Economy:
The economy added 206,000 jobs in June. The unemployment rate was reported at 4.1%. "The change in total nonfarm payroll employment for April was revised down by 57,000, from+165,000 to +108,000, and the change for May was revised down by 54,000, from +272,000 to+218,000. With these revisions, employment in April and May combined is 111,000 lower than previously reported." Average hourly earnings increased by 10 cents to $35. Over the past 12 months through June, average hourly earnings increased by 3.9%, higher than the annual CPI rate. Employment Situation Summary - 2024 Q02 Results The U-6 rate remained at 7.4%. Table A-15. Alternative measures of labor underutilization - 2024 Q02 Results
I view this report to more friendly to bond investors than stock investors, but the Stock Jocks will generally look with favor on an increased possibility of rate cuts provided the anticipated cut is not caused by an ongoing recession or one about to occur.
The CME FedWatch tool which uses the federal funds futures contracts to assign probabilities to FF rate changes currently has a 97.3% chance that the FF rate will be cut by at least .25% and a 76.5% probability of at least a 50 basis point cut, both on or before the December meeting. The current FF range is 5.25% to 5.5%. Those probabilities are not consistent with the 6 month treasury bill being near the midpoint of the current FF range.
U.S. 10 Year Treasury Note Overview | MarketWatch
Powell says Fed has made 'quite a bit of progress' on inflation but needs more confidence before cutting; Powell Cites Fed’s Progress on Inflation but Offers No Timing for Rate Cuts - The New York Times
Private payrolls grew by just 150,000 in June, less than expected This data is compiled by ADP. ADP National Employment Report: Private Sector Employment Increased by 150,000 Jobs in June; Annual Pay was Up 4.9%
Why a Potential Trump Victory Is Spooking the Bond Market - MarketWatch (subscription publication) Many of Trump's proposals would increase inflation. During the debate, he falsely claimed that increasing tariffs would have no impact on inflation and that tariffs are paid by exporters rather than the U.S. importers. (My Videos: Trump Tariff Proposals are Tax Hikes Paid by U S Consumers - YouTube; Trump Proposal to Eliminate Individual Income Taxes and to Replace Revenues Lost with Higher Tariffs - YouTube; Trump Trade Proposals - YouTube)
See also,
Trump is proposing a 10% tariff. Economists say that amounts to a $1,700 tax on Americans. - CBS News; Who Really Pays Tariffs? Trump-Biden Tariffs & Trade;
Trump Income Tax and Tariff Proposals: Details & Analysis; US tariffs are an arbitrary and regressive tax | CEPR;
The Impact of the 2018 Trade War on U.S. Prices and Welfare.pdf;
Why Trump's tariff proposals would harm working Americans | PIIE;
Trump's proposed tariffs and tax cuts would hurt low-income Americans the most | PIIE
China's working population is shrinking, facing low birth rate; Russia’s Demographic trajectory: dimensions and implications Russia demographic crisis has been exacerbated by young people fleeing after Putin launched his invasion of Ukraine.
++++
Allocation Shifts Discussed in this post:
Treasury Bills Purchased at Auction: $22,000 in principal amount
Corporate Bonds: $6,000 in principal amount
Individual Common Stocks: +$1,258.47
Stock Fund: +$185.85
Inflow Stocks/Stock Funds = +$1,444.32
2024 Outflow Stocks/Stock Funds: -$24,185.06
2023 Outflow Stocks/Stock Funds: -$27,091.82
The primary reason for reducing my stock allocation is the yields on short term treasury bills, investment grade corporate bonds and treasury money market funds given my capital preservation and income objectives being more important to me than the possibility of realized capital gains from stocks and stock funds taking into account my overall financial position and age.
++
IBond Redemption: $5,000 in principal amount plus $1,268 in interest
If the IBond is redeemed before 5 years after purchase, 3 months of interest will be forfeited, so I waited for that period to expire.
The fixed rate on this IBond purchased in June 2019 was .5%, which remains unchanged until the bond matures. The fixed rate for IBonds issued on 5/1/24 to 10/31/24 is 1.3%. The variable rate is based on CPI changes every six months. I bonds-TreasuryDirect
The .5% fixed rate is not appealing to me given the real yield of the 5 year TIP and other alternative investments. The real yield for the 5 Year TIP closed at 2.15% on 7/1/24, the day that I redeemed this IBond. The fixed rate of the IBond and the real yield of the TIP mean the same thing, that is, the yield above the CPI inflation rate.
Comparison of TIPS and Series I Savings Bonds — TreasuryDirect
Resource Center | U.S. Department of the Treasury (real yield curve data)
The next 10 year TIP auction is on 7/18/24. I did participate in the last 10 year TIP auction, buying just 1 in a Roth IRA account. The coupon is 1.75% with a real yield of 2.184% due to the discount to par value purchased price of 96.24947. This was a reopening auction where the the inflation accretion adjusted the principal amount. The term is 9 years and 8 months.
The 5 year TIP was last auctioned on 6/20/24. The real yield was 2.05%. The next auction for this maturity is on 10/24/24, more infrequent than the 10 year TIP auctions.
Rather than participating in the last 5 year TIP auction, I bought 1 TIP in the secondary market that matures on 4/15/28. Item # 8. Bought 1 TIP Maturing on 4/15/28 in the Secondary Market (6/14/24 Post) The real yield was at 2.289%
I use a ladder approach with TIPs. I have 1 maturing in January 2025 and 4 maturing next April, 1 in January 2026, 3 in April 2026 and so on out to 2034.
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Trump and His Party:
RealClearPolitics - Election 2024 - General Election: Trump vs. Biden
Trump’s Plan for NATO Is Emerging. - POLITICO As expected, Trump will implement his pro-Putin policies for Ukraine and NATO if elected in 2024.
