Economy:
DeepSeek: A shocking Chinese AI advancement is sending US stocks plunging | CNN Business The DeepSeek App is currently available for download at the Apple Store. The Chinese company that created the App allows anyone to use, adapt or improve the product. How China’s DeepSeek AI Chatbot Became an Overnight Success - The Atlantic
How Chinese AI Startup DeepSeek Made a Model that Rivals OpenAI | WIRED
DeepSeek is a modern Sputnik moment for West | The Strategist It is too early to draw that conclusion IMO. This development at least raise a question of whether trillions need to be spent buying expensive chips and building more data centers for the AI market.
Corporate tax cuts don’t boost the economy — despite what many investors believe - MarketWatch (subscription publication), summarizing this article at No, higher corporate taxes do not reduce profits
Krugman Calls Trump Tariffs 'Really, Really Destructive' - YouTube
This video published at the WSJ's YouTube channel summarizes some of the negative economic repercussions from mass deportations: The Hidden Costs of Trump's Mass Deportations | WSJ - YouTube
Deporting 80-90 immigrants at a time, using military aircraft, will not have much of an impact on the U.S. economy for several months. It will be extremely expensive. The cost of deporting 80 immigrants using a C-17 military aircraft from Texas to Guatemala was $252,000. Using a C-130E, the cost skyrockets to between $816,000 to $852,000 per trip. Trump's first deportation flights with average of just 80 migrants cost up to $852,000 per trip - The Mirror US More will most likely enter the U.S. illegally than are deported each day.
Based on the current prices of major U.S. stock indexes, investors do not believe that Trump will start a tariff war, as he said that he would do. The consensus IMO, expressed through the current stock market levels, is that Trump is all bark and no bite on tariffs. I do not have the same confidence, viewing it as more probable than not that Trump will start a widespread trade war given the numerous statements that he made on this topic both prior to and after the election including a statement made last Tuesday on his behalf regarding 25% tariffs on imports from Canada and Mexico and a 10% tariff on China's exports. Trump still expects to impose Feb 1 tariffs on Canada and Mexico, White House says | Reuters
Point72's CEO Steven Cohen anticipates market peak soon-Investing.com
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Allocation Shifts Discussed in this Post:
I am in a pause as a stock buyer, as I wait for more information about the potential impacts of Trump policies on the U.S. economy. I do not need to own any stocks and will continue to do some light selling to reduce my average cost per share in some existing stock positions which is part of my overall risk reduction strategy.
I may sell 50 shares of PRWCX later this week.
I will continue buying treasury bills, treasury notes, and corporate bonds where I am merely redeploying proceeds from maturing securities.
Treasury Bills Purchased at Auction (principal amount): $15,000
Treasury Notes Purchased at Auction (principal amount): $3,000
Corporate Bonds (principal amount): $10,000
Outflow U.S. Common Stocks: -$464.32
(Consisting of $754.05 in proceeds minus $289.73 in purchases with a realized gain of +$265.75)
Inflow Stock Funds: +$135
Net Outflow Common Stocks/Stock Funds: -$320.32
Outflow Canadian Reset Equity Preferred Stock: -C$1,974 (realized gain at +C$413)
2025 Net Inflow U.S. Common Stocks/Stock Funds: +$1,804.53
I may be back to a net outflow in 2025 by month's end.
January Treasury Yield Curve:
10 Year TIP Breakeven Inflation: 2.42%, up from 2.12% as of 9/17/24.
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Some Venting About Trump's Flagrant Law Violations and His attempt to repeal the first sentence of the 14th Amendment by executive order:
About a month ago, I published a YouTube video predicting that Trump would repeal, as he promised during the campaign, the birthright citizenship clause in the U.S. Constitution by executive order. Trump Proposes to End Birthright Citizenship by Executive Fiat - YouTube
He has now done so. Protecting The Meaning And Value Of American Citizenship – The White House
To create a case and controversy, which is necessary for the federal courts to address the constitutionality of that order, I predicted in that earlier video that Trump would simply order the government to refrain from issuing passports to children born in the United States whose parents were in the country illegally (video at 7:26)
The U.S. Constitution clearly provides in Section 1 of the 14th Amendment that there is a constitutional right to birthright citizenship:
"All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside" Fourteenth Amendment Section 1 | Constitution Annotated | Congress.gov | Library of Congress
Immigrants who are in the United States unlawfully are subject to the jurisdiction of the U.S. and state governments.
They can be charged with committing crimes and tried in a U.S. court.
If convicted, they can be sent to a U.S. penitentiary and many have been.
Civil courts also have jurisdiction over them.
If an illegal immigrant is involved in a car accident, that person can be sued in court for damages.
They have to pay taxes.
If they fail to pay rent, they can be evicted from their apartments.
If they abuse their child born in the U.S., child protective services can take custody of the child. There is no question but that they have been and are now subject to U.S. jurisdiction.
The persons who are not subject to U.S. jurisdiction are those who have diplomatic immunity. And that is what subject to the jurisdiction meant when the 14th Amendment was passed by Congress and approved by the states.
The judicial interpretations standards used by Republican Justices, both the plain and the original meaning standards, support the constitutional right to birthright citizenship.
Unfortunately, the Republican Justices, who profess to follow those judicial interpretation standards, at least when adherence accomplishes their ideological and religious goals, are results oriented, meaning that they will find a way to reach their preferred policy result on major issues, irrespective of what would be required using an interpretation standard that they profess to follow. This is not something that is new. {My video: Brief history of results oriented Supreme Court Decisions - YouTube}
A federal district court judge, appointed by President Reagan, has temporarily enjoined the U.S. government from taking action under Trump's executive order taking away birthright citizenship, calling that executive order blatantly unconstitutional, which I view as an accurate statement.
