) 

Goal: Any total return prior to ROC adjustments to the tax cost basis in excess of the dividend payments.

G. Bought 10 TY at $27.72:

Quote: Tri-Continental Corp. Overview - A CEF

Cost: $277.2 

TY was one of the few CEFs that commenced operations prior to the 1929 crash and survived it. The highly leveraged CEFs, including highly leveraged  CEFs that owned those leveraged CEFs, did not last long. The history of those failures is described in The Great Crash 1929 by John Kenneth Galbraith.

Leveraged at about 2% using a $50 par value preferred stock (5% coupon): Tri-Continental Corp. $2.50 Cum. Preferred. Overview  (1 million shares); Tri-Continental Corp. | $2.50 Cumulative Preferred Stock (TY.PR) Information Page | Preferred Stock Channel

Sponsor's website: Tri-Continental Corporation-Columbia Threadneedle Investments US

TY SEC Filings 

Tri-Continental Corporation- 2022 SEC Filed Annual Report

Top 10 Holdings as of 7/31/23: 

Data Date of 8/30/23 Trade: 

Closing Net Asset Value per share: $31.75

Closing Market Price: $27.73

Discount: -12.66%

Average 3 Year Discount: 11.3%

Sourced: TY  - CEF Connect (Click "Price Information" Tab)

Dividends: Paid quarterly at a variable rate. Capital gain distributions are made in the 4th quarter.  Tri-Continental Distribution Policy and History | Columbia Threadneedle Investments US; Tri-Continental Corporation (TY) Dividend History | Seeking Alpha

Total Income/Capital Gain Distributions per share

2020:  $1.0657 / $.5698

2021:  $1.0859 / $3.6352

2022: $1.0828 / $1.1502

I would use $1.08 as the annual income dividend per share just to calculate a 3.9% dividend yield without any capital gains distribution. That $1.08 appears to be relatively steady and trending slightly higher. I would not try to predict an annual average capital gain distribution. 

Last Ex Dividend: 6/9/23

Tri-Continental Corporation Declares Third Quarter Distribution ("The Corporation has paid dividends on its common stock for 79 consecutive years.")

Last Round-Trip Discussion: Item # .H. Eliminated TY - Sold 10 at $33.5 (5/14/21 Post)(profit snapshot = $106.15) - Item # 2.E. Bought 10 TY at  $22.93 (5/30/20 Post) 

2. Small Ball Sells: 

A. Eliminated OKE Duplicate Positions: Sold 5+ at $64.78 and 1 at $64.93: 

Quote: ONEOK Inc (OKE)

OKE is a natural gas and natural gas liquids infrastructure company involved in gathering, processing, fractionation, storage, transportation and marketing.  2022 SEC Filed Annual Report (see pages 5, 7 -16)

Page 8

Proceeds  = $417.44

Website: ONEOK, Inc.

Profit Snapshots: $274.81 

2023 OKE 5+ Shares +$232.57

2023 OKE 1 Share +$42.34 

Remaining OKE Position: I am keeping a 9+ share position in my Schwab account that has a $22.41 average cost per share:

Price as of 8/25/23 Close

The current yield at $22.41 is 17.05%. 

Last Buy Discussions: Item # 1.L. Added to OKE-Bought 1 at $24.9 (10/24/20 Post); Item # 1.G. Started OKE in Fidelity Taxable Account-Bought 5 at  $27.77 (6/13/20 Post); 

Material Recent News:  ONEOK to Acquire Magellan Midstream Partners in Transaction Valued at $18.8 billion (5/14/23) The $18.8B includes assumed debt. "The consideration will consist of $25.00 in cash and 0.6670 shares of ONEOK common stock for each outstanding Magellan common unit, representing a current implied value to each Magellan unitholder of $67.50 per unit, for a 22% premium, based on May 12, 2023 closing prices." Magellan Midstream Partners L.P.  (MMP); MMP SEC Filed Earnings Press Release for the Q/E 6/30/23; mMMP 10-Q for the Q/E 6/30/23 (debt listed at page 23, mostly intermediate and long term SU bonds); MMP SEC Filings 

To fund the cash portion, OKE recently sold $5.25B in bonds: 

Prospectus (see "Use of Proceeds" at page S-19)

Dividend: Quarterly at $.955 per share ($3.82 annually), last raised from $.935 effective for the 2023 first quarter. 