I have discussed Trump's pro-Putin policies is several prior YT Videos:
Putin-Trump "Peace" Plan for Ukraine - YouTube; Trump and Putin Part 3 - YouTube;
Putin and Trump Part 2 - YouTube;
GOP's Return to Isolationism with a Pro Putin Result - YouTube;
Analytical and Fact Based Thinking: Putin and Trump - YouTube;
Mark Esper on Trump's Comment about NATO and Russia - YouTube
In a poll taken after the debate, only 27% of respondents believe that Biden has the mental and cognitive health to serve as President. Increasing numbers of voters don't think Biden should be running after debate with Trump — CBS News poll - CBS News There are no good options left for the Democrats after Biden's performance during the horror movie that some call a "debate". The least bad option is for Biden to voluntary quit the race and to throw his support to the VP Harris. An open convention would generate far too much chaos and could result in a candidate with low name recognition who is untested in a national campaign with only a few months left.
Biden's loss is IMO close to inevitable now and would become 100% inevitable by participating in September's debate and displaying the same or similar cognitive issues. Swing voters cannot unhear and unsee Biden's performance.
++
The 6 Republican Justices created a presidential immunity for criminal acts provided the crime is part of the President's "official duties" which will have virtually unlimited scope as a practical matter given the powers of the Presidency.
Trump Immunity: SCOTUS Justices’ Comments Come Back to Haunt Them Saying one thing during a confirmation hearing and doing the opposite is what I expect from them.
The creation of this absolute immunity from criminal prosecution as a practical matter will IMO make the 6 Republican Justices complicit and accessories to crimes committed by future Presidents and would justify their impeachment.
I do not foresee any practical distinction between the absolute immunity for crimes relating to the exercise of Presidential powers under Article 2 and the "at least presumptively" immune more peripheral, outer perimeter official acts with a substantial and important limitation on the evidence that can be used to rebut that presumption immunity. Supreme Court Hands Donald Trump Presidential Immunity for "Official Acts"-YouTube; ‘For all practical purposes this is absolute immunity’ says law professor Lawrence Tribe-YouTube
One Article 2 power allows the President to grant pardons. If a President went on national television and admitted to accepting a $1 million cash payment in return for pardoning someone, he could not be prosecuted for bribery.
The Republican Justices created this immunity for crimes knowing what Trump did to stay in power, his penchant for committing unlawful acts, and that he was more likely than not to be re-elected in November. I believe that Republican judges have already proven that they will not hold him to account.
The Republican Justices have greenlighted criminal acts by the President, providing a clear roadmap to dictatorship. Legal expert: Court just gave Trump ‘a license for dictatorship’ - YouTube
Predictably, Republicans cheered the decision and claimed that it was a win for democracy. Trump touts Supreme Court's presidential immunity ruling as 'big win for our Constitution and for democracy' | Fox News In TrumpWorld, another big win for democracy would have been for VP Pence to reject the certified election results in 4 states won by Biden, as demanded by Trump, and to then have the republican legislatures in those states make a decision on who won. The result would have been Donald Trump's election in 2020, achieved by simply canceling the vote totals.
The Chief Justice stated in the Presidential immunity for crimes opinion that the President was not above the law and then proceeded to make sure that the President was above the law.
The Republican Justices have in fact greenlighted future Presidents to commit crimes while claiming that the President is not above the law. And that greenlight has been given to Trump, if re-elected, who has already proven to be most lawless President that the nation has ever had, with Richard Nixon running in a far distant second place.
My Video: Republican Justices Greenlight the President to Commit Crimes - YouTube)
The Republican Justices also effectively deleted the Take Care clause that is actually in the Constitution when creating for the President, as a practical matter, an absolute immunity for crimes committed while President. The President is charged with the duty and responsibility in Article II, §3 to take care that the laws are followed but can violate the criminal laws without being charged for a crime even after leaving office:
See also The Supreme Court Puts Trump Above the Law - The Atlantic; The Supreme Court’s Trump immunity decision is a blueprint for dictatorship - Vox); Nothing Will Stand in Trump’s Way With Supreme Court’s Immunity Ruling-YouTube; Opinion | The Supreme Court Creates a Lawless Presidency - The New York Times (by Kate Shaw); The Supreme Court Rescues Trump From Facing Trial - Giving Him a Get-out-of-Jail Free Card - The Atlantic
Something Has Gone Deeply Wrong at the Supreme Court - The Atlantic And it will get a lot worse.
My Video: Will the 6 Republican Supreme Court Justices Bear Responsibility for Presidential Crimes Hereafter - YouTube I view the immunity decision to be grounds for impeaching the 6 Republican Justices. Each person can make up their own mind.
The Republican Justices continue to advance their political tribe's policy objectives by overruling a 40 year old precedent, believing that judges, particularly the republican ones, know science better than real scientists. Supreme Court delivers blow to power of federal agencies, overturning 40-year-old precedent; Supreme Court overturns 1984 Chevron precedent, curbing power of federal government; ‘Massive power grab’ by SCOTUS ‘throws out decades of established law’ - YouTube The central reason for that reversal is to cancel environmental regulations.
Trump says that he was the number 1 environmentalist President. Trump Declares Himself “the No. 1 Environmental President” | Vanity Fair He recently made that claim, when seeking $1B in campaign contributions from the fossil fuel industry, that he would end federal funding of clean energy programs At a Dinner, Trump Assailed Climate Rules and Asked $1 Billion From Big Oil - The New York Times; Trump seeks $1 billion from oil CEOs, vows to limit EVs - The Washington Post; Inside Trump’s Plan to Bulldoze American Climate Policy.
He has called man made climate change a hoax and republicans agree with that conclusion. Donald Trump Called Climate Change a Hoax-TIME; Donald Trump Has Repeatedly Called Climate Change a “Hoax” No amount of scientific evidence will ever change that opinion. Shortly before burning to a crisp due to climate change, there may conceivably be a few republicans who will start to wonder that maybe, just maybe, the climate change science was not a hoax.
Stare Decisis means absolutely nothing to the Republican Justices who are on a now unstoppable crusade to take the U.S. back to the 19th Century, though they still claim that this doctrine is important to them as they rapidly repeal well-settled Constitutional law and create new constitutional law more to their liking, like Presidential immunity for crimes, that is to their liking. When stare decisis is destroyed, which is what the Republican Justices have done, and they are only in the early stages of doing so, there is no longer an anchor in constitutional law that ties the present to the past.