Birthright citizenship: Judge blocks Trump’s ‘blatantly unconstitutional’ executive order
The TRO lasts 14 days and will generally be followed by a preliminary injunction hearing. I have not yet looked to see if one has been scheduled. Since the issue is a legal one, the court may combine the preliminary injunction hearing with a trial on the merits.
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The Republican Supreme Justices have provided Trump with a carte blanche to commit violations of existing laws, including the criminal ones, as well as the Constitution, without any repercussions as a practical matter. The immunity decision creates an easily followed path for future Presidents to see that the laws are not faithfully executed, which is a constitutional duty of Presidents as provided in Article II of the Constitution.
I agree with the Erwin Chemerinsky, a constitutional law scholar and Dean of the UC Berkeley School of Law, that Trump has already taken "clearly illegal" actions. Possibly Trump is testing whether there are any limits to Presidential powers. Trump has repeatedly said in the past that he can do whatever he wants to do as President. There are good reasons to believe that the Republican Supreme Court Justices are in sync with that belief.
While removal after an impeachment conviction is still theoretically possible, this will never happen to Trump, no matter how many laws that he violates over the next 4 years.
There are no guardrails left to restrain him from exercising what used to be viewed as dictatorial powers prior to the Trump era, but are now cheered by 80 million Trump voters since the result is something that they favor. The cheering would stop abruptly if a far left President was committing law violations to accomplish policy objectives.
Note that my focus here is on the democratic process and the avoidance of a dictatorship, not whether the policy being advanced is good or bad in my opinion.
I would classify the current republican party as an authoritarian leaning one, the first major U.S. political party to fall clearly within that classification in the nation's history IMO.
Arthur Schlesinger published a book in 1974 entitled the "The Imperial Presidency". The Imperial Presidency-Wikipedia The powers of the President have grown exponentially since 1974 and now includes a get out of jail free card.
So can Trump fire 15 Inspector Generals without obeying the law passed by Congress, impound funds that Congress has appropriated and signed into law by prior Presidents, and fire career Justice Department employees protected by the civil service statutes?
The republicans in Congress will never make any attempt to turn Trump into a law abiding citizen, which is impossible anyway IMO, nor will he ever face repercussions from those who voted to give him a second term no matter what he does.
Any republican politician who even made a slight effort in that direction or to utter even the mildest criticism would be attacked by Trump and would lose the next primary election to someone who would never utter a critical word about him.
I doubt that the Republican Justices, as the most ardent proponents and supporters of the Imperial Presidency, a position antithetical to anything resembling conservatism in the American tradition, will curtail Trump's violations of laws passed by Congress and signed into law by a prior President.
Trump has basically impounded funds appropriated by Congress and signed into law by a prior President. Judge blocks Trump federal funding freeze on all public loans, grants and more aid - CBS News Trump is in effect repealing by executive order existing laws through impoundment. It is just another authoritarian act and was predictable based on what he said that he would do during the campaign. I discussed the illegality of impoundment in a YouTube Video. Trump's Proposal To Impound Funds Authorized by Congress pursuant to laws that he does not like - YouTube (published about 7 months ago)
Trump funding freeze a blatant violation of Constitution, federal law: Legal experts - ABC News (1/28/25)
Trump's Attempt to Usurp Congress's Spending Power
Congress, which is now controlled by completely servile Trump loyalists, is merely an extension of Trump, and a mere surplusage appendage.
The Senate and House republicans might as well give Trump proxies to cast their votes, fire their staffs, thereby saving the government wasteful salary and travel expenses, and just go back home.
What can you say about 50 republican senators confirming Hegseth as Defense Secretary - nothing positive IMO. Pete Hegseth - Wikipedia Their votes to confirm that creature is just further proof on how irrelevant they are in Trump's America.
**
Trump’s Colombia Spat Is a Gift to China - The Atlantic I would agree with this assessment. Growing hatred of America outside of the U.S., which Trump will cause, is not the same as earning respect. China will take advantage of this opportunity that Trump is giving and will continue to give.
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1. Canadian Reset Equity Preferred Stocks:
A. Pared TRPPRE:CA - Sold 100 of 250 at C$19.75 - IB Account:
Quote: TRP-PE.TO
Proceeds: C$1,974 after C$1 commission.
Issuer: TC Energy Corp. (TRP)
I have a small ball position in TRP, which I last discussed here: Item # 4.A. Pared TRP - Sold 10 at $47.47 (10/24/24 Post)
Lots Prior to sale with total cost numbers: I sold the highest cost lot using FIFO accounting
Profit Snapshot: +C$413
Last Discussed: Item #5.A. Bought 100 TRPPRE at C$15 and 50 at C$11.12 (3/28/2020 Post)
Par Value: C$25 per share
Resets: Every 5 years at a 2.35% spread to the 5 year Canadian government bond yield.
Canada 5 Year Government Bond Overview | MarketWatch
Callable: Only on reset dates
Dividends: Paid Quarterly and Cumulative
Last Reset: October 2024 at 5.08% which makes the stock vulnerable to a persistent rise in rates. TC Energy provides conversion right and dividend rate notice for Series 9 and 10 preferred shares
New Average cost per share: C$13.72 (150 shares)
 |
| Snapshot after pare- Price at 1/22/25 close |
Yield at C$13.72 = 9.26%
Computed as follows: .0508% coupon x. C$25 par value = C$1.27 annual dividend per share ÷ C$13.72 average cost per share = 9.2566%.
