Showing posts with label CBL. Show all posts
Showing posts with label CBL. Show all posts

Wednesday, March 8, 2017

Observations and Sample of Recent Trades 3/8/17 (AX.UN:CA-ARESF, CBL, CBLPRD, SCHF, IMGN, VHT, VGK )/ Trump and McCarthyism/ Trump Daily Intelligence Briefing: Watching Fox and Friends

Trump, Roy Cohn and McCarthyism:

 In one of his recent tweets, Donald claimed that Obama had wiretapped the entire Trump Tower and that Obama's alleged conduct smacked of McCarthyism: 
"Terrible! Just found out that Obama had my "wires tapped" in Trump Tower just before the victory. Nothing found. This is McCarthyism!"

Besides being unable to spell simple words, Donald apparently does not know the meaning of McCarthyism, which is strange since he was a protege of Ray Cohn who was Senator's McCarthy's right hand man:  

 The president accused Obama of ‘McCarthyism.’ But Trump’s mentor helped enforce it. - The Washington Post; 

 What Donald Trump Learned From Joseph McCarthy’s Right-Hand Man - The New York Times

 Donald does have Roy's main personality attributes and that is not a compliment. 

For those youngsters who do not know about Senator McCarthy (R.Wis.) and the true meaning of McCarthyism, I have linked the following primers: 


When someone makes a serious allegation against another without proof, that is McCarthyism, Donald. So your four tweets about Obama tapping your phones are examples of McCarthyism.   

Donald's new mentor, Steve Bannon, believes that McCarthy was someone worthy of emulation, which is not surprising. Steve Bannon in 2013: Joseph McCarthy was right in crusade against Communist infiltration - CNN 

 +++++++++++

 Trump's Daily Intelligence Briefing Sourced From Fox and Friends:

 Donald just loves the Fox and Friends show since the hosts fawn over him endlessly and never contradict him with facts. 

 In Monday's intelligence briefing from Steve Doocy, the mandatory Fox Faux Blonde (this one is known as Ainsley Earhardt) and Brian Kilmeade, Donald shared with the world what he learned in six tweets. 

 The Fake News Creator-In-Chief felt compelled to embellish what he learned from those "TV Personalities", as usual. 

 For example, Trump's intelligence briefing referred to a former GITMO prisoner being killed by an airstrike in Yemen. There was a gleaming gold headline flashed on the screen:  “GITMO PRISONERS REENGAGED IN TERRORISM”.

 Trump then published the following tweet: 

 "122 vicious prisoners, released by the Obama Administration from Gitmo, have returned to the battlefield. Just another terrible decision!"

 As it turns out, 113 of those 122 Gitmo prisoners were released by George Bush. Donald could care less about that factoid. The Fake News Creator-In-Chief is entitled to his own facts. 

 Fact-Check: Trump Is Wrong About Guantánamo Detainees - The New York Times

 You’ll never guess who tweeted something false that he saw on TV - The Washington Post

 Will Donald correct any false statement made by him? 

 Never is the obvious answer. 

 On the contrary, he will continue to make the same false statement over and over again even when there is an abundance of irrefutable evidence that establishes the statement's falsity. Welcome to the new Alternate Reality Universe created by Donald.  

 Trump could care less about providing Trump Nation with accurate information. 

 Donald learned from his mentor, Roy Cohn, that facts are irrelevant. Facts are always irrelevant to demagogues. And, as Roy taught his pupil so well, it is critical to never admit being wrong, no matter how much evidence stacks up against an obviously false statement.  

 Trump’s split screen: A two-hour virtual conversation between the president and ‘Fox & Friends’ - The Washington Post

 The President Essentially Live Tweeted Fox & Friends This Morning | TVNewser

 +++++++++++++

 Donald's Inability to Spell Simple Words:  

 The average grade school child could beat Donald in a spelling bee. The average fifth grader may be too high of a hurdle for Donald, so the kid needs to be given some kind of handicap. 

President swings and misses twice in attempt to spell 'hereby'

 A look at the misspelled tweets of President-elect Donald Trump - NY Daily News

 Maybe I am being unfair. I am not as old as Donald, and my brain misfires too. However, my remaining brain synapses are not misfiring all of the time-yet. And, I am not the President, lack access to the nuclear codes, and don't have to worry about hitting wrong buttons-yet.

+++++++++++

 New Yorker Magazine Investigation Into Possible Trump Violations of Foreign Corrupt Practices Act: 

 Donald Trump’s Worst Deal - The New Yorker

"The President helped build a hotel in Azerbaijan that appears to be a corrupt operation engineered by oligarchs tied to Iran’s Revolutionary Guard."


 This is another area in need of further investigation which will never happen for as long as the GOP controls both the Senate and the House. 

 Trump's tax returns were not disclosed because he wants to hide dealings with nefarious characters.  The GOP members in Congress, including Devin Nunes, will continue to provide cover for Trump. 

 Donald Trump's most important friend in Congress-Devin Nunes | MSNBC

 When is Jeff Sessions going to start his investigation?

 ++++++++++++++

 "Let Them Eat Cake" 

 Modern Version: In responding to a question about low income families being able to afford healthcare under the GOP's plan, Jason Chaffetz (R.Utah) retorted that those low income people need to give up their IPhones and spend the money on health insurance. Chaffetz: Americans may need to choose between iPhone or healthcare | TheHill

 That response indicates what I would label the typical alternate universe that republican House members inhabit.

 +++++++++++++

 I am behind discussing my bond and CD purchases. The intermediate bond purchases discussed below and in subsequent posts continue to decline slightly in price and can be purchased now at lower prices than shown for my trades.

 I am more concerned now with the return of my money than the return on my money.

