Economy:
Chinese state media hits out at 'fabricated' U.S. tech claims - Reuters Sure does not sound like China is expressing its fervent desire to take a knee on this issue.
China blamed the U.S. for trying to "achieve unreasonable interests through extreme pressure" and for harboring "extravagant expectations". U.S., China bicker over 'extravagant expectations' on trade deal - Reuters
China sees "no rush" to continue trade talks: China in 'no rush' to restart trade talks
China Faces New ‘Long March’ as Trade War Intensifies, Xi Jinping Says - The New York Times While China will suffer more economically than the U.S. from an all out trade war, China's citizens can withstand more pain for longer.
Trump Administration Could Blacklist China’s Hikvision, a Surveillance Firm - The New York Times
Toyota says Trump tariff threat shows investments in US 'not welcomed'
Trump’s trade war with China will hit TVs, dishwashers, toys, lithium batteries, iPhones — even Silly Putty - MarketWatch
Japan's strong Q1 growth surprises economists - MarketWatch (2.1% annualized with most economists predicting flat to slightly negative)
Tensions with Iran have risen steadily since Donald pulled the U.S. out of nuclear deal and imposed sanctions on Iran and countries who purchase Iranian oil. Threats to the Middle East oil supply are increasing as well.
Trump administration announces all countries importing Iranian oil will be subject to US sanctions - CNN;
Saudi Oil Infrastructure at Risk as Small Attacks Raise Potential for Big Disruption - The New York Times
Oil prices gain as Middle East tensions flare up - MarketWatch; Bomb-carrying drone from Yemen rebels targets Saudi airport - MarketWatch
Except for an occasional impact on oil prices, the growing tensions in the Middle East are not having an impact on other markets. The "flare up" in tensions is just another outlier risk assigned a zero percent chance of becoming material. One problem with oil infrastructure facilities is that they are vulnerable to destruction.
++++
Markets and Market Commentary:
Morgan Stanley: More tariffs on China could trigger a global recession (in this scenario, MS predicts that the FF rate will be back to zero by the Spring of 2020).
Cramer: Make sure your stock portfolio has little exposure to China
Bank of America predicts a 20% to 30% S&P 500 decline if the White House imposes 25% tariffs on the rest of Chinese goods. (cited in The Trade War and Tariffs Will Make the Stock Market Scary. Don’t Panic.-Barron's) The S & P 500 just experienced a 20% decline when there were no headline concerns about a trade war. The concern in the 2018 4th quarter was that the FED would keep hiking interest rates for no good reason and precipitate a recession.
There is no shortage of estimates of how an all out trade war will impact the U.S. economy and corporate earnings.
Most of the estimates have the U.S. GDP declining anywhere from .3% to .6% as a result.
That range is a reasonable estimate, but everyone is guessing.
No one knows since even a mild negative reaction is dependent on U.S. consumers continuing to increase their spending, which may turn out to be erroneous. Would you pay $150 more for a discretionary purchase of a new Iphone due to the tariffs or wait? A Morgan Stanley analyst estimates the cost of the $999 list price of the XS Max will rise by $16o. Will iPhones Cost More With Trump's Tariffs? - Bloomberg Sure, the American importer could eat part of the cost but then that will sink profits and margins.
J.P. Morgan's strategists predict a $9 hit to S & P 500 earnings resulting from an all out trade war. (cited in Applied Materials, Charles Schwab, and More Cheap Stocks for the Trade War - Barron's) That is another guess.
Morgan Stanley: More tariffs on China could trigger a global recession (in this scenario, MS predicts that the FF rate will be back to zero by the Spring of 2020).
Cramer: Make sure your stock portfolio has little exposure to China
Bank of America predicts a 20% to 30% S&P 500 decline if the White House imposes 25% tariffs on the rest of Chinese goods. (cited in The Trade War and Tariffs Will Make the Stock Market Scary. Don’t Panic.-Barron's) The S & P 500 just experienced a 20% decline when there were no headline concerns about a trade war. The concern in the 2018 4th quarter was that the FED would keep hiking interest rates for no good reason and precipitate a recession.