Last Elimination: Item # 2.A. Sold 100 TRPPRE at C$22.26 (5/23/17 Post)(profit snapshot = C$467.5)
My Video: Canadian Reset Equity Preferred Stocks - YouTube
2. Small Ball Buys:
A. Started FLGB - Part 5 at $27:
Quote: FLGB | Franklin FTSE United Kingdom ETF Overview
Cost: $135
Sponsor's website: Franklin FTSE United Kingdom ETF - FLGB
Expense Ratio: .09%
The expense ratio is lower than a similar ETF offered by Ishares that has a .5% expense ratio. iShares MSCI United Kingdom ETF | EWU
Number of Holdings: 104
Top 10 Holdings:
Dividends: Paid semiannually at variable rates
Last 2 Dividends: $1.16, rounded up
Yield at $27 Using $1.16 annual = 4.3%
Last Ex Dividend: 12/20/24
B. Added 5 FNLC at $25.35:
Quote: First Bancorp Inc. (FNLC)
Cost $126.75
FNLC is a bank holding company whose operating subsidiary is First National Bank. The headquarters is located in Damariscotta, ME. "First National Bank was established in 1864 and now has 18 branches located along Maine’s coast from Wiscasset to Calais and two branches in the greater Bangor area."
Market Capitalization: Near $290M, multiply market price by the 11,115,528 shares outstanding as of 12/31/24.
Investment Category: Regional Bank Basket Strategy (contains snapshots of realized gains/losses)
I discussed restarting a position in FNLC in my last report. Item # 1.G. Restarted FNLC - Bought 10 at $26.08 (1/22/25 Post)
New Average cost per share: $25.83 (15 shares)
Dividend: Quarterly at $.36 per share ($1.44 annually)
Yield at AC = 5.575%
Last Ex Dividend: 1/6/25
Last Earnings Report (Q/E 12/31/24): SEC Filed Earnings Press Release
Comparisons are to the 2023 4th quarter.
Diluted E.P.S. $.65, up from $.60
NIM: 2.42%, up from 2.34%
Efficiency Ratio: 56.66%, up from 54.08%
NPL Ratio: .18%, up from .1% (both are good)
NPA Ratio: .14%, up from .07% (both are good)
Charge off ratio: .02% (excellent)
Tangible Book value per share: $19.87, up from $19.12.
Total deposits up 4.8% from December 31, 2023.
"Uninsured deposits were an estimated 18.6% of total deposits as of December 31, 2024, and 69% of uninsured deposits were fully collateralized."
As with most banks, interest rate risk in owned securities was mismanaged in 2021. This bank had excessive amounts of low yielding mortgage backed in 2021 and failed to adjust duration.
As of 9/30/24, the bank owned 706.193M in securities and had an unrealized loss, mostly in mortgage back securities, of $87.821M:
This mismanagement of interest rate when it was obvious that interest rates would have to move higher to combat problematic inflation was normal for banks. I am not signaling out this bank for criticism.
FNLC Realized Gains to Date: $1,339.54
C. Added to Lotto VKTX- Bought 2 at $33.62, 1 at $32.82, 1 at $32.65:
Quote: Viking Therapeutics Inc. (VKTX)
Cost: $132.71
Website: Viking Therapeutics Home - Viking Therapeutics
10-Q for the Q/E 9/30/24
I mentioned these purchases in a comment published on 1/23/25.
Investment Category: Lottery Ticket
Viking has three primary drugs in clinical trials.
The volatility in the stock price originates IMO from its weight loss drugs (VK2735), both an injectable and pill versions.
This is already a crowded field with major drug companies, Novo Nordisk and Eli Lilly already marketing approved products for this condition.
News about favorable results for marketed weight loss drugs, or new ones in the pipeline, will negatively impact Viking's stock price.
Maybe Viking will be able to differentiate its product by securing regulatory approval of its pill version. The company recently started a Phase 2 trial. Viking Therapeutics Announces Initiation of Phase 2 VENTURE-Oral Dosing Trial of VK2735 Tablet Formulation in Patients with Obesity - Jan 8, 2025
The injectable version of VK2735 is further along in trials. Viking Therapeutics Reports New Data from VK2735 Obesity Program at ObesityWeek® 2024 - Nov 4, 2024
Even if these compounds are eventually approved by the FDA, Viking, as a clinical stage biotech, has no experience in manufacturing and marketing approved products.
Viking must have a major pharmaceutical company to partner VK2735, both in pill and injectable form, who is willing to assume the costs of trials and to make a sizeable initial payment for marketing rights, milestone payments for regulatory approvals, and royalties. In other words, VK2735 needs to monetized soon.
Another drug that is in late stage trials is VK2809 that has completed a Phase 2b trial for treating NASH. The results are promising: Viking Therapeutics Presents Results from Phase 2b VOYAGE Study of VK2809 in Biopsy-Confirmed NASH/MASH at the 75th Liver Meeting® 2024 - Nov 19, 2024 I own a small ball position in another company that is entitled to receive royalties when and if VK2809 is approved and sales start. Ligand Pharmaceuticals Inc. (LGND) I discuss LGND in Item # 3.F. below.
There are other products in the pipeline.
Proof of concept only: Viking Therapeutics Rare Disease Program - Viking Therapeutics "X-ALD is a rare X-linked, inherited neurological disorder characterized by a breakdown in the protective barriers surrounding brain and nerve cells."
Proof of concept only: Viking Therapeutics VK5211 ("orally available, non-steroidal selective androgen receptor modulator, or SARM, in development for the treatment of patients recovering from non-elective hip fracture surgery.")