In the Fischer decision released last Friday, 5 of the Republican Justices rewrote the federal criminal statute, referred to as obstruction of an official proceeding, that will lead to a dismissal of that charge against Trump and more than 100 of his followers who were charged with the same crime for disrupting the Joint Session of Congress on 1/6. This was accomplished by deleting from this statute the following words:
";or otherwise obstructs, influences or impedes any official proceeding, or attempts to do",
The Republicans Justices, three of whom were placed on the Court by Trump, have in effect immunized Trump for the violence that inevitably occurred when he riled up an angry and armed mob and then sent them to the Capital to disrupt the peaceful transfer of power.
Prior to this decision, I discussed this case in a YT video. Supreme Court Protects Trump from Obstruction of an Official Proceeding Criminal Charge - YouTube I suspected then that the Republicans would rewrite the statute to protect Trump after listening to their questions during the oral argument.
The Republican Justices in the Fischer decision did not take a textual approach to interpreting this statute, nor did they apply the plain meaning of the statutory language which is crystal clear and would cover the attempt to disrupt the Joint Session of Congress on January 6th. The Republican Justices claim to be textualists, but that is when the textual and plain meaning judicial interpretation standards achieve the desired result. (see also The Supreme Court's January 6 Decision Is Utterly Baffling - The Atlantic)
In another case decided within the past two weeks, the Republican Justices rewrote a statute to in effect legalize bribes paid to state officials under federal law. Republican Supreme Court Justices In Effect Legalized Bribery of State Officials - YouTube; Supreme Court says state officials can engage in a little corruption, as a Treat - Vox
If Trump wins, and I view that as more likely than not based on Biden's debate performance, Alito and possibly Thomas will retire during his term that will allow Trump to replace them younger Justices that can serve for 40 years or so (e.g. another Gorsuch, Barrett, or Kavanaugh, who are carbon copies of Alito and Thomas, maybe Barrett is only a 98% copy of Alito)
We now have a rogue Supreme Court.
My Video: Republican Supreme Court Justices Will Overrule Gay Marriage Decision - YouTube
Trump is in favor of arresting Liz Cheney and trying her for treason before a military tribunal. Trump amplifies posts calling for televised military tribunal for Liz Cheney Her crime in Trump's America, which may now be a paper thin majority, was to participate on the Congressional Panel investigating the republican assault on the nation's Capital.
Former Mississippi governor Phil Bryant (R) demands sources, sues reporters and editors for defamation - YouTube; She won a Pulitzer for exposing how the country's poorest state spent federal welfare money. Now she might go to jail.
Rudy Giuliani officially disbarred in New York for Trump election interference efforts - YouTube Trump will leave devastation in his wake.
Judge rejects John Eastman's bid to retain law practice while fighting disbarment - POLITICO
++++
Putin and His Orwellian Dictatorship:
Losses ∙ Russia ∙ WarSpotting — documented material losses in Russo-Ukrainian war
Putin Is Banking On a Trump Win for His New World Order | Vanity Fair
Ukrainian Drone Hits Tambov Gunpowder Plant in Russia - YouTube
Anne Applebaum on Ukraine, Russia, Europe, and the US - YouTube She notes that there is strong evidence that Russia was planning to kidnap Ukrainian children before the war started, see video starting at 6 minutes. Putin has been indicted for war crimes and crimes against humanity by the International Criminal Court for his role in those kidnappings.
Ukrainian children recount horrors of being kidnapped by Russian soldiers - CBS News;
Child abductions in the Russo-Ukrainian War- Wikipedia; Deportation of Ukrainian children to Russia is war crime - UN; ICC judges issue arrest warrant for Vladimir Putin over alleged war crimes | Vladimir Putin
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1. Small Ball Buys:
A. Added 5 WPC at $54.97:
Cost: $274.85
"W. P. Carey ranks among the largest net lease REITs with a well-diversified portfolio of high-quality, operationally critical commercial real estate, which includes 1,282 net lease properties covering approximately 168 million square feet and a portfolio of 89 self-storage operating properties as of March 31, 2024. With offices in New York, London, Amsterdam and Dallas, the company remains focused on investing primarily in single-tenant, industrial, warehouse and retail properties located in the U.S. and Northern and Western Europe, under long-term net leases with built-in rent escalations."
Website: Leaseback Build-to-Suit Real Estate Finance | W. P. Carey
Last Buy Discussion: Item #1.F. Added to WPC - Bought 5 at $53.3 (4/19/24 Post)
New Average cost per share this account: $59.62 (50+ shares)
 |
| Snapshot Intraday on 6/26/24 after add |
Dividend: Quarterly at $.87 per share ($3.48), last raised from $.865 effective for the 2024 second quarter payment.
Note that the quarterly dividend was cut from $1.071 per share to $.86 effective the 2024 first quarter payment. This reduction was due to WPC's decision to sell some office properties and to transfer ownership of the remaining office properties to a newly created REIT, Net Lease Office Properties)(NLOP), and then distributing the shares to WPC shareholders. W. P. Carey Announces Completion of Spin-Off of Net Lease Office Properties - W. P. Carey Inc.; W. P. Carey Announces Strategic Plan to Exit Office - W. P. Carey Inc. I have sold my NLOP shares received as part of that spinoff.
Yield at $59.62 AC = 5.837%
Last Ex Dividend: 6/26/24 (owned all as of)
Last Bond Offering (6/24): Prospectus for $400M 5.375% SU Note maturing in 2024
Last Earnings Report (Q/E 3/31/24):
SEC Filed Press Release; SEC Filed Supplemental; SEC Filed Slide Presentations
Revenue: $386.842M
E.P.S. = $.72
AFFO per share = $1.14
Net Income to AFFO Calculations:
Affirms 2024 AFFO per share guidance of $4.65 to $4.75
Dispositions during the quarter: $889.2M
Investment Volume: $280.3M
"As of March 31, 2024, the Company had total liquidity of $2.8 billion, including approximately $1.7 billion of available capacity under its Senior Unsecured Credit Facility (net of amounts reserved for standby letters of credit), $777.0 million of cash and cash equivalents, and $283.8 million of cash held at qualified intermediaries."