There is no shortage of estimates of how an all out trade war will impact the U.S. economy and corporate earnings.
Most of the estimates have the U.S. GDP declining anywhere from .3% to .6% as a result.
That range is a reasonable estimate, but everyone is guessing.
No one knows since even a mild negative reaction is dependent on U.S. consumers continuing to increase their spending, which may turn out to be erroneous. Would you pay $150 more for a discretionary purchase of a new Iphone due to the tariffs or wait? A Morgan Stanley analyst estimates the cost of the $999 list price of the XS Max will rise by $16o. Will iPhones Cost More With Trump's Tariffs? - Bloomberg Sure, the American importer could eat part of the cost but then that will sink profits and margins.
J.P. Morgan's strategists predict a $9 hit to S & P 500 earnings resulting from an all out trade war. (cited in Applied Materials, Charles Schwab, and More Cheap Stocks for the Trade War - Barron's) That is another guess.
China's currency is a strong barometer on US-China trade (since Donald tweeted about increasing the 15% tariffs to 25%, the Yuan has lost about 3% of its value against the USD; USD / CNY Currency Chart. US Dollar to Chinese Yuan Renminbi Rates )
US multinationals will help market rally to all-time highs: Yardeni
Bulls like Ed Yardeni have a multitude of ways to justify their bullishness irrespective of the news about the China trade negotiations stalling.
One category is the belief that a total breakdown in the negotiations will not happen since both sides will act rationally and compromise where needed to conclude a deal.
The new hope is that Donald and President Xi Jinping will reach some kind of accommodation when they meet at the next G-20 meeting, scheduled for 6/28-29/2019, notwithstanding the hardening of positions on both sides and the failure to reach an agreement after one year of tedious negotiations.
It would be in China's interest to do just enough to cause Donald to postpone the new 25% tariffs on $300B+ of exports and then dare him to impose them when negotiations break down closer to the 2020 election.
The next general category is that an all out trade war will not last long because both sides want and need a deal.
The third category is that even an all out trade war will have a minor impact on the U.S. economy. So don't worry, be happy. Picture of Stock Jock on Chill Juice: 😎
One theory that is relevant to that third category is that U.S. multinationals, who now manufacture products in China, will find a way to reconfigure their supply chains to avoid the tariffs. That will happen to some extent when the company has a number of manufacturing plants outside of China.
This supply chain reconfiguration does not mean that a new plant will be built in the U.S. to make sneakers or TVs, for example, but only that products manufactured in China and normally sold to U.S. customers will be sold elsewhere where there are no tariffs. In some cases, the production in China would be too large and/or too costly for that redirection.
When components are manufactured in China that are incorporated into a product, then changing suppliers may prove to be difficult, time consuming and/or expensive, and production capacity outside of China may not even be available to meet demand.
My major concern is that an all out trade war will hit just as the U.S. economy is weakening due to other factors.
The Atlanta FED's estimate of second quarter real GDP growth now stands at 1.2%. GDPNow-Federal Reserve Bank of Atlanta It needs to remembered that the first estimate for the 1st quarter would have been more than 50% lower when excluding items likely to soon reverse (e.g. big buildup in inventory)
The primary wild card is what will U.S. consumers do when an all out trade war hits home with the 25% tariffs levied on all of China's exports.
Other potential adverse developments would include China banning the sale of some U.S. products: Apple's EPS at risk of 29% hit if its products are banned in China, Goldman says - MarketWatch Will China take that kind of action? No one really knows.
Personally, I think that sales of about 1/5th of consumer discretionary items will plunge in response to the all out tariff war once U.S. customers realize that Donald has not told them the truth about who pays for the tariffs. A stock market correction or bear market could sap consumer confidence as would some anemic GDP numbers for the last three quarters and a reversal in job gains to losses.