++++++++++++

 1. Intermediate Term Bond Ladder Basket Strategy: 

A. Bought 2 Apple 2.5% Senior Unsecured Bonds Maturing on 2/9/25:

                                                        

Issuer:  Apple Inc. (AAPL) 
Finra Page: Bond Detail (prospectus not linked)
Moody's at Aa1
S & P at AA+
YTM at Total Cost (97.435):  2.863%

 This Apple bond closed at 96.13 today, creating a YTM of 3.055%. 

 B. Sold 2 CBL 5.25% Senior Unsecured Bonds Maturing in 2023:
                                          
                             
Profit Snapshot: +$39.88
                                           

 Issuer: CBL & Associates Properties Inc.  (CBL)-REIT Owner Of Malls
FINRA Page: Bond Detail

 Rationale: On 2/24/17, another major anchor for mall stores, J.C. Penney, reported a larger than expected decline in same store sales and announced that it will close 130-140 underperforming stores. Reuters

 Box retailers are in a clear downsizing mode.

 Moody's: Disappointing holiday prompts cautious planning for 2017 and continued store rationalization

 I decided to liquidate my small CBL positions in response. The other position liquidated at a small profit was CBLPRD:

 Profit Snapshot +$23.98
                                        

 CBL & Associates Properties Inc. 7.375% Cumulative Preferred Series D

 I did receive one quarterly dividend payment.

 The common shares had a bad day on 2/24/17: CBL $9.97 -$0.40 -3.86%

 C. Bought 2 Verizon 2.45% Senior Unsecured Bonds Maturing on 11/1/22:
                                                 
FINRA Page: Bond Detail
Credit Ratings:
Moody's at Baa1
S & P at BBB+
Fitch at A-
YTM at Total Cost (97.319 ): 2.967%

 This bond closed at 96.1 today, creating a YTM of 3.211%.

 I have 2 Verizon 1.1% senior unsecured bonds maturing on 11/1/2017. This bond was bought a a total cost below par value on 1/12/17 (YTM at 1.222%). I may use the proceeds to buy another VZ bond maturing in 2023.

 D. Bought 1 U.S. Bank (USB) 2.375% Senior Unsecured Bonds Maturing on 7/22/26:
                                                   
Finra Page: Bond  Detail
Credit Ratings:
Moody's at A1
S & P at A+
Fitch at AA
YTM at Total Cost (94.231 ) = 3.087%

 This is another bond where I will likely buy more, but only at lower prices.

 E. Added 1 Northern States 2.15% First Mortgage Bond Maturing on 8/15/22:
     
My last purchase of this bond was in a taxable account. I bought this one in a Roth IRA.

 FINRA Page: Bond Detail
Credit Ratings:
Moody's at Aa3
S & P at A
Fitch at A+
YTM at Total Cost (98.026 ) = 2.581%

 I currently own 3 of this first mortgage bond with 2 owned in Roth IRA accounts.

 2. Short Term Bond/CD Ladder Basket Strategy:

 A. Bought 1 Bank of Baroda .85% CD Maturing on 12/11/17:
    

 B. Bought 2 Franklin Synergy Band 1.1% CDs (monthly interest) Maturing on 7/16/18:
                                        

 C. Bought 2 UST .625% Maturing on 5/31/17: 


3. Continued Paring Stock Allocation:

 A. Pared Artis REIT: Sold 200 AX-UN:CA at C$12.94:

                                           

 Quote:  Artis Real Estate Investment Trust (AX.UN:TOR)

 Company Website: Artis REIT
Portfolio Map

 Profit Snapshot: +C$96.5


As with other Canadian REITs that I own, Artis pays monthly distributions of C$.09 per unit. The last ex date was on 2/24/17. Distribution History
Sourced:  2016 Annual Report

 I last eliminated my CAD priced ordinary shares in 2014: Item # 1 SOLD 300 AX-UN:CA at C$15.71 (9/26/14 Post)-Item # 1 Bought 300 of Artis REIT at C$14.36 (9/28/13 Post)

 Artis and other Canadian REITs have been hurt since the 2014 summer due to economic slowdowns caused by the crude oil price collapse, particularly in the Alberta province. There will be over time repeated boom and bust cycles in those property markets.

 I still own 300 ARESF shares, the USD priced ordinary Artis units that trade on the U.S. pink sheet exchange. The ARESF price will reflect the price of the units traded in Toronto converted into USDs.

 B. Sold 102+ of the ETF SCHF:

 Profit Snapshot:  +$65.77
                                      

 QUOTE:  Schwab International Equity ETF (SCHF)

 I have been selling small stock fund positions as a preferred way to raise cash when I am paring my stock allocation. International stock funds have underperformed the S & P 500 due in part to the strength of the USD.

The three year annualized average total return for this fund was -.28% through 2/28/17, compared to an annualized average total return of 10.51% for the  S&P 500 ETF (SPY). International stock funds will have their day in the sun, but continued strength in the USD will be a headwind for USD priced international funds.

C. SOLD 100 IMGN AT $3.55:
                                       

 Profit Snapshot: +$77.48
    

 I sold my highest cost lots into a price spike that started on 12/30. The shares had closed at $1.58 the prior day and soared to $2.04 on 12/30. There was another spike to $2.49 (1/4/17)  from $2.08. The last spike started after a 2.47 close on 2/22 that took the price up to an intra-day high of $3.78 on 2/28. The price spike was in three stages: IMGN

 I still own a 50 share lot bought at $1.77 (12/12/16). Maybe I can afford to hold onto that lot for awhile.