"As of March 31, 2024, the Company’s net lease portfolio occupancy rate was 99.1%, up 100 basis points from 98.1% as of December 31, 2023, due primarily to the lease-up of an approximately 1.6 million square foot warehouse property located in University Park, Illinois."
Weighted average lease term: 12.2 years
Weighted average interest rate: 3.2%
 |
| P.1, Supplemental |
Top 20 tenants: see page 2o, Supplemental.
C. Added to WBA - Bought 5 at $12; 5 at $11.53; 5 at $11.11:
Quote: Walgreens Boots Alliance Inc. (WBA)
Cost: $173.16
WBA Analyst Estimates | MarketWatch
WBA was removed from the DJIA earlier this year. The stock was replaced by Amazon.
10-Q for the F/Q ending 5/31/24 This is the third fiscal quarter.
Last Discussed: Item # 1.B. Added to WBA - Bought 5 at at $16.01; 5 at $15.5; 5 at $14.9 (5/31/24 Post)
I have previously described my purchases of WBA as contrarian value, possibly masochistic in that the stock may prove to be a value trap. So far, the value trap is a reasonable description IMO, but the jury has not returned its final verdict.
New Average Cost per share: $15.59 (50 Shares)
I will likely continue averaging down in 5 shares lots until I hit 100 shares. Each subsequent purchase will have to be at the lowest price in the chain.
Dividend: Quarterly at $.25 per share, cut from $.48 effective for the 2024 first quarter, which was a long overdue dividend slash. The current share price is forecasting another cut.
Yield at New AC = 6.41% (assumes no more dividend cuts which may be too optimistic)
Last Ex Dividend: 5/20/24
Last Earnings Report (Q/E 5/31/24):
SEC Filed Earnings Press Release
E.P.S. = $.4
Adjusted E.P.S. = $.63, "down 36.6 percent on a constant currency basis compared to the year-ago quarter, including a $0.24 impact from lower sale-leaseback gains, a challenging U.S. retail environment, and recent pharmacy industry trends"
Consensus at $.68
Revenues: $36.4B, up $35.415B in the 2023 third F/Q
Consensus Revenue Estimate at $35.9B
Free cash flow: $344M
WBA plans to close a meaningful percent of its quarter or so locations that are underperforming. Walgreens will close a ‘significant’ number of its 8,600 US locations | CNN Business
Guidance for fiscal 2024 earnings was lowered to $2.8 to $2.95 per share from $3.2 to $3.35. When earnings guidance is slashed this much, there is a concern that another cut will occur before year end after the next quarterly report given what WBA characterized as a "worse-than-expected U.S. consumer environment".
Discussed at Walgreens (WBA) earnings Q3 2024.
D. Added to CALF - Bought 2 at $42.94:
Quote: Pacer US Small Cap Cash Cows 100 ETF Overview
Cost: $85.85
Sponsor's website: CALF | Pacer ETFs
The fund selects the highest, 12 month trailing free cash flow yield stocks in the S&P Small Cap 600 index. I view that as a valid criteria to use. Small cap stocks have been underperforming large caps for some time now.
Expense Ratio: .59%
New Average cost per share: $42.57 (32 shares)
Dividends: Paid quarterly
The dividend yield will be low without capital gain distributions.
CALF Page at Morningstar: Currently rated 4 stars.
E. Bought 5 LKQ at $41.4:
Quote: LKQ Corp. (LKQ)
Cost: $207
LKQ Analyst Estimates | MarketWatch As of 7/1/24, the date of the purchase, the average E.P.S. estimate for 2024 was at $4.04; at $4.47 in 2025; and at $4.86 in 2026. The P/E at $41.4 using the 2025 estimate is about 8.52. I believe those are non-GAAP estimates.
This is my first purchase. I placed LKQ on a monitor list earlier this year. The stock declined 14.48% on 4/23/24, closing at $41.65, in response to a negative earnings report discussed below. LKQ Stock Historical Prices & Data I waited to see whether there would be some price stabilization near that 4/23 closing price before initiating a position.
LKQ has a dominant share in the U.S. for salvage/aftermarket parts used in vehicle collision repairs. The LKQ market share is over 70%. LKQ is also the largest mechanical parts distributor in Europe. About 90% of revenues are classified as non-discretionary purchases. I view the foregoing as comforting.
This is an excerpt from the last annual report that describes the business segments:
SEC Filed 2023 Annual Report at page 3
LKQ Corporation - Investor Relations
Fitch Revises LKQ Corporation's Outlook to Positive; Affirms IDR at 'BBB-Moody's also rates the SU debt at BBB- with a stable outlook.
Dividend: Quarterly at $.30, last raised from $.275 effective for the 2023 4th quarter payment. The dividend was at $.25 in 2021.
Yield at $41.4: 2.9%, which is not enticing to me but other factors including the share price decline increasing the potential capital gain down the road, the non-discretionary sourcing of revenues and market share generated an extremely mild level of interest.
Last Ex Dividend: 5/15/25
Last Earnings Report (Q/E 3/31/24):
SEC Filed Press Release and 10-Q (debt listed at page 34)
Revenue: $3.703B, up from $3.349B in the 2023 first quarter
The increase in revenues was due to acquisitions:
"parts and services organic revenue decreased 0.3% (0.5% increase on a per day basis), foreign exchange rates increased revenue by 0.8% and the net impact of acquisitions and divestitures increased revenue by 11.6% year over year, for a total parts and services revenue increase of 12.1%. Other revenue for the first quarter of 2024 fell 14.6% primarily due to weaker precious metals prices relative to the same period in 2023."
GAAP E.P.S. = $.59, down from $1.01
Non-GAAP E.P.S. = $.82, down from $1.04
GAAP to Non-GAAP Reconciliation:
The footnote in the previous snapshot refers to the Uni-Select acquisition.
Depreciation amortization "expenses": $100M
Free Cash Flow: $187M, with $30M used to repurchase common shares.
Notwithstanding the poor report, LKQ maintained its 2024 adjusted E.P.S. guidance of $3.9 to $4.2:
If the 2024 guidance is revised down later this year, I would anticipate more weakness in the stock price. A better than expected second quarter report, which relieves the anxiety created by the first quarter miss, would permit the stock to recoup some of its decline IMO.