Phase 1 and Phase 2 Proof of Concept: Viking Therapeutics VK0612 - Viking Therapeutics (" Preliminary clinical data suggest VK0612 has the potential to provide substantial glucose-lowering effects, with an attractive safety and convenience profile compared with existing type 2 diabetes therapies")
Preclinical: Viking Therapeutics VK1430 - Viking Therapeutics (part of small molecule inhibitors "of the enzyme diacylglycerol O-acyltransferase 1 (DGAT-1) for the potential treatment of metabolic disorders such as hypertriglyceridemia, NASH, obesity, and dyslipidemia."
Recent article: Viking Therapeutics: Strategic Growth and Strong Buy Rating Amidst Advancements in Obesity Drug Pipeline - TipRanks.com
Prior Elimination: I started a small ball Lotto position when VKTX was selling in the low single digits and eliminated that position. Item #1.A. Sold 30 VKTX at $22.84 (5/20/23 Post)(profit snapshot = $551.7)
Early Buy Discussions: All of these shares have been sold. Item # 1.I. Added to Lotto VRTX Bought 5 at $4.67; 3 at $4.32; 10 at $3.95 (1/20/22 Post); Item # 1.M. Bought 10 VKTX at $5.88 (7/2/2021 Post)
My concern then and now is that the weight loss drugs, particularly the injectable version, are too late entries into this space; and Viking lacks the resources or experience to compete with incumbent marketers of approved weight loss products.
Since I sold the stock in 2023, Viking has made progress in advancing its weight loss and NASH drugs in clinical trials which, IMO, makes the stock somewhat less risky.
However, there remains risks that one or all of the primary clinical stage compounds may fail to meet end points in later stage trials. There are substantial risks involved in going head-to-head with Lilly and Novo, even with regulatory approvals.
Current Position: 6 shares
Average Cost per share: $39.76
Dividends: None and none expected
Last Discussed: Item # 3.F. Restarted VKTX - Bought 1 at $53.89; 1 at $51.95(11/27/24 Post) I discussed the last loss report in that post. SEC Filed Press Release and 10-Q
Since I eliminated my position in 2023, Viking has raised significant amounts of capital selling shares.
Last Stock Offering (3/24): Prospectus 6.471M shares, plus greenshoe, at a public offering price of $85 per share. The greenshoe was exercised by the underwriters bringing the total offering to 7,441,650 shares sold at $85, with about $632.5M in proceeds to Viking after the underwriters' commission. Viking Therapeutics Announces Closing of Public Offering of Common Stock Including Full Exercise of Underwriters' Option to Purchase Additional Shares - Mar 4, 2024
Quote: Western Union Co. (WU)
Cost: $30.27
Investment Category: Bond Substitute (Describes the goal rather than the safety of the dividend)
WU Analyst Estimates | MarketWatch
WU Key Metrics Page at Reuters
New average cost per share: $11.56 (80+ shares)
Dividend: Quarterly at $.235 per share ($.94 annually)
I am reinvesting the dividend.
Yield at New AC: 8.13%
Last Ex Dividend: 12/23/24 (owned 70+ as of)
Last Earnings Report (Q/E 9/30/24 Post) I discussed this report here: Item # 3.C. Bought 5 WU at $11.26; 3 at $10.86 (10/31/24 Post); SEC Filed Press Release and 10-Q.
Goal: Dividend Harvest plus at least 2% annualized return when selling the stock.
Maximum Position: 100 shares.
Recent News: Western Union Announces New $1 Billion Share Repurchase Program
3. Small Ball Sells:
A. Pared Duplicate Position in T - Sold 7 at $24.17:
Quote: AT&T Inc. (T)
Using the specific identification method, I sold my highest cost shares.
Proceeds: $169.19
T Analyst Estimates | MarketWatch
Investment Category: Bond Substitute (Describes the goal, which is harvesting the dividend and realizing at least a 2% annual return when selling shares, rather than the safety of the dividend. AT&T slashed its dividend from $.52 to the current $.2775 per share effective for the 2022 second quarter payment.)
Last Discussed: Item # 1.G. Continued to Pare AT&T (T) - Sold Highest Cost 5 Shares in my Fidelity Account at $23.08 (12/5/24 Post); Item # 2.H. Sold 5 T at $22.98; 5 at $23.01 in Schwab Account (11/27/24 Post)(profit snapshot = $41.11); Item # 2.C. Pared AT&T in 2 Taxable Accounts - Sold 5 at $22.37; 5 at $22.22 (10/31/24 Post)(profit snapshot = $38.89; discussed 2024 third quarter earnings report, SEC Filed Press Release)
Profit Snapshot: $32.14
New average cost per share this account: $16.87 (25+ shares)
The AC per share was reduced from $17.29.
Remaining Shares this account: Another example of small ball.
Dividend: Quarterly at $.2775 per share ($1.11 annually)
AT&T Inc. (T) Dividend History | Nasdaq
Yield at New AC per share: 6.58%
The yield was increased from 6.42% as a result of selling the highest cost 7 shares.
Last Ex Dividend: 1/10/25
Last Earnings Report (Q/E 12/31/24): This report was released on 1/27/25. The stock rose in response and I elected to sell into the rally.
SEC Filed Earnings Press Release
E.P.S. $.56
Adjusted E.P.S. = .54
Consensus non-GAAP at $.50
2024 Annual Free Cash Flow +$17.6B, up .9B compared to 2023
Reconciliation of GAAP to Non-GAAP:
Note that adjusted E.P.S. declined to $2.26 last year from $2.41 in 2023.
Adjusted E.P.S. guidance for 2025: $1.97-$2.07 which excludes contributions from the 70% interest in DirectTV whose sale to TPG is expected to close in mid-2025.
+482,oo0 postpaid net phone additions, better than the consensus
+307,000 net subscriber adds in broadband.