 D. Sold 15 VHT at $139.69:

 VHT Fund Quote-Vanguard Health Care ETF Fund

 This ETF can be bought by Vanguard customers commission free which makes small lot trading cost effective.
                                        
Profit Snapshot: +$190.84
                                         
E. Sold 25 out 132 shares of VGK at $50.21-ROTH IRA: This is another ETF that can be bought commission free by Vanguard customers.
                                        
VGK Fund Quote - Vanguard FTSE Europe ETF

 Profit Snapshot: +$43.87

                                         

 I still own 107+ VGK shares and plan to keep those shares and to continue reinvesting the dividend.

 Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members
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Saturday, February 28, 2015

Added 150 AEG at $7.79/Sold: 50 CBLPRD at $26.06 in Roth IRA and 50 FPOPRA at $26.2 in Taxable Account/Bought 1000 Asaleo Care at AUD$1.86

I discuss last Friday's purchase of Aegon (AEG) in a SA Instablog:  

 Added To AEGON (AEG) - South Gent | Seeking Alpha

Stable Vix Pattern (Bullish):
Links to SeekingAlpha Instablog, Articles and Comments:

South Gent's Instablog | Seeking Alpha

South Gent's Articles | Seeking Alpha

South Gent's Comments | Seeking Alpha

*********************

Recent Developments:

The American Trucking Associations reported that truck tonnage increased 1.2% in January. The ATA's Truck Tonnage Index hit an all time high at 135.7 last month.

Seasonally adjusted CPI declined by .7% in January. Energy costs declined by 9.7% and 19.6% over the past 12 months. On a non-adjusted basis, CPI fell .1% over the twelve month period ending in January. Core consumer prices rose .2% in January. Core CPI has risen 1.6% over the past year before seasonal adjustments. Consumer Price Index Summary The Cleveland Fed's Median CPI Index rose .2% in January, a 1.9% annualized rate, and is up 2.2% over the past year. Current Median CPI

The government revised 4th quarter real GDP growth to 2.2% from its 2.6% original estimate. Growth in consumer spending was left unchanged at a rapid 4.2%. The PCE price index fell at a .4% annualized pace due to energy price declines. Excluding food and energy, the core PCE price index rose at a 1.1% rate. News Release: Gross Domestic Product

First Trust Take on the GDP Report

The following snapshot contains treasury yield data starting 2/2/15 and ending on 2/27/15:


Daily Treasury Yield Curve Rates
*************************

1. Sold 50 CBLPRD at $26.06 in Roth IRA (Equity REIT Common and Preferred Stock Basket Strategy)(see Disclaimer):

Snapshot of Trade:


2015 Roth IRA Sold 50 CBLPRD at $26.06


Snapshot of Roth IRA History:



Dividends: $138.3


Snapshot of Profit:

2015 CBLPRD 50 Shares +$58.98

Item # 6 Bought 50 CBLPRD at $24.6 (9/14/13 Post)

Total Return: $197.28 or 15.94% (holding period 17+ months)

Security Description:  CBL & Associates Properties Inc. 7.375% Cumulative Preferred Series D stock (CBL.PD) is a cumulative equity preferred stock issued by mall REIT CBL & Associates Properties Inc that will pay mostly or entirely non-qualified dividends at the fixed coupon rate of 7.375% on a $25 par value. Prospectus

CBLPRD can be called now at the issuer's option. It is possible that CBL will call the security provided it can refinance at a sufficiently lower rate to make it worthwhile.  

 CBLPRC, which had a 7.75% coupon. was redeemed in November 2012. CBL Announces Redemption of 7.75% Series C Cumulative Redeemable Preferred Stock My first buy of that one was near $10. I am pleased that I have not lost money on any of those preferred stocks yet, and I would like to keep that way.

Total Realized Gains to Date CBL Equity Preferred Stocks: +$522.39

 Prior Trades: As noted in the post discussing this trade, I have nibbled on CBL preferred stocks for several years (snapshots at Item # 5 Bought 50 CBLPRE at $22.7). I have also bought and sold the functionally equivalent CBLPRE as part of my equity REIT basket strategy. Sold:  50 CBLPRE at $23.81

 Rationale: I see more downside risk than upside potential at a $26.06 price, which represents a 4.24% premium to the $25 par value.


This preferred stock traded down to $23.75 during the 2013 interest rate spike, falling from a April 2013 high near $25.5. CBL.PD Stock Chart

Future Buys: I will consider buying this preferred stock back in an IRA when its current yield exceeds 8%.


2. Sold 50 FPOPRA at $26.2 (Equity REIT Common and Preferred Stock Basket Strategy)(see Disclaimer):


Snapshot of Trade:

2015 Sold 50 FPOPRA at $26.2

Snapshot of Profit:

2015 FPOPRA 50 Shares +$81.58

Item # 1 Bought: 50 FPOPRA at $24.25 (1/6/14 Post)

Dividends: $121.09 (5 quarterly dividends)

Total Return: $202.67 or 16.6% (holding period 13 + months)

Security Description: The First Potomac Realty Trust Cumulative Preferred Stock Series A. FPO.PA) is an equity preferred stock issued by the REIT First Potomac Realty Trust (FPO:NYSE). This preferred stock pays cumulative and non-qualified dividends at the fixed coupon rate of 7.75% on a $25 par value. Distributions are paid quarterly. FPO has the option to redeem this security on or after 1/18/2016. There is a typical dividend stopper clause contained in the prospectus at page S-18.

There is also a change of control provision (pages S-19 to S-23)

Prospectus

SEC Filings for FPO

FPO 2014 10-K

Rationale: I see more downside risk than upside potential at a $26.2 price, which represents a 4.8% premium to par value.