The next earnings report will be released on 7/25/24.
F. Added 4 KHC at $31.92
Quote: Kraft Heinz Co.
Cost $126.66
KHC Analyst Estimates | MarketWatch
Last Sell Discussion: Item # 2.E. Pared KHC - Sold 6 at $38.34 (1/12/24 Post) This is standard small ball risk management.
New Average cost per share: $32.93 (35 shares)
Dividend: Quarterly at $.40 per share
Dividend History | The Kraft Heinz Company
Yield at New AC = 4.859%
Last Ex Dividend: 6/6/24 (owned 25 as of)
I discussed the last earnings in this recent post: Item # 2.B. Added to KHC - Bought 5 at $33.1; 1 at $32.3 (6/20/24 Post); SEC Filed Press Release
Another packaged food company, General Mills (GIS), reported disappointing results for its fiscal quarter ending 5/26/24: GIS SEC Filed Earnings Press Release for the F/Q ending 5/28/24 My position in GIS is larger, and my last discussion can be found here: Item # 2.A. Pared GIS - Sold Highest Cost 5 Shares at $68.17 (3/22/24 Post)
G. Added 5 SPTN at $18.06:
Quote: SpartanNash Co. (SPTN)
Cost $90.3
"SpartanNash operates two complementary business segments – food wholesale and grocery retail. Its global supply chain network serves wholesale customers that include independent and chain grocers, national retail brands, e-commerce platforms, and U.S. military commissaries and exchanges. The Company distributes products for every aisle in the grocery store, from fresh produce to household goods to its OwnBrands, which include the Our Family® portfolio of products. On the retail side, SpartanNash operates 147 brick-and-mortar grocery stores, primarily under the banners of Family Fare, Martin’s Super Markets and D&W Fresh Market, in addition to dozens of pharmacies and fuel centers."
SPTN Analyst Estimates | MarketWatch
New Average cost per share: $19 (25 shares)
Dividend: Quarterly at $.2175 per share ($.87 annually)
SPTN Dividend History | Nasdaq
Yield at $19: 4.579%
Last Ex Dividend: 6/14/24 (owned 15 as of)
Last Elimination: Item # 2.F. Eliminated SPTN - Sold 15 at $29.01 in Fidelity Account; 20 at $31.05 in Vanguard Account; 10 at $30.64 in Schwab Account (3/23/22 Post)(profit snapshot = $421.49)
Last Discussed: Item # 2.E. Added to SPTN - Bought 5 at $18.46 (6/20/24 Post)
I discussed the last earnings report in this post: Item # 1.B. Added to SPTN - Bought 5 at $18.95 (6/7/24 Post); SEC Filed Earnings Press Release for the Q/E 4/20/24 and 10-Q. Recent earnings reports have been disappointing.
A contract to supply private brands to military commissaries expires in December 2025, see summary of risks at page 12, 10-K.
H. Added $100 to FSMEX at $61.48:
Quote: Fidelity Select Medical Technology and Devices Portfolio Overview
Sponsor's website: Fidelity ® Select Medical Technology and Devices Portfolio | Fidelity Investments
Expense Ratio: .65%
Top 10 Holdings as of 5/31/24:
I do not have positions in any of those stocks, so buying shares in this fund is part of my diversification strategy.
Recent Dividend History: Paid semiannually.
There will be negligible ordinary dividends. The primary dividend will be sourced from capital gains.
FSMEX Page at Morningstar: Currently rated 4 stars.
I now own almost 20 shares.
2. Corporate Bonds:
A. Bought 2 Avnet 4.625% SU Maturing on 4/15/26 at a Total Cost of 98.41:
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Issuer: Avnet Inc. (AVT)
AVT Analyst Estimates | MarketWatch
SEC Filed Earnings Press Release for the Third F/Q ending 3/30/24
This is the next SU bond to mature.
 |
| Page 51, Annual Report |
SEC Filed Annual Report for the F/Y Ending 7/1/23
There is a securitization of receivables that will need be refinanced next year, but that will not be a problem IMO.
Last SU Offering (3/2023): Prospectus for $500M of 6.25% SU Note Maturing in 2028 Refinancing costs have gone up slightly due to the rise in interest rates.
Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa3/BBB-
YTM at Total Cost: 5.561%
Current Yield at TC = 4.7%
B. Bought 2 Unum 3.875% SU Maturing on 11/5/25 at a Total Cost of 97.547:
%203.875%25%2011:5:2025%20.png)
Issuer: Unum Group (UNM)
I have eliminated my common stock position.
UNM Analyst Estimates | MarketWatch
SEC Filed Earnings Press Release for the Q/E 3/31/24
Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB
YTM at Total Cost: 5.778%
Current Yield at TC: 3.97%
I now own 4 bonds.
Last Bond Offering (6/2024): Prospectus for $400M 6% SU Maturing in 2054, with a public offering price of 97.902.
C. Bought 1 Kinder Morgan 4.3% SU Maturing on 6/1/25 at a Total Cost of 98.819:
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Issuer: Kinder Morgan Inc. (KMI)
I own 100 shares of the common stock. Item # 1. Bought 100 KMI in Vanguard Taxable Account at $15.89 (1/7/22 Post)
KMI SEC Filed Earnings Press Release for the Q/E 3/31/24
Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB
YTM at Total Cost: 5.62%
Current Yield at TC: 4.35%
I now own 3 bonds.
D. Bought 1 Wells Fargo 4.5% SU Maturing on 7/28/25 at a Total Cost of 98.725:
%204.5%25%207:28:25%20.png)
Issuer Wells Fargo & Co. (WFC)
WFC Analyst Estimates | MarketWatch
SEC Filed Earnings Release for the Q/E 3/31/24
Finra Page: Bond Page | FINRA.org
Credit Ratings: A1/BBB+
YTM at Total Cost: 5.736%
Current Yield at TC = 4.558%
3. Treasury Bills Purchased at Auction:
A. Bought 10 Treasury Bills at the 7/1/24 Auction:
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Maturing on 10/3/24
Interest: $131
Investment Rate: 5.383%
B. Bought 10 Treasury Bills at the 7/3/24 Auction:
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C. Bought 2 Treasury Bills at the 7/1/24 Auction:
%201:2:25%20.png){kind=small}
181 Day Bill
Matures on 1/2/25
When held to maturity, the interest will be taxable in 2025.