Currently, the S & P 500 is moving within a trading range between 2800 to 2945. Investors are currently in a news vacuum about whether or not the China trade negotiations will successfully conclude with an agreement. While it is possible that the recent rhetoric is posturing, the more likely scenario is that the U.S. and China are on the verge of an all out trade war. If Donald slaps 25% tariffs on the remaining $300B or so in imports, that will be difficult for the Stock Jocks to ignore.
US multinationals will help market rally to all-time highs: Yardeni
Bulls like Ed Yardeni have a multitude of ways to justify their bullishness irrespective of the news about the China trade negotiations stalling.
One category is the belief that a total breakdown in the negotiations will not happen since both sides will act rationally and compromise where needed to conclude a deal.
The new hope is that Donald and President Xi Jinping will reach some kind of accommodation when they meet at the next G-20 meeting, scheduled for 6/28-29/2019, notwithstanding the hardening of positions on both sides and the failure to reach an agreement after one year of tedious negotiations.
It would be in China's interest to do just enough to cause Donald to postpone the new 25% tariffs on $300B+ of exports and then dare him to impose them when negotiations break down closer to the 2020 election.
The next general category is that an all out trade war will not last long because both sides want and need a deal.
The third category is that even an all out trade war will have a minor impact on the U.S. economy. So don't worry, be happy. Picture of Stock Jock on Chill Juice: 😎
One theory that is relevant to that third category is that U.S. multinationals, who now manufacture products in China, will find a way to reconfigure their supply chains to avoid the tariffs. That will happen to some extent when the company has a number of manufacturing plants outside of China.
This supply chain reconfiguration does not mean that a new plant will be built in the U.S. to make sneakers or TVs, for example, but only that products manufactured in China and normally sold to U.S. customers will be sold elsewhere where there are no tariffs. In some cases, the production in China would be too large and/or too costly for that redirection.
When components are manufactured in China that are incorporated into a product, then changing suppliers may prove to be difficult, time consuming and/or expensive, and production capacity outside of China may not even be available to meet demand.
My major concern is that an all out trade war will hit just as the U.S. economy is weakening due to other factors.
The Atlanta FED's estimate of second quarter real GDP growth now stands at 1.2%. GDPNow-Federal Reserve Bank of Atlanta It needs to remembered that the first estimate for the 1st quarter would have been more than 50% lower when excluding items likely to soon reverse (e.g. big buildup in inventory)
The primary wild card is what will U.S. consumers do when an all out trade war hits home with the 25% tariffs levied on all of China's exports.
Other potential adverse developments would include China banning the sale of some U.S. products: Apple's EPS at risk of 29% hit if its products are banned in China, Goldman says - MarketWatch Will China take that kind of action? No one really knows.
Personally, I think that sales of about 1/5th of consumer discretionary items will plunge in response to the all out tariff war once U.S. customers realize that Donald has not told them the truth about who pays for the tariffs. A stock market correction or bear market could sap consumer confidence as would some anemic GDP numbers for the last three quarters and a reversal in job gains to losses.
Currently, the S & P 500 is moving within a trading range between 2800 to 2945. Investors are currently in a news vacuum about whether or not the China trade negotiations will successfully conclude with an agreement. While it is possible that the recent rhetoric is posturing, the more likely scenario is that the U.S. and China are on the verge of an all out trade war. If Donald slaps 25% tariffs on the remaining $300B or so in imports, that will be difficult for the Stock Jocks to ignore.
+++++
Trump:
White House directs former counsel Don McGahn not to testify before House panel-CNN Barr claims that he is only trying to protect future Presidents rather than Donald through preventing McGahn's compliance with the subpoena.
Barr is a proponent of the Imperial Presidency legal doctrine which basically places the President above the law and free of checks or balances from the legislative or judicial branches of government.