During the interest rate rise in 2013, this preferred stock fell to about $24 after trading over $26.6 in May 2013. FPO.PA Stock Chart


Future Buys/Sells: I will consider repurchasing this preferred stock when and if the price falls below my last purchase price.

3. Bought 1000 Asaleo Care Limited at AUD$1.8576 (Australian Dollar Strategy)(see Disclaimer):

This stock went ex dividend for a AUD$.054 distribution three days after my purchase. Asaleo Care Ltd - Bloomberg The company currently intends to pay out 70% to 80% of statutory net profits after tax (NPAT). I can not link the reference, but I am referring to page 11 of 115 in the "Appendix 4E for 2014 Financial Year", which can be downloaded for review at Asaleo Care.


Snapshot of Trade:



Conversion USDs into AUDS:


Currency Exchange Without Broker's Fee-Approximate Value:


When I placed the trade at approximately 10:00 P.M. CST, the rate was 1.2764 or about 1.35%. The fee is supposed to be 1% which is built into the exchange rate.

Company Description: Asaleo Care Ltd (AHY:ASX) is an Australian based personal care products company. I took a snapshot of the products rather than describing them in words:



Asaleo's products are distributed in Australia, New Zealand and Fiji.

For 2015, the company is currently projecting low to mid single digit growth in net profit before taxes, and it does not anticipate paying Australian income taxes until F/Y 2016. The company did pay $2.5M in tax to New Zealand in F/Y 2014 and $.4M to Fiji.

Svenska Cellulosa AB (SCAB:STO) owned 32.5% of Asaleo's shares as of 12/31/14. I own 50 shares of Svenska's ADR which has performed well since my purchase: Bought Svenska Cellulosa (SVCBY)-A Swedish Personal Care And Tissue Company - South Gent | Seeking Alpha I mentioned Asaleo when discussing that purchase.

The company claims that EBITDA is growing:



Last Earnings Report: All amounts are expressed in Australian Dollars.



F/Y 14 Financials vs. F/Y 13:

The fiscal 2014 results were adversely impacted by significant non-recurring costs connected to the firm's IPO. Those items are described at page 26 of the Appendix referenced above.

The company provides pro-forma adjustments to its reported profits:




The company has drawn $271M on its $350M credit facility as of 12/31/14 at an "all up" cost of 4.4%.



Rationale:  The primary reasons are diversification, valuation and dividend support.

Bloomberg has the P/E at 13.74 based on estimated 2015 E.P.S and a AUD$1.8 share price. That is cheaper than other personal care product companies. I also was able to acquire shares at a discount due to using my USDs to make the purchase. I will soon receive a dividend paid in AUDs. While that dividend will not be franked, future dividends starting in F/Y 2016 may be partially or entirely franked depending on the company's tax rate.


Risks: The company summarizes risks incident to its operations starting at page 35 of the previously referenced Appendix 4E available for download at Asaleo Care.

This company is a small minnow in a highly competitive industry.

The company's history as a public company is of recent vintage.

Needless to say, an investor who is not a long term owner of AUDs is exposed to currency risk when buying a foreign stock after converting their native currency into the foreign local currency in order to complete the purchase.

I also bought some AUDs in excess of what I needed to pay for this purchase:


AUD/USD Chart 
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Saturday, May 31, 2014

Bought: 100 ARMF at $22.15, 100 EMD at $12.8, 100 ASEA at $16.57, 100 FDL at $23.04/Paired Trade: Sold 200 KMP:CA at C$10.45 and Added 200 HLP_UN:CA at C$10.2/Bought 300 of the Canadian ETF FIE:CA at C$7.26/Sold: 50 OFCPRL at $26.21, 50 CBLPRE at $23.81


Stocks:

Stable Vix Pattern (bullish)
Short Term: Market Needs a 15% Correction
Intermediate Term: Slightly Bullish
Long Term: Bullish


It is helpful for me to download from S & P its data on the S & P 500 and the various sectors contained in that index. This data contains current and historical information on S & P 500 earnings (as reported and forecasted), sales, operating margin, book value, dividends per share, etc. It can be downloaded in XLS format and can be found using the following search terms in google:

XLS S & P Earnings- S & P Dow Indices

Bonds:

Short Term to Long Term: Slightly Bearish Based on Interest Rate Normalization

This forecast assumes that the average inflation rate over the next 10 years will be between 2% to 2.25%, within the range being priced into the 10 year TIP.

Last Wednesday, the government released a worst than expected revision to first quarter GDP. The stock market responded with the S & P 500 hitting a new all time closing high: S & P 500 1,920.03 +10.25 (+0.54%) And bonds went down in price and up in yield: TLT: $114.15 -0.61 (-0.53%).

The Merrill Lynch global technical strategist  predicts that treasuries are fast approaching the "eventual resumption of the larger, long-term bear trend". Barrons.com

Another strategist suggests that pension funds are responsible for the rise in bond prices this year, leaving the treasury bond in a "very lopsided return profile: a low upside in terms of positive returns and the possibility of sizable losses ... " While I would not agree with all of this strategist's reasons for pension fund buying, the reasons are not as important as the increases in demand, for whatever reason, when the FED has caused a shortage in available treasuries to purchase maturing in 10 years or later. (click tab "T-Notes and T-Bonds" at System Open Market Account Holdings - Federal Reserve Bank of New York)

It is questionable whether a ten year treasury at its current yield will have a positive real rate of return. The average annual real rate of return based on the inflation forecast embodied in the 10 year TIP is minimal. It would not take much of an increase in that average inflation rate, which is almost 1% below the historical long term average, to cause a negative real return before taxes.