Interest: $51.43
Investment Rate: 5.323%
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.
So far, I have entered orders to buy $10,000 in principal amount at next week's treasury auctions including $7K in the 3 month bill, $2K in the 6 month T Bill and $1K in the 1 year T Bill. By holding the 6 month and 1 year T Bills to their maturities, the interest income for those bills will be included in my 2025 tax return.
ReplyDeleteThere is also a 3 year treasury note that will be auctioned on Tuesday 7/9, the same day as the 1 year Bill.
The 1 year T Bill yield closed at 4.98% (7/5) which is one reason for the $1,000 buy. Using the Treasury Department yield curve data, the high yield for the 1 year Bill was at 5.25% hit on 4/20/24.
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2024
Over the past month or so, I have noted a meaningful decline in investment grade bond yields that mature in the 1 to 2 year time frame. I have consequently slowed down my short term corporate bond purchases in response and may soon stop if the trend continues.
After visiting my Fidelity account this evening, I noted that I had been credited with the proceeds of 4 Oracle bonds ($4K) which have matured, so I increased my dollar allocation by $5K to the 3 month treasury bill auction, bringing the total to $12K. The stock allocation in that account is about 12%.
DeleteI incorrectly described the current CME FedWatch probabilities for rate cuts on or before the December 2024 and have rewritten that section to read:
ReplyDelete"The CME FedWatch tool which uses the federal funds futures contracts to assign probabilities to FF rate changes currently has a 97.3% chance that the FF rate will be cut by at least .25% and a 76.5% probability of at least a 50 basis point cut, both on or before the December meeting. The current FF range is 5.25% to 5.5%. Those probabilities are not consistent with the 6 month treasury bill being near the midpoint of the current FF range."
Although I have been increasing my stock allocation over the past 3 weeks, I have not moved the needle.
ReplyDeleteI am becoming increasingly concerned about my reinvestment options for maturing treasuries and corporate bonds, and that concern is far more material mentally than the actual dollar value of recent dividend stock purchases.
I just downloaded my Vanguard statement for June 2024 and this is my allocation in that account:
Stocks: 6.6%
Fixed Income: 37% (mostly short term bonds maturing within 2 years and Tennessee Municipal Bonds)
Short Term Reserves: 54.9% (all in VMRXX, a U.S. government MM fund that currently has a 7 day SEC yield of 5.2%)
Other 1.5%
The yield in the money market fund will decline quickly after federal rate cuts, so the current yield may prove to be at or near the top of the uptrend in short term rates that started in March 2023 with the FED raising the FF range by .25% off 0-.25%. It is reasonable to expect that the next move will be a cut.
Generally, I will own 200 to 300 common stocks but the overall dollar exposure to each stock is light. Over 90% of the dollar exposure is in dividend paying stocks.
My thought is to start taking the reduced rates on 4-5 year bonds....to lock in what will be a higher rate as soon as the FED cuts start?
DeleteThe plus is that if the lower rates don't seem permanent, value of held bonds will increase, and can be sold.
Land: There is a certainty about Fed rate cuts that is built into the 2-5 year note yields. Predicting the future with certainty is not possible. Bond investors are more likely than not right that the FED will cut rates but the amount and timing can not be predicted with certainty that is expressed in short term treasury note yields (2 to 5 years).
DeleteUsing the Treasury's calculations of yields, the 6 month T Bill closed yesterday at 5.34%.
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202407
The 2 to 5 year notes closed at
4.62% 2 years
4.37% 3 years
4.24% 5 years
I am seeing similar yield declines in investment grade corporate bonds compared to those that mature in 6 months to 1 year.
My current belief is that Trump will win the election, possibly in a landslide as noted yesterday by the Democrat Senator from Colorado. Policies that he has proposed will be inflationary, which includes tax cuts, increased tariffs on imported goods and mass deportations of of illegals creating more upside wage pressure. So inflation may start to accelerate some again in the back half of 2025 and extending into 2026-2028.
Several noted economists agree with my assessment and a number of articles have been written by them explaining why that is a likely outcome.
Most voters IMO do not have a clue about why inflation surged in 2021-2022, or worse assign incorrect reasons to blame Biden, and that will not change with a resurgence after Trump's election with republicans controlling the Senate and House.
If that proves to be the case, TIPs purchases in the 3 to 5 year range, with their current real yields, would likely have a higher total return than the same maturing nominal treasuries due to the inflation accretion to the principal amount.
I will mention in my next post the studies that assess how much Trump's tax cuts in his first term added to the budget deficits thereafter, and a similar forecast by just extending those cuts for another 10 years when they expire next year. That is before adding the deficit impact from his other tax cut proposals.
I've been trying to process this. It's throws a wrench in the picture.
DeleteIf Trump wins and inflation soars, it changes the future picture so much from expectations that eventually FED will cut due to soft landing or recession. I knew about expectations of inflation but hadn't connected it to the future.
It also mean expectations are no longer certain...that it's worth paying a higher tax on converting 401k for this and next year before the rate cuts expire and rates presumably increase. With a GOP win, there may be more years of lower rates.
Hum.
Land: For Trump to implement his reactionary agenda, which will hurt most of his supporters IMO, the republicans will need to take control over the House and Senate and possibly end the filibuster rule in the Senate. If his proposals are adopted, it will take awhile before increases in the tariffs, tax cuts, mass deportations and other drivers of higher inflation to filter through into the CPI and PCE inflation numbers. So the rate hikes in response may be more of a 2026 than a late 2025 phenomenon. Predicting the future is at best a guess. I generally play multiple scenarios in my portfolio allocations.
DeleteIn the IBond redemption section, I added material to my original discussion relating to the 1 TIP purchase at the last 10 year TIP auction. The coupon is 1.75% with a real yield of 2.184% due to the discount to par value purchased price of 96.24947. This was a reopening auction where the the inflation accretion adjusted the principal amount. The term is 9 years and 8 months.