B. Pared SCM - Sold 5 at $14.76:
Quote: Stellus Capital Investment Corp. (SCM) - Externally Managed BDC
Proceeds: $73.8
I sold my highest cost lot using the specific identification method.
SEC Filed 2023 Annual Report (Risk summary starts at page 34 and ends at page 69)
Website: Stellus Capital Management
Last Discussed: Item # 3.A. Pared SCM - Sold Highest Cost 5 Shares at $13.83- Fidelity Account (4/26/24 Post)(profit snapshot = $30.92)
Profit Snapshot: +$36.15
New Average cost per share: $6.98 (25 Shares)
 |
| Snapshot Intraday on 1/23/25 after pare |
Dividend: Monthly at $.1333 per share ($1.6 annually)
SCM Dividend History & Date | Seeking Alpha
Yield at $6.98: 22.92%
Next Ex Dividend: 1/31/25
Net Asset value per share history:
9/30/24: $13.55
12/31/23: $13.26
12/31/22: $14.02
9/30/22: $14.18 10-Q for the Q/E 9/30/22 at page 1
6/30/22: $14.32 10-Q for the Q/E 6/30/22
12/31/21: $14.61
9/30/21: $14.15
6/30/21: $14.07
3/31/21: $14.03 10-Q for the Q/E 3/31/21 at page 3
12/31/20: $14.03 10-K at page 74
12/31/19: $14.14
12/31/18: $14.09
12/31/17: $13.81
12/31/16 $13.69
12/31/15: $13.19
12/31/14: $13.94
12/31/13: $14.54
November 2012: IPO at $15 ($14.46 after underwriters discount)
NII per share: $.39, down from $.47
95% of loans at floating rates
Net Realized Loss on Investments per share: $.13 and $.87 per share for the 9 months ending on 9/30/24
10-Q for the Q/E 9/30/24 A summary of investments starts at page 5.
Composition of Investments:
 |
| 10-Q at page 45 |
Company Assessment of Credit Risks:
 |
| 10-Q at page 68 |
Company Assessment of Impacts on Net Investment Income from Changes in Interest Rates:
 |
| 10-Q at page 79 |
With floating rate loans, net interest income will decline as interest rates fall.
Last Substantive Buy Discussions: Item # 1.E. Bought 5 SCM at $7.41 in Fidelity Account (8/15/20 Post); Item # 3.J. Added 10 SCM at $7.85; 5 at $7.65; 10 at $7.5 (7/18/20 Post); Item # 2.B. Added 10 SCM at $7.8; 2 at $6.26, 3 at $5.30; 5 at $7.53 (5/9/20 Post).
Other Sell Discussions: Item # 2.B. Eliminated SCM in Vanguard Taxable Account Sold 30 at $15.36 and Item # 2.C. Eliminated SCM ins Schwab Account-Sold 10 at $15.55 (2/20/23 Post)(profit snapshots = $310.04);
Item # 3.C. Pared SCM in Fidelity Account - Sold 5 at $13.89 (8/23/22 Post)(profit snapshot = $28.69); Item 2.L. Pared SCM in Fidelity Taxable Account-Sold 5 at $14 (12/3/21 Post)(profit snapshot = $30.75);
Item # 2.B. Sold 8.558 SCM shares at $13.19 (8/27/21 Post)(profit snapshot = $45.73); Item # 2.G. Pared SCM in Vanguard Taxable-Sold 10 at $13.2 (6/19/21 Post)(profit snapshot = $11.33); Item # 1.C. Pared SCM in Fidelity Taxable -Sold 13 at $12.46 and 13+ at $13.25 (4/17/21 Post)(profit snapshot = $69.04); Item # 1.F. Pared SCM in Fidelity Taxable-Sold 20 at $11.08 and Item #1.G. Pared SCM in Vanguard Taxable-Sold 20 at $11.17 (12/19/20 Post)(profit snapshots = $14.23); Item # 3 Sold 50 SCM at $13.72 (9/21/19 Post)(eliminating position as of that date; profit snapshot = $3.75); Item # 1.I. Sold 20 SCM at $7.61 (8/22/20 Post)(contains snapshots of prior trades; profit snapshot = $10.84); Item # 1.B. Sold 32+ SCM at $14.22-Used Commission Free Trade (2/2/19 Post)(profit snapshot = $78.09); Item # 1.A. Sold Highest Cost Lot-50 Shares at $12.63 (5/3/18 Post)(profit snapshot = $34.24); Item 2.B. Sold 100 SCM at $14.23 (2/27/17 Post)(profit snapshot=$285.96); Item # 2 Sold 100 SCM at $13.02 (1/12/17 Post)(profit snapshot= $141.96)
SCM Realized Gains to Date: $1,131.72
Goal: Any total return in excess of the dividends paid.
C. Pared ARCC Again in Fidelity Account - Sold 5 at $23.42:
Quote: Ares Capital Corp (ARCC) - Externally managed BDC
Proceeds: $117.1
ARCC is one of the best externally managed BDCs IMO.
Profit Snapshot: $58.41
Average cost per share: $9.57 (15 shares)
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| Snapshot Intraday on 1/23/25 after pare |
Regular Dividend: Quarterly at $.48 per share ($1.92 annually)
ARCC Dividend History & Date | Seeking Alpha
Special Dividends: $.09 per share in special dividend were paid in 2023.
Yield at $9.57 (regular dividend only): 20.06%
Last Ex Dividend: 12/13/24
Last Earnings Report (Q/E 9/30/24): I discussed this report here: Item # 2.E. Pared ARCC in Fidelity Account - Sold 5 at $21.64 (11/27/24 Post)(profit snapshot = $48.01; has links to prior sell discussions); SEC Filed Earnings Press Release
ARCC Realized Gains to Date: $1,116.46
Goal: Any total return in excess of the dividends paid.