In Barr's version of the Imperial Presidency, McGahn can not be asked questions about his testimony given to Mueller that has now been published for anyone to read who cares to spend the time. The Mueller report is available from booksellers. The Mueller Report: The Final Report of the Special Counsel into Donald Trump, Russia, and Collusion: Robert S. Mueller III, Special Counsel's Office U.S. Department of Justice ($1.99 for a download)
The primary legal argument advanced by Barr is that senior Presidential advisors can not be compelled to testify before Congress under the DOJ's newly created for Donald expansion of the "separation of powers" doctrine.
This immunity from testimony created by Barr for Donald has no constitutional basis and would apply even when the senior advisor has already given public testimony on the same matter and the testimony is clearly relevant to whether the President has committed a crime.
The only federal court presented with a similar argument shot it down Federal judge rules against Miers, White House on subpoenas - POLITICO; Committee on the Judiciary, U.S. House of Representatives v. Harriet Miers et. al. (2008) Another federal court has held that even a properly asserted claim of executive privilege can be waived when the executive branch has "already publicly revealed the sum and substance of the very material it is now seeking to withhold". Committee on Oversight and Government Reform, U.S. House of Representatives v. Loretta e. Lynch (2016) Then there is the crime/fraud exception to the assertion of any privilege. Trump stonewalls, and a court slaps him down - The Washington Post
Donald has distanced himself from the DOJ's ongoing and multiple obstruction efforts which he wants to pin on Barr as if he had nothing to do with it. (Trump: "As I understand it they're doing that for the office of the presidency for future presidents. As I understand it it's a very important precedent." )
The Department of Justice and Donald simply do not want McGahn repeating his Mueller testimony on TV which will reach millions more voters than the written excerpts of his testimony contained in the dense Mueller report that few have read. That is the reason why the AG and the U.S. Department of Justice are active participants in legally frivolous delay and deny tactics.
Trump administration tells judge Congress did not deny border wall funds when it declined to appropriate money for it - The Washington Post The Alternate Reality inhabited by Trumpsters now includes lawyers at the Department of Justice.
White House directs former counsel Don McGahn not to testify before House panel-CNN Barr claims that he is only trying to protect future Presidents rather than Donald through preventing McGahn's compliance with the subpoena.
Barr is a proponent of the Imperial Presidency legal doctrine which basically places the President above the law and free of checks or balances from the legislative or judicial branches of government.
In Barr's version of the Imperial Presidency, McGahn can not be asked questions about his testimony given to Mueller that has now been published for anyone to read who cares to spend the time. The Mueller report is available from booksellers. The Mueller Report: The Final Report of the Special Counsel into Donald Trump, Russia, and Collusion: Robert S. Mueller III, Special Counsel's Office U.S. Department of Justice ($1.99 for a download)
The primary legal argument advanced by Barr is that senior Presidential advisors can not be compelled to testify before Congress under the DOJ's newly created for Donald expansion of the "separation of powers" doctrine.
This immunity from testimony created by Barr for Donald has no constitutional basis and would apply even when the senior advisor has already given public testimony on the same matter and the testimony is clearly relevant to whether the President has committed a crime.
The only federal court presented with a similar argument shot it down Federal judge rules against Miers, White House on subpoenas - POLITICO; Committee on the Judiciary, U.S. House of Representatives v. Harriet Miers et. al. (2008) Another federal court has held that even a properly asserted claim of executive privilege can be waived when the executive branch has "already publicly revealed the sum and substance of the very material it is now seeking to withhold". Committee on Oversight and Government Reform, U.S. House of Representatives v. Loretta e. Lynch (2016) Then there is the crime/fraud exception to the assertion of any privilege. Trump stonewalls, and a court slaps him down - The Washington Post
Donald has distanced himself from the DOJ's ongoing and multiple obstruction efforts which he wants to pin on Barr as if he had nothing to do with it. (Trump: "As I understand it they're doing that for the office of the presidency for future presidents. As I understand it it's a very important precedent." )
The Department of Justice and Donald simply do not want McGahn repeating his Mueller testimony on TV which will reach millions more voters than the written excerpts of his testimony contained in the dense Mueller report that few have read. That is the reason why the AG and the U.S. Department of Justice are active participants in legally frivolous delay and deny tactics.