ReplyDeleteRather than participating in the last 5 year TIP auction, I bought a TIP in the secondary market that matures on 4/15/28 and has a real yield of 2.289%:
Item # 8. Bought 1 TIP in a Roth IRA Account:
https://tennesseeindependent.blogspot.com/2024/06/cmcsa-cnobp-emp-enb-jqc-pine-reiunca.html
The 2034 TIP maturity is currently the furthest in my TIP ladder.
I will occasionally trade longer term TIPs in Roth IRA accounts, but have quit doing that after having profitable trades with those highly volatile maturities. Those trades included TIPs maturing in 2040s. All of those trades occurred in 2016-2017.
Some snapshot are contained in this old SeekingAlpha post:
Scroll to Update 10/26/16:
https://seekingalpha.com/instablog/434935-south-gent/4901042-update-on-buying-tips-in-secondary-market
Ligand Pharmaceuticals Inc. (LGND)
ReplyDelete$90.28 +$5.91 +7.00%
Last Updated: Jul 8, 2024 11:06 a.m. EDT
https://www.marketwatch.com/investing/stock/lgnd?mod=search_symbol
The market cap is near $1.5B. The bid/ask price is normally wide. I currently own about 10 shares. The stock is highly volatile.
The pop today is due to this announcement:
"Ligand to Acquire APEIRON Biologics AG for $100 Million"
https://www.businesswire.com/news/home/20240706652097/en/
Ligand claims that this acquisition "will be immediately accretive to Ligand EPS by an estimated $1.00 per share on an annualized basis with a $0.50 impact to 2024"
"The APEIRON acquisition will be immediately accretive to Ligand’s earnings per share (EPS) by approximately $1.00 on an annualized basis. Ligand is increasing its 2024 revenue guidance to be in the range of $140 million to $157 million (previously $130 million to $142 million) and is raising core adjusted EPS guidance to $5.00 to $5.50 (previously $4.25 to $4.75). Royalties are now expected to range from $100 million to $105 million (previously $90 million to $95 million)."
Additional amounts may be owed to APEIRON shareholders as generally summarized in the press release.
I last discussed LGND in a 6/27/24 comment:
https://tennesseeindependent.blogspot.com/2024/06/apa-aqn-cmcsa-dcom-kbwy-khc-nomd.html?showComment=1719504966819#c1750851487669028324
My last blog discussion was in this March 2024 post:
Item # 1.B. Added to LGND - Bought $30 at $77.32; 1 at $76; 1 at $75; 1 at $73; 1 at $71.8:
https://tennesseeindependent.blogspot.com/2024/03/agr-bhb-cfg-eprprc-ffbc-lgnd-mbwm.html
As previously discussed, an important future event is whether Viking Therapeutics can advance its NASH drug to an FDA approval with LGND receiving royalties for licensing the small molecule.
6/4/24 Press Release:
https://www.prnewswire.com/news-releases/viking-therapeutics-announces-positive-52-week-histologic-data-from-phase-2b-voyage-study-of-vk2809-in-patients-with-biopsy-confirmed-non-alcoholic-steatohepatitis-nash-302162714.html
LGND 2023 SEC Filed Annual Report at page 11:
Royalties at 3.5% to 7.5% + milestone payments
https://www.sec.gov/Archives/edgar/data/886163/000088616324000009/lgnd-20231231.htm
As previously discussed, LGND bought stock in Viking when entering in license agreements and has been harvesting its gains over the past year or so.
Interesting stock. Thanks for the update.
DeleteLand: I refreshed my memory on how Ligand (LGND) acquired Viking stock. Relying just on my memory now for something researched a year or so ago may not produce an accurate summary.
DeleteI initially did some research on Ligand before buying a position in Viking Therapeutics (VKTX) as a Lottery Ticket. Prior to then, I had no knowledge about the company.
I sold my remaining VKTX shares too soon, though I will not quarrel too much with myself given the realized percentage gain.
Item # 1.A. Eliminated VKTX - Sold 30 at $22.84 (profit snapshot = $551.7): https://tennesseeindependent.blogspot.com/2023/05/bbdc-botz-brkl-cfg-fhb-fhnpre-hbnc-jqc.html
When LGND licensed 5 small molecules to Viking in 2014, including the molecule that is in late stage trials for treating NASH, Viking was responsible for all development costs.
That is the model that LGND used frequently when discovering a molecule and then licensing it to another company who was responsible for the trial and other costs.
LGND acquired Viking shares in connection with the VKTX IPO in 2015. LGND purchased 1.1M of the 3M shares offered by Viking at the $8 IPO price. Viking issued LGND another 3.8M SHARES as part of its license agreement. 2016 10-K at page 55.
LGND owned 1 million Viking shares as of 3/31/24, 10/Q at page 29 Those shares may have been sold since then.
Viking Therapeutics Inc. (VKTX)
Closed at $54.15 yesterday.
https://www.marketwatch.com/investing/stock/vktx?mod=search_symbol
LGND has been liquidating its VKTX position over time:
LGND recognized a $60M gain from selling 700,000 VKTX shares in the 2024 first quarter, page 28
Recognized in 2023 a $44.4M gain from selling 5M VKTX shares, 2023 10-K at page 87.
Recognized in 2021 a $3.6M gain from selling .6M VKTX shares.
More recently, LGND is starting to acquire some compounds that it intends to market or using its cash to purchase royalty rights that other companies would receive, similar to what Royalty Pharma PLC (RPRX) does which has risks when the royalty stream is for a product still in clinical development.
That approach resulted in a failure for LGND when the OVID Therapeutics drug failed in a late stage trial and LGND had purchased part of the royalty stream for that drug.
So much to understand when assessing a drug pipeline stock. The financial handoffs are complicated factors.
DeleteLand: Transferring all trial and other costs to the licensee substantially reduces both the risks and rewards. Royalties from sales of the licensed compound will be much lower compared to when both companies share development costs in some way and have allocated in some way the risk of a failure.
DeleteThe lower royalties payable to LGND for licensed compounds partially explains the low market capitalization. Home runs are turned into mostly singles and the occasional double.