ARCC SU Bonds: I currently own 12.
Stacked as follows:
6 of the 4.25% SU bond that matures on 3/12/25
4 of the 3.25% SU bond that matures on 7/15/25
2 of the 3.875% SU bond that matures on 1/15/26 (discussed in Item # 4.D. below)
Last Bond Offering (1/25): Prospectus for $1B in a 5.8% SU note maturing in 2032.
D. Eliminated Duplicate Position in PNNT - Sold 26+ at $6.96:
Quote: PennantPark Investment Corp. (PNNT) - Externally Managed BDC
Proceeds: $182.31
Website: Investors | PennantPark
Annual Report for the F/Y Ending 9/30/24 (Risk factor summary starts at page 21 and ends at page 38; summary of investments starts at page 54)
Profit Snapshot: $42.88
Last Discussed: Item # 3.L. Added to PNNT - Bought 5 at $4.95; 5 at $4.75 (5/6/23 Post); Item # 1.F. Bought 5 PNNT at $5.11 (4/15/23 Post)
PNNT recently preannounced that its net income per share for the 2024 4th quarter would be $.19- $.21 below its current quarterly dividend of $.24 paid in 3 monthly installment of 8 cents.
Sourced from SEC Filing
PNNT Dividend History | Seeking Alpha
Last Ex Dividend: 1/15/25
Net income for many BDCs have been trending down due to increases in nonperforming loans and floating rate loans, priced at spreads to short term rates, resetting at lower coupons. Together, that makes these high risk stocks far less appealing to me as a hold, particularly those that have experienced a significant increase in NPLs even though the economy is still in an expansion phase.
Net Asset Value per share history: Unfavorable
9/30/24: $7.56
9/30/23: $7.7
12/31/22: $7.11 10-Q at page 4
12/31/21: $10.11 10-Q at page 4
12/31/20: $8.79 10-Q at page 4
12/31/15 $ 9.02
9/30/15 $ 9.82
12/31/14 $10.43
9/20/14 $11.03
12/31/13 $10.8
12/31/12 $10.38
12/31/10 $11.14
9/30/10 $10.69
12/31/09 $11.86
12/31/08 $10.24
12//31/07 $12.07
IPO at $15 Prospectus April 2007
Last Earnings Report (Q/E 9/30/24): SEC Filed Press Release
NII per share: $.22
The "portfolio totaled $1,328.1 million and consisted of $667.9 million or 50% of first lien secured debt, $99.6 million or 7% of U.S. Government Securities, $67.2 million or 5% of second lien secured debt, $181.7 million or 14% of subordinated debt (including $115.9 million or 9% in PSLF) and $311.7 million or 23% of preferred and common equity (including $67.9 million or 5% in PSLF). Our interest bearing debt portfolio consisted of 94% variable-rate investments and 6% fixed-rate investments. As of September 30, 2024, we had two portfolio companies on non-accrual, representing 4.1% and 2.3% percent of our overall portfolio on a cost and fair value basis, respectively."
"For the three months and year ended September 30, 2024, net realized gains (losses) totaled $2.5 million and $(33.6) million, respectively. For the three months and year ended September 30, 2023, net realized gains (losses) totaled $(5.2) million and $(156.8) million, respectively."
I still own 10+ shares in my Fidelity account with an average cost per share at $3.08.
E. Pared SU - Sold 2+ at $39.19:
Quotes:
USDs: Suncor Energy Inc (SU)
CADs: Suncor Energy Inc. (Canada: Toronto)
Canadian Dollar to US Dollar Exchange Rate Chart | Xe
I sold my highest cost lots using the specific identification method.
There is a risk that Trump will impose a 25% tariff on Canadian exports to the U.S. including energy products. That will adversely impact Canadian E&P companies and possibly energy infrastructure companies, provided the tariff remains in effect for more than a few weeks and U.S. buyers seek out other sources that are not subject to tariffs.
It is the U.S. importer that has to pay the tariff tax contrary to Trump's false assertion, repeatedly made by him, that the foreign country pays the tariff tax.
SU Analyst Estimates | MarketWatch
Website: Suncor
SEC Filings (foreign company forms)
For the 1 year period ending 1/24/25, the USD priced SU share was up 22.37% compared to the +29.08% for the CAD price share. The disparity is due to the CAD losing value against the USD.
Profit Snapshot: $54.36
Last Discussed: Item # 1.I. Eliminated SU in 2 Taxable Accounts - Sold 8 at $33.09; 10 at $33.29 (2/13/23 Post)(profit snapshots = $273)
Last Buy Discussion: Item # 2.K. Added to SU in Vanguard Taxable Account-Bought 2 SU at $20.93 (5/8/21 Post)
New Average cost per share: $13.33 (12+ shares)
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| Snapshot Intraday on 1/24/25 after pare |
The AC per share was reduced from $13.83.
Dividend: Quarterly at C$.57, raised from C$.545 effective for the 2024 4th quarter payment. Slashed from C$.465 to C$.21 effective for the 2020 second quarter payment.
Dividend In USDs: SU Dividend History | Seeking Alpha (substantial slash in 2020)
Last 4 Dividends in USDs: $1.6086 (rounded up to $1.61)
SU Realized Gains to Date: +US$1,304
F. Pared LGND - Sold 1 at $118.06:
Quote:Ligand Pharmaceuticals Inc. (LGND)
Proceeds: $118.06
Market Capitalization at $118.06: $2.23B
52 week range: $67.72-$129.9 (highly volatile)
I would also note that there is usually a wide bid/ask spread.