OKE Dividend History | Seeking Alpha

Last Ex Dividend: 8/1/23 (owned as of)

Last Earnings Report (Q/E 6/30/23): 

SEC Filed Press Release 

GAAP E.P.S. $1.04, up from $.92 in the 2022 second quarter

Consensus at $1.02 

Adjusted EBITDA: $971M, up from $886M

Guidance for 2023 on Stand-Alone Basis (without Magellan acquisition): Midpoint GAAP E.P.S. at $5.54, up from previous guidance of $5.36. Expects total capital expenditures of about 1.575B. 

Analyst Reports (available to Schwab customers): 

Morningstar (8/8/23): 3 stars with a fair value of $62 and a narrow moat, noting that about 90% of OKE's earnings are fee based and the company hedges its limited commodity exposure. 

S&P (8/11/23): 4 stars with a 12 month PT of $72. 

Argus (5/8/23): Hold. Concerned about high debt in rising interest rate environment. 

Currently Owned OKE SU Bonds: I own 6 OKE SU bonds that mature on 9/1/2024 and 2 that mature on 3/15/25. The SU debt is currently ranked Baa2/BBB. Fitch has a BBB rating. Fitch Rates ONEOK's Senior Unsecured Notes 'BBB' (8/9/23)

ONEOK (OKE) Price-to-Free-Cash-Flow; ONEOK (OKE) Free Cash Flow (Quarterly) - Zacks.com

B. Eliminated Duplicate Position in CALF - Sold 8+ at $42.18: 

See Item # 1.A above. 

Proceeds: $341.5

Profit Snapshot: +$13.38 

C. Eliminated Duplicate Position in COWZ - Sold 2 at $50.27: 

Proceeds: $100.92

See Item #1.B. above. 

Profit Snapshot: +$7.22

D. Eliminated Duplicate Positions in NMFC - Sold 30 Shares at $12.86: 

See Item # 1.E. above

Proceeds: $385.8

Profit Snapshots: $160.55

2023 NMFC 5 Shares +$40.31

2023 NMFC 25 Shares + $120.24

Realized Gains NMFC to Date:  +$434.15 ($273.6 prior in realized gains)

3. Equity Preferred Stocks: 

A. Started NYCB.PRA - Bought 10 at $22.59: 

Quote: New York Community Bancorp Inc.  Fixed/Floating Rate Preferred Stock (NYCB.PRA) 

Cost: $225.9

Issuer:  New York Community Bancorp Inc. (NYCB) 

NYCB SEC Filings 

SEC Filed Earnings Press Release for the Q/E 6/30/23 So far, NYCB has received substantial benefits from acquiring Signature Bank assets from the FDIC. 

I own the common stock. 

Placement in Capital Structure: Equity Preferred Stock, senior only to common stock. 

Prospectus

Par Value: $25

Coupon Fixed-to-Floating Rates 

Fixed Coupon: 6.375% through March 17, 2027

Yield at 6.375% at $22.59 TC = 7.055%

Floating Rate: Starting with the quarter ending 6/17/27 at the 3 month Libor + 3.821%. The alternate rate mechanism will be used if and when this preferred stock enters its floating rate period. The alternate rate will most likely be the 3 month SOFR + the tenor spread. 

Dividend: Paid quarterly, qualified and non-cumulative. 

Maturity: None, potentially perpetual.  

Optional Redemption: On a dividend payment date on or after 3/17/27

Stopper Clause: Standard. NYCB must eliminate the cash common share dividend before eliminating the preferred dividend. 

Stopper Clause, page S-22

Next Ex Dividend: 9/6/23

NYCB Declares a Quarterly Cash Dividend on its Preferred Stock 

B. Bought 5 BOHPRA at $14.78: 

Quote: BOH-PA 

Cost = $73.88 

Issuer: Bank of Hawaii Corp. (BOH) 

BOH Analyst Estimates | MarketWatch

BOH SEC Filings 

BOH SEC Filed Earnings Press Release for the Q/E 6/30/23 

BOHPRA Prospectus 

Par Value: $25

Coupon = 4.375% 

Dividends: Paid quarterly, qualified and non-cumulative. 

Yield at $14.78: 7.4% 

Last Ex Dividend: 7/14/23

Stopper Clause: Standard (to eliminate the preferred stock dividend, BOH must first eliminate the cash common stock dividend and refrain from using cash to buy back stock with certain exceptions, see pages S-5, S-22-23).  