****************************

Recent Developments:

 The government revised first quarter real GDP to an annualized decrease of 1%. News Release: Gross Domestic Product The prior estimate was a .1% increase. The consensus estimate for the revision was a -.6%.

The government reported that seasonally adjusted initial unemployment claims BLC decreased 27,000 to 300,000. DOL Press Release.pdf The 4 week moving average was 311,500, the lowest level since August 2007:


4-Week Moving Average of Initial Claims

While this chart shows that the 4 week moving average of initial unemployment claims has returned to levels consistent with prior expansions, it is also important to keep in mind that the labor participation rate is hitting new lows, returning to early 1978 levels, as more people leave the labor force:


Civilian Labor Force Participation Rate

And the duration of unemployment remains at elevated levels: Number of Civilians Unemployed for 27 Weeks and Over; Average (Mean) Duration of Unemployment

Durable good orders increased a seasonally adjusted .8% in April compared to March, better than the consensus estimate of a .7% decline. census.gov/manufacturing.pdf

The Case Shiller housing index for 20 large cities increased 12.4% in March Y-O-Y. Home Prices Rise in March Average home prices, however, are only back to mid-2004 levels (see chart at page 3).

The PCE Price index for April increased by .2%. The Y-O-Y increase was 1.6%, up from 1.1% in March (page 3: Personal Income and Outlays April 2014.pdf) The FED prefers the PCE price index over the CPI. Various reasons are given for that preference. One reason which is not given is that the PCE price index has been running lower than CPI. The PCE price index has an over 20% weighting in medical costs compared to 7%+ in the CPI calculation. Federal Reserve Bank of Cleveland The PCE price index was reduced last year due to temporary government budget cuts to healthcare providers. Prior to those cuts, medical cost inflation was running at 3.1%, and was reduced to 1.9%. The historical long term rate of increase is about 5.5%. Medical cost inflation has started to pick up.

The ISM Chicago's Business Barometer rose 2 points to 65.5 in May. The consensus was for 61. Prices paid "experienced the largest monthly gain in nearly five years". {Business Insider (see chart at the bottom of the page); Business Insider (chart of medical cost component of PCE); "Rising Medical Costs Boosting Inflation" - Barron's}

****************************

1. Bought 100 ARMF at $22.15 (see Disclaimer): I really wanted to wait for a lower price before buying more of this leveraged bond CEF. Since I have been selling some lower yielding securities, and consequently hurting my cash flow some, I decided to buy this high yielding bond CEF to replace some of that lost income generation.  

This lot was bought in a taxable account. I currently own 50 shares in the Roth IRA. I view this security as too risky for further adds in a retirement account.

I have been substituting some higher yielding leveraged bond CEFs and some equity REITs for lower yielding equity preferred stocks and long dated bonds. The Canadian REITs have been a fertile area for yield over the past several months.

I view this movement into leveraged bond CEFs to be temporary, lasting for a few weeks or months at the most. When there is another significant correction in equity preferred stocks that send their yields significantly higher, then I will start to transition back to some of those including the ones that I have been selling recently. 

Snapshot of Trade:



Security Description: The Ares Multi-Strategy Credit Fund (ARMF) is a new leveraged income CEF that attempts to provide an "attractive level of total return" by "dynamically" investing in a broad range of credit instruments.


SEC Form N-Q-List of Holdings as of 1/31/14

Data From Date of Trade 5/9/14
Closing Market Price: $22.14
Closing Net Asset Value: $24.23
Discount: -8.63

CEFConnect page for ARMF

SEC Filings for ARMF: EDGAR

SEC Form N-Q: Holdings as of 1/31/14

Last SEC Filed Shareholder Report: Period Ending 10/31/13

Even a knowledgeable investor will not have any knowledge about most of the securities owned by this fund.  


Rationale and Risks: See Discussion in the preceding link. The fund has a summary of risks at its website, available for review after clicking the "Risk Considerations" tab. Ares Publicly Traded Credit Funds-Risk Considerations I regard this fund as high risk.

This CEF pays monthly dividends at the current rate of $.1525 per share. At that rate, the dividend yield is about 8.26% at a total cost of $22.15 per share. Ares Multi-Strategy Credit Fund, Inc. Declares Monthly Distributions of $0.1525 Per Share; Distribution Tab at CEFConnect.

Last Friday's Close: ARMF: $21.83 +0.10 (+0.46%) 

2. Bought 100 EMD at $12.8 (see Disclaimer): 

Snapshot of Trade:



Security Description: Western Asset Emerging Markets Income Fund (EMD) is a leveraged closed end fund that invests in emerging market sovereign and corporate debt.

As of 3/31/14, the fund was weighted in investment grade bonds and over 80% of the weighting was in EM bonds denominated in U.S. Dollars, which removes currency risk for those securities:



As of 3/31/14, the fund owned 195 holdings with an effective duration of 6.69 years. Duration is the method that investors use to measure interest rate sensitivity. Get to know your bond fund: Duration | Vanguard

Data From Date of Trade 5/12/14
Closing Net Asset Value Per Share: $14.15
Closing Market Price: $12.83
Discount: -9.33%
Average 1 Year Discount: -10.41
Average 3 Year Discount: -6.34%
Average 5 Year Discount: -8.3%

CEFConnect Page for EMD

EMD Page at Morningstar (3 stars)

Sponsor's Website: Individual Investor

The sponsor's fact card shows an average annual total return, based on net asset value, of 12.86% since inception (6/25/93) through 3/31/2014:  Emerging Markets Income Fund Fact Card.pdf

For 10 years through 5/23/14, the average annual total return was 10.07%. That number can be found by clicking the "performance" tab at CEFConnect.