LGND Analyst Estimates | MarketWatch
SEC Filed 2023 Annual Report Investment highlights from 2023 are summarized at page 6.
Website: Ligand Pharmaceuticals - Biopharma's Technology and Capital Partner
Royalty Portfolio - Ligand Pharmaceuticals (contains general information about royalties payable to LGND by other companies)
Royalties and Milestone Payments from Approved Products:
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| 10-Q at page 13 |
Potential Royalties from Clinical Stage Drugs:
There are other pipeline products.
Investment Category: Lottery Ticket
I view this type of investment as an alternative to playing blackjack at a casino. Losing and winning hands are just part of the game. With ongoing revenue streams, Ligand is less risky IMO than Viking that has no approved products yet.
Profit Snapshot: $41.81
New Average cost per share: $72.96 (6+ Shares)
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| Snapshot Intraday on 1/28/25 after pare |
Last Discussed: Item # 5.C. Eliminated Duplicate Position In LGND - Sold 2 at $103.69 - Schwab Account (8/21/24 Post)(profit Snapshot = $31.19) I discussed the 2024 second quarter report and some of the recent problems in that post. SEC Filed Press Release
Last Buy Discussion: Item #1.B. Added to LGND - Bought $30 at $77.22; 1 at $76; 1 at $75; 1 at $73; 1 at $71.8 (3/8/24 Post)
Dividend: None and none expected which is one reason for the LT classification.
Last Earnings Report (Q/E 9/30/24): SEC Filed Earnings Press Release
GAAP E.P.S. (.39)
Non-GAAP E.P.S. $1.84
Reconciliation of GAAP to Non-GAAP: There are a lot of adjustments which I do not like.
Some reasons why this stock may succeed are the number of pipeline products that may generate future royalties, possible success in investments (e.g Primrose Bio), and the relatively small number of shares at 18.419M.
LGND has sold Viking (VKTX) shares at substantial realized gains, as previously discussed, and still owns 1M shares as of 9/30/24. Ligand has executed a collar in 2024 to hedge against fluctuations in those shares. The realized gain in 2023 was $44.4M. (2023 Annual Report at page 86)
During the 9 months ending on 9/30/24, LGND sold .7M VKTX shares for a realized gain of $60M. The shares were acquired as part of Ligand licensing several compounds to Viking. The furthest along in trials is VK2809 for NASH.
Acquisitions are discussed at pages 23-24 of the 10-Q The largest acquisition was in July 2024 when Ligand acquired the outstanding shares of Biologics AG for $100.5M in base consideration, using cash on hand. This acquisition included royalty payments for Qarziba, a commercial stage product for the treatment of high-risk neuroblastoma approved for marketing in 35 countries. Ligand to Acquire APEIRON Biologics AG for $100 Million (7/8/24) ("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). Guidance for sales of Captisol® is unchanged at $25 million to $27 million and contract revenue is now expected to range from $15 million to $25 million (previously $15 million to $20 million"). This acquisition closed in July 2024.
The investment in Primrose Bio, "a private company focused on synthetic biology", is summarized at page 21-23.
A royalty purchase agreement with Agenus is summarized at page 21.
LGND has used some cash to purchase royalty streams owed to other companies when and if certain products receive regulatory approval. This is similar to the business of Royalty Pharma PLC (RPRX).
A quick failure was Ligand's $30M purchase of royalties that may have been paid to Ovid Therapeutics by Takeda related to Ovid's soticlestat which failed in a Phase 3 trial. During the 9 months ending on 9/30/24, LGND wrote off this investment by 26.2M. I do not agree with removing that charge from GAAP earnings since purchasing royalty streams is now part of LGND's ongoing business.
For such a small company, Ligand is complicated and has a lot of moving parts.
4. Corporate Bonds:
A. Bought 2 General Motors Financial 4% SU Maturing on 10/6/26 at a Total Cost of 98.653:
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Issuer: Wholly owned subsidiary of General Motors Co. (GM) who does not guarantee the notes.
GM Financial SEC Filed Earnings Press Release for the Q/E 9/30/24 (net income of $499M for the quarter and $1.6B for the 9 months)
GM Financial SEC Filed Earnings Press Release for Q/E 12/31/24 (net income of $215M which included a $320M impairment charge for an investment in SAIC-GMAC)
Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB
The credit rating will be the same as for GM issued bonds. Fitch Revises General Motors' Outlook to Positive; Affirms IDR at 'BBB'
If the parent company filed for bankruptcy again,as it did in 2009, it is possible that the the GM Financial subsidiary could survive outside of bankruptcy reorganization, which is relevant to the bond owners, and consequently would be a slightly better credit risk.
YTM at Total Cost: 4.822%
Current Yield at TC = 4.055%
I replaced 2 General Motors Finance SU bonds that matured on 1/15/25.
B. Bought 2 Kraft Heinz 3% SU Maturing on 6/1/26 at a Total Cost of 97.8:
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Issuer: Kraft Heinz Co. (KHC)
KHC Analyst Estimates | MarketWatch
SEC Filed Earnings Press Release for the F/Q ending 9/28/24
I have recently started a small ball position in the common stock.
Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB
YTM at Total Cost: 4.668%
Current Yield at TC = 3.068%
C. Bought 2 Omnicom 3.6% SU Maturing on 4/15/26 at a Total Cost of 98.7:
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Issuer: Omnicom Group Inc. (OMC)
OMC Analyst Estimates | MarketWatch
OMC SEC Filed Earnings Press Release for the Q/E 9/30/24
Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa1/BBB+
YTM at Total Cost: 4.683%
Current Yield at TC: 3.647%
Last Bond Offering (7/24): Prospectus for $600M of a 5.3% SU Maturing in 2033
Recent News: Omnicom to Acquire Interpublic Group to Create Premier Marketing and Sales Company (12/9/24) This is an all stock acquisition.