Maturity: None, potentially perpetual

Issuer Optional Call: On any dividend payment date on or after 8/1/2026. Given the low coupon, I view a call as highly unlikely in my lifetime. I view the coupon to be highly favorable to the issuer long term.  

Purchase Restriction: The current yield is okay given the price discount to par value. I may add to this position in 5 shares lots, but each subsequent purchase will have to be at the lowest price in the chain given the risk associated with bank holding company preferred stocks and the low coupon. 

4. Treasury Auction Purchases: $5,000 in principal amount

A. Bought 5 Treasury Bills at 8/28/23 Auction- Vanguard Taxable Account:

The 12/1/22 date shown on the previous snapshot is the original issue date. 

91 Day Bill

Matures on 11/30/23

Interest: $67.5

Investment Rate: 5.503%

This purchase was sourced from the Vanguard Cash Reserves Federal Money Market Fund Admiral Shares (VMRXX), which is my settlement fund in that account. The 7 days SEC yield on the date of purchase was at 5.28%. I will likely receive only a few more dollars with this treasury bill purchase compared to what I would have been paid by keeping the money in VMRXX.  

5. Exchange Traded First Mortgage Baby Bonds:

Cost: $214.7

A. Added to ELC in Fidelity Account - Bought 5 at $21.46: 

Quote: Entergy Louisiana LLC  First Mortgage Bonds 4.875% Series due 2066

Issuer: Wholly owned operating subsidiary of Entergy Corp. (ETR). 

ETR 10-Q for the Q/E 6/30/23 (Entergy Louisiana results for the 2nd quarter)

Last Discussed: Item # 2.A. Added to ELC - Bought 5 at $21.85 in Fidelity Taxable Account (8/12/23 Post)

Investment Category: Exchange Traded Baby Bonds

"Exchange Traded": Trades like a stock on the stock exchange. 

Trades Flat: Just like a stock in that whoever owns the security on the "ex" date receives the entire distribution. Accrued interest is not paid to the seller in other words.  

Prospectus

Par Value: $25

Interest Payments: Quarterly

Security: First Mortgage on substantially all assets 

Call protection has expired. 

Maturity: 9/1/2066 unless called earlier at issuer's option.   

Interest rate risk: I have discussed this issue many times but will summarize my conclusions again here. 

Interest rate risk is substantial for a bond maturing in 2066 and asymmetric in favor of the issuer. 

Asymmetric interest rate risk means that the (1) issuer will allow the owners to keep the bond when interest rates are rising and the bond's value is going down which has been occurring over the past year or so; but (2) will call the bond at par value when it can refinance on more favorable terms due to a significant decline in interest rates leaving the owners with proceeds that can not be reinvested in similarly rated bonds at or near the called bond's current yield and/or YTM. 

The mechanisms for creating asymmetric interest rate risks in favor of the issuer are (1) limited call protection, generally 5 years after issuance; (2) long maturities; and (3) no make whole provision that would penalize the issuer for exercising the optional call right when interest rates are low, which, if present, would frequently result in no call by the issuer when the yield is favorable to the owner. 

When I am able to buy the exchange traded bond at a significant discount to par value, I mitigate somewhat the interest rate risk that is associated with an issuer call when interest rates have fallen sufficiently that the issuer would be better off calling at par and refinancing. The reason is the profit realized when the bond is called which adds to the YTM. 

New Average cost per share: $21.8 (40 shares)

Yield at New AC =  5.59% (.04875% coupon x. $25 par value = $1.21875 per share annual interest ÷ $21.80 average cost per share = 5.59%)

Last Ex Interest: 8/30/23 (owned all as of) 

Credit Ratings: A2/A

B. Added 5 EAI at $21.48 - Fidelity Account: 

Quote:  Entergy Arkansas 1st Mortgage Bonds 4.875% due 2066 (EAI)

Last Discussed: Item # 7.C. Added to EAI in Schwab Account - Bought 5 at $21.75; 5 at $21.35 (8/26/23 Post)(AC at $22.04; 40 shares; yield at 5.53%) 

New Average cost per share this account: $23.1 (60 shares)

Yield at New AC:  5.276%

Prospectus

Last Ex Interest: 8/30/23  (owned all as of)

Par Value: $25

First Mortgage on substantially all assets 

Call Protection has expired. 

Issue has the right to call at par value + accrued and unpaid interest. 