Last SEC Form N-Q: Western Asset Emerging Markets Income Holdings as of 2/28/14

Last SEC Filed Shareholder Report: Western Asset Emerging Markets Income Fund (EMD)

EMD Page at Morningstar (rated 3 stars at the time of purchase)

Prior Trade: None

Related Trade: I recently bought a similar fund from the same sponsor. Item # 2  Bought 100 ESD at $17.28 (4/12/14 Post)

Rationale: The fund is currently paying a quarterly dividend of $.255 per share. Western Asset Emerging Markets Income Fund, Inc (EMD) Dividend History Assuming a continuation of that rate, the dividend yield would be about 7.97% at a total cost of $12.8. Income generation is the primary rationale for investing in this fund. 

Risks: Emerging market bonds are subject to a wide variety of significant risks which explains why I only nibble in this sector and will generally hold a position for a relatively brief period. This bond class fell significantly in 2013 as interest rates rose in the U.S. These EM bond funds have exposures to countries which I do not favor, such as Venezuela, and I would prefer that a fund simply avoid their debt altogether.

Closing Price Last Friday: EMD: $13.06 +0.03 (+0.23%)

3. Paired Trade: Sold 200  Killam Properties at C$10.44 and Added 200 Healthlease Properties REIT at C$10.2 (Canadian Dollar (CAD) Strategy)(see Disclaimer): This pared trade was motivated by the Healthlease's significantly higher yield and better first quarter earnings report. 

Snapshot of Trades:

Killam:

2014 Sold 200 KMP:CA at C$10.44
Healthlease:

2014 Added 200 HLP_UN:CA at C$10.2
Profit Killam: The profit was negligible: 

2014  KMP:CA 200 Shares +$38.87

Item # 1 Bought 200 KMP:CA at C$10.16 (4/12/14 Post)

Total Profit Realized Gains: $145.93 (prior trade $107.06)

Security Descriptions: Killam Properties (KMP:TOR) is a Canadian non-REIT that owns apartments and manufactured housing sites. Investor Facts Killam reported first quarter FFO per share of C$.13, down from $.15 in the 2013 first quarter. The company blamed higher heating an operating costs and the timing of redeploying proceeds from a 4th quarter property disposition. Investor News

Healthlease Properties Real Estate Investment Trust (HLP.UN:TOR) is an externally managed REIT that owns senior housing and care facilities and is expanding rapidly in the U.S. The company recently completed the acquisition of 5 senior housing and care properties described in this news release: HealthLease Properties REIT Announces Completion of Acquisitions of Five Senior Housing and Care properties (5/21/14).

The company sold in early May 7.5M units at $C10. HealthLease Properties Real Estate Investment Trust Announces Closing of CDN$75 Million Equity Financing




Prior Trade Healthlease: Item # 7 Bought: 100 HLP_UN:CA at C$10.17 

Recent Earnings Reports: As of 3/31/14, Healthlease owned 45 properties, up from 15 as of 3/31/13. Debt to gross book value was reported at 58.76%. The weighted average interest rate was 4.33%. Diluted FFO per unit was C$.27, up from $.2 in the 2013 first quarter. AFFO per unit was C$.25 with a payout ratio based on AFFO at 81.3%. HLP Q1 2014.pdf

Under triple net leases, the company has "minimal" operating expenses. However, the REIT pays its external manager 3% of gross rent on each property and an incentive fee of 15% of AFFO per unit "above a certain threshold" established by the Board based on forecasted AFFO each year. (page 10). 

Page 9 of report:


The largest tenant is a company called Saber. Saber Healthcare Group




Page 10 of Report:



Rationale: I am picking almost 3% more in yield with the Healthlease shares, and Killam is not expected to grow FFO during 2014.

HLP leases properties under long term triple net leases.

This REIT is currently paying a monthly distribution of C$.07083 per unit or C$.85 annually. At that rate, the dividend yield at a total cost of C$10.2 is about 8.33%. HLP went ex dividend for its monthly distribution on 5/28/14, the same data as all of my monthly dividend paying Canadian REITs. 

Risks: I discuss risks in the preceding linked post. Among those risks, the company is externally managed and will purchase some properties developed by its manager after an "independent" appraisal. I always view external management agreements with disfavor. I would much prefer that a REIT be internally managed by its own employees.

Healthlease is the only externally managed REIT that I currently own.

Currency risk is always present when buying a foreign security.

As with any REIT, the bankruptcy of a large tenant can have serious implications. 

Future Buys/Sells: I will be monitoring Killam for a potential re-entry at below C$9.75. The flat FFO guidance for 2014 is understandable but nonetheless undesirable. 

I will not be buying more of Healthlease. I hope to hold the 300 shares for a couple of years, harvest the monthly dividend payments, and hopefully make 5% to 10% on the shares.

Closing Price Last Friday: HLP-UN.TO: C$10.45 -0.06 (-0.57%) 

4. Bought 300 FIE:CA at C$7.26 (Canadian Dollar (CAD) Strategy)(see Disclaimer):

Snapshot of Trade: 



Snapshot of Quote Before Trade:


Security Description: The iShares Canadian Financial Monthly Income ETF (FIE:TOR) is a Canadian ETF.


Sponsor's Website: IShares Canada ETFs

Top Ten Holdings as of 5/12/14:

The top two holdings are two other Canadian ETFs. I already own 300 shares of the low cost 1-5 Year Laddered Corporate Bond ETF (CA:CBO) (corporate bonds rated "A" or better, staggered equal weightings, expense ratio .28%):

Bond Ratings CBO Holdings as of 5/12/14:


The other ETF holding is the Canadian Preferred Share Index Fund (CA:CPD) which has 205 holdings and a .45% expense ratio. FIE will include acquired fund fees in its expense ratio.