D. Bought 2 Physicians Realty 4.3% SU Maturing on 3/15/27 at a Total Cost of 99.092:
Issuer: Operating entity for Healthpeak Properties Inc. (DOC) who guarantees the notes.
I have a small ball position in the common stock. Item # 1.J. Restarted PEAK - Bought 10 at $15.61 (11/4/23 Post)
Physicians Realty was acquired by Healthpeak who thereafter changed its symbol to DOC. I previously owned the common stock of Physician's Realty.
SEC Filed 2024 Third Quarter Report
Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa1/BBB+
YTM at Total Cost: 4.744%
Current Yield at TC = 4.339%
I now own 4 bonds.
E. Bought 2 Ares Capital 3.875% SU Maturing on 1/15/26 at a Total Cost of 99.066:
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Issuer: Ares Capital Corp. - Externally Managed BDC
I own the common stock in two taxable accounts and have been paring my positions in 2 taxable accounts. See Item # 3.C. above.
SEC Filed Earnings Press Release for the Q/E 9/30/24
Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB
YTM at Total Cost: 4.858%
Current Yield at TC: 3.912%
I own 6 Ares SU bonds that mature on 3/1/25 and 4 maturing on 7/15/25. Prior to this purchase, I did not own any that matured after 7/15/25.
With this last purchase, I am kicking the can down the road a bit.
I have realized in the past a "profit" trading Ares SU bonds:
2020-2021 Trades:
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5. Treasury Bills Purchased at Auction:
A. Bought 10 Treasury Bills at the 1/27/25 Auction:
182 Day Bills
Mature on 7/31/25
Interest: $209.3
Investment Rate: 4.287%
B. Bought 5 Treasury Bills at the 1/23/25 Auction:
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58 Day Bill
Matures on 3/25/25
Interest: $33.06
Investment Rate: 4.338%
6. Treasury Notes Purchased at Auctions:
A. Bought 2 Treasury Notes at the 1/27/25 Auction:
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2 year note
Matures on 1/31/27
Coupon: 4.125%
YTM: 4.211%
B. Bought 1 Treasury Note at the 1/27 Auction:
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5 Year Note
Matures on 1/31/30
Coupon: 4.25%
YTM: 4.43%
When treasury notes are moving down in price and higher in yield, I may buy 1 or 2 more at a lower price.
A recent example is buying a 7 year treasury note in the secondary market shortly after purchasing 1 at auction. See Item # 5.C. Bought 1 Treasury Note 4.5% Coupon Maturing on 12/31/31 at a Total Cost of 99.585 (1/15/25 Post) This note was auctioned on 12/23/24 at 99.8099. Item # 6.A. Bought at Auction 1 Treasury Note 4.5% Coupon at 99.8099 (1/1/25 Post)
7. U.S. Equity Preferred Stock:
A. Eliminated ASBPRF - Sold 10 at $21.15:
Quote: Associated Banc-Corp (ASB-PF)
Proceeds: $211.5
Issuer: Associated Banc-Corp. (ASB) - A Bank Holding Company
ASB Analyst Estimates | MarketWatch
Profit Snapshot: $53.1
Last Discussed: Item # 3.C. Bought 10 ASBPRF at $15.84 (7/15/23 Post)
Par Value: $25
Coupon: 5.625%
Dividend: Paid quarterly, qualified and non-cumulative.
Maturity: None, potentially perpetual
Issuer Optional Redemption: On or after 9/15/25 at par value + accrued and unpaid dividend.
Stopper Clause: Standard. Prior to eliminated the preferred non-cumulative dividend, Associated would have to eliminate the common share cash dividend and refrain from using cash to buy back common stock. The Stopper Clause is the legal mechanism that enforces the preferred stockholders preferential right to cash compared only to the common stock.
I had 4 Associated Banc 4.25% junior bonds mature on 1/15/25:
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| +$206.12 Realized Market Discount, rather than a LT Gain |
I have eliminated my common share position as well.
8. Bond ETFs:
A. Eliminated FALN - Sold 10 at $27.11:
Proceeds: $271.1
Sponsor's website: iShares Fallen Angels USD Bond ETF
The term "fallen angel" refers to a bond that had an investment grade rating but has fallen into a below investment grade credit rating. Many of these bonds will have the highest junk rating from Moody's or S&P, or both.
I view bond funds with disfavor and will only buy for trades and dividend harvesting. (see my video Bond Funds - Disadvantages - YouTube) They will gain in price when an uptrend in interest rates gives rise to a non-temporary decline.
Expense Ratio: .25%
Number of Holdings: 162 as of 1/24/25
Effective Duration: 4.59 years
Profit Snapshot: +$15.85
Last Discussed: Item # 1.A. Bought 10 FALN at $25.53 (12/2/23 Post)
Dividends: Monthly at a variable rate
The fund will make 2 monthly dividend payments in December and none in January.
Last Ex Dividend: 12/18/24
This is a similar junk bond fund to the VanEck Vectors Fallen Angel High Yield Bond ETF (ANGL) which I have traded in the past. Item #1.K. Eliminated ANGL - Sold 25 at $29.12 (7/3/20 Post)(profit snapshot = $58.44); ANGL - VanEck Fallen Angel High Yield Bond ETF | Holdings & Performance | VanEck ANGL currently has a 4 star rating from Morningstar. ANGL – Portfolio- Morningstar
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.