One of the compounds that LGND markets is called Captisol which optimizes the performance of other drugs. It generated a lot of revenues for use in Gilead's Covid drug Veklury, but that has dried up and revenues for other products are now much lower. LGND has a third party manufacture the drug and it is selling the product to other drug companies rather than marketing them to doctors and their patients. This approach is consistent with a historical hands off approach when it comes to development and marketing costs.
https://www.captisol.com/
There was a departure from this model involving an acquired drug called ZELSUVMI, recently approved by the FDA for treating molluscum:
https://investor.ligand.com/news-and-events/press-releases/news-details/2024/U.S.-Food-and-Drug-Administration-Approves-ZELSUVMI-as-a-First-in-Class-Medication-for-the-Treatment-of-Molluscum-Contagiosum/default.aspx
Ligand acquired that compound in Novan's bankruptcy:
https://investor.ligand.com/news-and-events/press-releases/news-details/2023/Ligand-Acquires-Assets-Of-Novan-Inc.-For-12.2-Million/default.aspx
I am not buying at the current price.
The June CPI released earlier this morning is bond friendly. The ten year treasury yield has declined about 10 basis points in response so far today.
ReplyDeleteMonth-to-Month CPI -.1%
Month-to-Month Core CPI .1%
Annual CPI Through June 2024: 3%
Annual Core CPI: 3.3%
Owners Equivalent Rent:
Month-to-Month at +.3%
Annual at +5.4%
Weighted at 26.691% in CPI, more in core CPI which excludes food and energy.
This is a fictional expense item. Owners of homes do not pay rent to themselves.
IWM small caps were up about 3.6% today. Just above the recent double top.
DeleteSo expectation is that when / if rates go down, small caps will fair much better (since they can get cheaper funding.)
Meanwhile the big tech stocks will see an outflow because? I assume because a softlanding will lead to diversification out of them.
I'm debating if I want to sell some IWM in my Roth (so not taxable) and wait for a pullback. So far waiting has been rewarding - in a big way.
Land: Small companies will generally borrow money through a bank credit facility that will be priced at spreads to a short term rate like the 3 month SOFR. Fed rate cuts will cut their borrowing costs.
DeleteAnother issue involves hopium rather than the concrete number flowing from lower borrowing costs. The general belief is that this sector is more economically sensitive, and lower interest rates may prolong the economic expansion, pushing a recession farther into the future.
The small caps have also materially underperformed and may be one of the beneficiaries of a rotation out of high multiple stocks, primarily in the technology sector, that have experienced hugh gains and may be due for some profit taking now.
10 Year Average Annual Total Returns through 7/10/24 (total return includes dividend reinvestment):
IWM: 7.27%
https://www.morningstar.com/etfs/arcx/iwm/performance
SPY: +13.08%
https://www.morningstar.com/etfs/arcx/spy/performance
XLK (Technology Select Sector SPDR® ETF) +21.48%
https://www.morningstar.com/etfs/arcx/xlk/performance
NASDAQ Composite Index:
ReplyDelete18,315.06 -332.39 (-1.78%)
As of 11:52 AM EDT
The Technology Select Sector SPDR Fund (XLK)
$231.97 -$5.71 (-2.40%)
As of 11:54 AM EDT
https://www.marketwatch.com/investing/fund/xlk?mod=search_symbol
Fidelity MSCI Utilities Index ETF (FUTY)
$45.66 +$0.90 +2.01%
https://www.marketwatch.com/investing/fund/futy?mod=search_symbol
Vanguard Real Estate ETF (VNQ)
$86.94 +$2.56 +3.03%
https://www.marketwatch.com/investing/fund/vnq?mod=search_symbol
SPDR S&P Regional Banking ETF (KRE)
$51.50. +$1.63 +3.27%
https://www.marketwatch.com/investing/fund/kre?mod=search_symbol
iShares 7-10 Year Treasury Bond ETF (IEF)
$94.94 +$ 0.79 +0.83%
Last Updated: Jul 11, 2024 at 12:00 p.m. EDT
https://www.marketwatch.com/investing/fund/ief?mod=search_symbol
Up: Utilities, Real Estate, Small Banking
DeleteRE is due to lower loan rates.
Small banking is better at lower rates?
Utilities are a run to safety. But their divs compete better at lower rates?
Land: Utilities and equity REITs are bond substitute sectors whose dividends become more attractive as interest rates decline.
DeleteWhen I use the phrase "bond substitute" when referring to a stock or stock sector, I am not expressing an opinion on the safety of the dividend, but that the income stream from the stock, plus dividend increases, is or will likely be better than yields from bonds.
If the intermediate interest rates continue to decline, with short rates falling in tandem with FED rate cuts, equity REITs will also be able to refinance maturing mortgages and senior unsecured debt at lower yields, compared to recent refinancings and what may have been feared, and many will pay less for borrowings at variable rates priced at spreads to short term rates like SOFR.
Lower interest costs will increased their funds from operations (cash flow), and provide more support for their dividends and more room to increase the dividends. That would be occurring in a scenario, which I am assuming here, when new fixed income investments and treasury bills would be going down in yields.
"Equity REITs" mean REITs that own property as distinguished from "Mortgage REITs" that are more highly leveraged and own paper assets.
Many regional banks stocks are in the bond substitute category now with dividend yields over 5%.
P/E ratios using TTM GAAP earnings are low ranging in many cases between 8 -12.
So there is a valuation and yield argument for owning them, at least to some degree.
Bank deposit and borrowing costs will fall with a decline in interest rates and the unrealized losses on owned investment securities will fall as well.
Deposit costs are already in decline judging from what I am seeing in new CD offerings.
The downside for NIM would be a repricing of loan rates at prime or spreads to the prime rate. NIM would probably expand some for most regional banks as the lower interest expenses paid by the bank on deposits and its borrowings will more than offset lower loan interest payments price at variable rates.
Also, lower mortgage rates would cause more of a paydown of low yielding mortgage backed securities providing the bank with better reinvestment options for interest income over the next year or two.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2024/07/calf-cznc-hrunca-idna-irbo-pnm-sbsi-wba.html