Credit Rating: A2/A

6. CDs -FDIC Insured - Schwab Account: 

A. Bought 2 Wells Fargo 5.25% CDs Maturing on 3/6/25 - Schwab Account: 

Interest paid monthly. 

I discussed in my last post buying 2 WFC 5.25% CDs that pay monthly interest and mature on 2/24/25. I am just redeploying proceeds from maturing securities, mostly treasury bills purchased at auction or treasury notes purchased in the secondary market, when received in that account. Income after redeployment is trending higher. 

B. Bought 1 Charles Schwab Bank 5.4% CD Maturing on 9/18/24: 

Interest paid semiannually. 

7. $3000 Original Principal Amount Redemption of IBond: 

This IBond was bought in 2016 when the fixed coupon rate was .1%, which is equivalent to the TIP real yield. 

I discussed this purchase in a 2016 post. Buying IBonds Through Treasury Direct | Seeking Alpha

On the same day, I bought in a Roth IRA account a TIP maturing on 4/15/2028 that had a real yield of 2.065%.  

I discussed the mechanics of buying TIPs in the secondary market in several posts, including these two posts published in 2016. Update On Buying TIPs In The Secondary Market | Seeking Alpha; The Mechanics Of Purchasing A TIP In The Secondary Market | Seeking Alpha

8. Corporate Bonds: 

A. Bought 2 Oaktree Specialty Lending 3.5% SU Maturing on 2/25/25 at a Total Cost of 95.452: 

Issuer: Oaktree Specialty Lending Corp. (OCSL) 

I have a small ball position in the common stock Item # 3.H. Bought 2 OCSL at $18.08 (5/13/23 Post); Item # 1.C. Added 5 OCSL at $18.53(4/1/23 Post) 

OCSL SEC Filings

SEC Filed Earnings Press Release for the Q/E 6/30/23 

New Finra Page: Bond Page | FINRA.org

Credit Rating: Baa3 from Moody's. Fidelity links this report which I read before buying. I currently have no quarrel with the Baa3 rating. I have discussed the credit risks that are inherent in any BDC SU bond. Those risks include (1) the payment of almost all net investment income as dividends to the common shareholders; (2) the risky nature of a BDC's loans; (3) liquidity risks associated with selling loans made to private companies and (4) leverage. 

YTM at Total Cost: 6.8%

Current Yield at TC: 3.66668%

For a BDC SU bond, I would much prefer the current yield being much closer to the YTM. 

Last SU Bond Offering (8/2023): Prospectus for 7.1% SU Maturing on 2/15/29 Note how much the coupon has gone up compared to the older bonds. 

9. Cash Flow into Fidelity Taxable Account on 9/1/23: 

Tennessee Municipal Bonds (Tax Free): $465.63

Investment Grade Corporate Bonds: $437.48

FDIC Insured CDs (Monthly Interest): $34.74

Common Stocks: $39.69

CEFs (Stock/Bond/Loans): $53.03 ($52.03 monthly payments)  

Exchange Traded First Mortgage Bonds: $30.47

Equity Preferred Stock: $2.23

Total: $1,063.27

Bond Maturity: $3,000

10. Cash Flow Vanguard Taxable Account: 

My Vanguard Taxable Account is about 1/3rd the size of my Fidelity Account but is currently generating about as much income. 

The reason is the cash held in two Vanguard MM funds VMFXX (settlement fund) and VMRXX (7 day yield at 5.29%) that paid a combined $691.75 on 8/31/23: 

9/1/23 Cash Flow into Vanguard Taxable Account: 

Tennessee Municipal Bonds (Tax Free): $225

Investment Grade Corporate Bonds: $155.28

CEFs Monthly Income (JRI): $12.29

Exchange Traded FM Bond (EAI): $9.14

Common Stock (ENB): $13.04 

Total  $1,106.5 with MM dividends paid on 8/31/23

The current yield of the Vanguard MM funds will be higher than almost all of my corporate bonds. The YTMs of the corporate bonds will generally be meaningfully higher than the current yields (e.g. the Oaktree Specialty Lending SU discussed above with a current yield of 3.67% and a YTM of 6.8%).  

I own ENB in 3 taxable accounts. When and if the price goes back over $40, I will likely eliminate the two duplicate positions. I am considering buying in 1 trade now the number of shares that may later be sold in the other two accounts.   

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 sale 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 my family members.