The other holdings are a smattering of REITs, banks and insurance companies:


I do not own any of the top ten holdings other than the ETF CBO. I own individual positions in the REITs Cominar (300 Shares), Artis (300 shares) and Riocan (100 shares) which together accounted for 2.28% of the weighting as of 5/12/14.

The current monthly dividend is C$.04 per share:  Distributions

Rationale: My main purpose for buying this security is to generate income on my CAD stash. The dividend yield at a total cost of C$7.26 is good at 6.61%. Secondarily, I pick up more indirect exposure to Canadian banks and insurance companies. I have already some minor indirect exposure to a few of those companies in my 200 share position in the Canadian Dividend Aristocrats Fund (CA:CDZ) They have a higher weighting in the Canadian Select Dividend Index ETF (CA:XDV), which I also own.

Risks: In addition to currency risk, there are the normal risks associated with a narrow sector ETF, particularly one that focuses on financial institutions. While the six large Canadian banks did far better than their U.S. counterparts during the Near Depression, their stock prices still suffered, and next time may be different.

There is a concern expressed by some investors that the Canadian housing market is overheated or already in a bubble. (e.g. Morningstar article: "When the Canadian Housing Bubble Pops").

Those concerns do have some factual foundations, as shown in the series of charts contained in this article: 11 charts

However, more than 1/2 of the mortgages are guaranteed by the Canada Mortgage and Housing Corporation. CMHC Mortgage Loan Insurance Overview | CMHC The Canadian banks will have different exposures to non-insured mortgages and different loan to value ratios. A recent article published by Seeking Alpha noted that Toronto-Dominion (TD) had 65% of its mortgages insured by the CMHC, with the uninsured mortgages having a loan to value ratio of 60% (page 24: Q2 Presentation.pdf)

Future Buys/Sells: I am not likely to buy more. I will consider selling when and if I have an  annualized total return greater than 10% or I become spooked about Canadian bank stocks.

Closing Price Last Friday: FIE.TO: C$7.24 0.00 (0.00%)

5. Bought 100 ASEA at $16.57 (Emerging Market Consumer Super Cycle Strategy)(see disclaimer):

Snapshot of Trade:



Security Description: Global X FTSE ASEAN 40 ETF (ASEA) tracks the 40 largest companies located in the ASEAN regions: Indonesia, Philippines, Singapore, Thailand and Malaysia.

Sponsor's Webpage: Global X ASEAN 40 ETF - ASEA

Fact Sheet as of 3/31/14: Global X Funds (40 holdings; expense ratio .65%)

Weightings as of 3/31/14:
Singapore: 37.86%
Malaysia: 26.97%
Indonesia: 17.47%
Thailand: 14.65%
Philippines: 3.04%

The three annualized three year total return is just 3.24% through 3/31/14 which just highlights how far emerging stock markets have fallen behind the U.S. stock market.

Singapore | Economy
Indonesia | Economy
Malaysia | Economy
Thailand | Economy

Prior Trades: I have not been able to hold this one for very long. Item # 1 Bought 100 of the ETF ASEA at $17.09 (January 2013)- Item # 4 Sold 100 ASEA at $17.8 (April 2013)

Related Trades: I currently own small positions in iShares MSCI Singapore ETF (EWS), iShares MSCI Malaysia ETF (EWM), and a CEF that invests in Indonesia's stocks, Aberdeen Indonesia Fund (IF). I also own several diversified EM stock funds that would have some overlap with ASEA. I recently added to my position in IF and will discuss that trade in a subsequent post.

Bought: 100 EWM at $15.23 (1/20/14 Post)
Bought Back 100 EWS at $13.1 (12/17/13 Post)

Some broader EM funds would include the two Asian mutual funds sponsored by Matthews, small positions in EM ETFs bought commission free (e.g. VWO, PIE, EEMV, IEMG), and the CEF MSF. Bought: 100 MSF at $15.18 (12/3/13 Post); Bought 50 PIE at $18 (12/3/13 Post); Bought:  20 of the Commission Free ETF IEMG at $48.4. I have not discussed the small recent acquisitions of VWO and EEMV

Rationale: One reason is simply the underperformance of the ASEAN stock markets over the past three years.

I am also playing the super cycle for the huge increase in EM middle class consumers, but I am using this ETF more as a trading vehicle. I discuss that super cycle throughout this blog (e.g. Item # 3 Bought 50 of the Stock ETF EELV at $27.2 November 2012)

The long term trend is the parabolic increase in middle class consumers throughout this region. Many U.S. and European multinationals will benefit from that trend in addition to local companies.

One firm estimates that the middle class will add 3 billion consumers in the next two decades, coming almost exclusively from the EM nations.  (Reuters and EY publication cited below)

See also:

Ernest and Young Publication: "Middle class growth in emerging markets" (525M in Asia alone are now in the middle class, more than the population in the European Union)

Deloitte Publication:  "Business Trends 2014"

Forbes Article: "Why Your Business Needs To Break Into Emerging Markets"

Nielsen Publication: "Meet the New Indonesian Consumer Class of 2020"

Nikeii Asian Review Article: "Asia's expanding middle class"

This major long term secular trend is discussed in a large number of articles easily found on the internet. It is not a secret. The problem over the past few years is that this major trend has been masked and dampened by lower than normal growth in several developed countries over the past six years, including the U.S. and several European countries.

Risks: This ETF has the usual set of risks for a foreign stock fund, including country risk. Recently, there has been turmoil in Thailand for example which has close to a 15% weighting in this ETF.

Currency risk is very important when a fund owns stocks in emerging markets, as highlighted most recently by what happened starting last May when interest rates started to rise in the U.S. Emerging market currencies declined significantly and rapidly, which would then cause a decline in a fund priced in USDs that owns stocks whose prices are denominated in those depreciating currencies. When there is a spike down in EM currencies, there also tends to be capital flight by some owners of EM stocks and bonds, and that will contribute to the decline in the U.S. fund's value as the securities owned by it fall in value.

A Rise in the Chart Line Indicates USD Strength:
USD/IDR Currency Conversion Chart (Indonesia's Rupiah)
USD/MYR Currency Conversion Chart (Malaysia Ringgit)
USD/SGD Currency Conversion Chart (Singapore Dollar)
USD/THB Currency Conversion Chart (Thai Baht)

Future Buys/Sells: I will most likely be using ASEA as a trade given its overlap with other existing positions.

Closing Price Last Friday: ASEA: $16.61 -0.18 (-1.07%)

6.  Bought 100 of the Stock ETF FDL at $23.04 (see Disclaimer):

Snapshot of Trade:

2014 Bought 100 FDL at $23.04
Security Description: The First Trust Morningstar Dividend Leaders Index Fund (FDL) is an ETF that attempts to track, before fees and expenses, the Morningstar Dividend Leaders Index.

Sponsor's website: First Trust Morningstar Dividend Leaders Index Fund (FDL)(net expense ratio .45%; five year annual total return through 4/30/14=20.49%; 30 day SEC yield at 3.4% as of 4/30/14)

Holdings

Holdings Over 1% Weighting as of 5/22/14
Distribution History (2013=$.6851 per share in uneven quarterly installments)

Prior Trades: None

Rationale and Risks: This is a trade. I am simply attempting to earn more than zero which is what I was earning with the funds used to settle this trade. This ETF is weighted in large cap blue chip companies that pay good dividends. That will not stop this fund from going down in price during a correction in an ongoing long term secular bull market.

And, as shown in a long term chart, FDL was smashed during the Dark Period, hitting a high around $25 in May 2007 before doing the swan dive to $7.9 or so just before 3/9/12009. Chart First Trust Morningstar Dividend Leaders ETF The fund was hurt by a substantial weighting in financials that were "dividend leaders" before they crashed and burned. Bank of America and Citigroup are no longer "dividend leaders", and I will not live long enough to see their dividends restored to pre-2009 levels.

Bank of America Corporation (BAC) Dividend History (quarterly rate now $.01 per share, down from $.64 paid during the 2008 third quarter)

Future Buys/Sells: I am using this security primarily as a trading vehicle and a short term depository for a cash allocation in taxable accounts that has grown beyond the normal 20%.

Closing Price Last Friday: FDL: $23.39 +0.11 (+.47%)

7. Sold 50 KFN/P at $25.48 Roth IRA (see disclaimer):

Snapshot of Trade:

2014 Roth IRA Sold 50 KFN/P at $25.48
Snapshot of Profit:

2014 Roth IRA KFN PR 50 Shares +$110.02 
Security Description:  KKR Financial Holdings LLC Pfd. 7.375% Series A (KFN.P)

Rationale: I am raising cash in my Roth IRA for later redeployment. I believe that the FED is ignoring current inflation trends in their ongoing effort to jump start the economy, hoping that inflation will not become problematic.

Closing Price Last Friday: KFN-P: $25.60 -0.08 (-0.31%)

8. Sold 50 OFCPRL at $26.21 (see Disclaimer):

Snapshot of Trade:

2014 Sold 50 OFCPRL at $26.21

Snapshot of Profit:

2014 OFCPRL 50 Shares +$92.58

Item # 2 Bought: 50 OFCPRL at $24.04 (1/6/14 Post)

Security Description: The Corporate Office Properties Trust Preferred Series L (OFC.PL) is an equity preferred stock that pays cumulative and non-qualified dividends at the fixed coupon rate of 7.375% on a $25 par value. The issuer has the option to redeem on or after 6/27/2017. Prospectus

Rationale: My current trading guidelines require that I consider selling a preferred stock when the price exceeds $25.75 and the yield is less than 7.25% based on the sale's price. This was the case with OFCPRL. The yield at a $26.21 price is about 7%. The trading guidelines represent an attempt to balance interest rate risk with current income generation. The markers are basically a judgment call that current inflation trends and the Fed's pedal to the metal abnormally accommodative and easy monetary policies tilt the balance toward selling when the marker is hit.

I also view REIT equity preferred stocks with some disfavor. REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages

Future Buys/Sells: I will want at least a 7.5% yield prior to considering a repurchase.

Closing Price Last Friday: OFC-PL: $26.25 +0.08 (+0.31%)

9. Sold 50 CBLPRE at $23.81 (see Disclaimer):

Snapshot of Trade:

2014 Sold 50 CBLPRE at $23.81

Snapshot of Profit:

2014 CBLPRE 50 Shares +39.58 
Item # 5 Bought 50 CBLPRE at $22.7 (Sept 2013 Post)

Security Description: The CBL & Associates Properties Inc. 6.625% Cumulative Preferred Series E (CBL.PE) is a potentially perpetual equity preferred stock that pays cumulative and non-qualified dividends at a 6.625% fixed coupon rate on a $25 par value. Prospectus

I still own 50 CBLPRD: Bought 50 CBLPRD at $24.6

Rationale: The yield fell below 7% based on the sales price of $23.81. At $23.81, the yield is about 6.96%.

 Future Buys/Sells: I may not buy this one back. I am becoming more concerned about REITs that own malls with JCP and Sears as major anchors.

Closing Price Last Friday: CBL-PE: $24.59 +0.09 (+0.37%) 
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