Trump judicial nominees decline to endorse Brown v. Board under Senate questioning - The Washington Post; Trump judicial picks dodge law, values on Brown v. Board of Education: USA Today
The Brown v. Board of Education of Topeka: 347 U.S. 483 (1954) decision is no longer settled law in Trump's America.
Trump pick for SF-based Ninth Circuit Kenneth Lee (some of Lee's previous statements: “whenever minorities do not succeed, they cry racism”; “charges of sexism often amount to nothing but irrelevant pouting” and Lee refused to say whether he agreed with Brown v. Board of Education, just one of 27 Trump nominees who refused to endorse that historic decision on school desegregation);
Republican Senators Confirm Judge Who Said Planned Parenthood ‘Kills Over 150,000 Females A Year’
Apparently, a law decree is all that prevents Donald from nominating Rush Limbaugh and Sean Hannity as judges.
++
Michael Flynn: Trump blames Obama for not warning him. Which Obama did. - Vox
Trump says he was not warned about Flynn. The Mueller report disagrees. - The Washington Post
Donald engages in revisionist history in real time.
Flynn told Mueller that people tied to Trump and Congress tried to obstruct probe
The Brown v. Board of Education of Topeka: 347 U.S. 483 (1954) decision is no longer settled law in Trump's America.
Trump pick for SF-based Ninth Circuit Kenneth Lee (some of Lee's previous statements: “whenever minorities do not succeed, they cry racism”; “charges of sexism often amount to nothing but irrelevant pouting” and Lee refused to say whether he agreed with Brown v. Board of Education, just one of 27 Trump nominees who refused to endorse that historic decision on school desegregation);
Republican Senators Confirm Judge Who Said Planned Parenthood ‘Kills Over 150,000 Females A Year’
Apparently, a law decree is all that prevents Donald from nominating Rush Limbaugh and Sean Hannity as judges.
++
Michael Flynn: Trump blames Obama for not warning him. Which Obama did. - Vox
Trump says he was not warned about Flynn. The Mueller report disagrees. - The Washington Post
Donald engages in revisionist history in real time.
Flynn told Mueller that people tied to Trump and Congress tried to obstruct probe
+++++
1. Intermediate Term Bond Ladder Basket Strategy:
A. Sold 2 Kroger 2.6% SU Maturing on 2/1/21:
Profit Snapshot: $19.2
Finra Page: Bond Detail
Sold at 99.653
YTM at 99.653 = 2.808%
Proceeds at 99.543
I am keeping the 2 Kroger 3.3% bonds that mature in 2021: Item # 2.B. (12/19/18 Post); Bond Detail
2. Short Term Bond/CD Ladder Basket Strategy:
$10K in adds
-$2K Early Redemption
A. Bought 2 General Motors Finance 2.65% SU Maturing on 4/13/20:
FINRA Page: Bond Detail (prospectus linked)
GM 2018 Annual Report
GM Earnings for the Q/E 3/31/19
GM Financial 10-Q for the Q/E 3/31/19
Credit Ratings:
Fitch at BBB for General Motors Financial's Senior Unsecured Debt (same as GM rating; Fitch Affirms GM and GM Financial at 'BBB'; Outlook Stable)
Bought at a Total Cost of 99.910
YTM At Total Cost Then at 2.747%
Current Yield at TC = 2.6524%
I am rolling in advance the expected proceeds from a GM Financial SU maturing next October.
B. Bought 1 Banco Santander UK Group Holding PLC 2.875% SU Maturing on 10/16/20:
Finra Page: Bond Detail (prospectus not linked)
Issuer: This issuer is a holding company for Banco Santander's U.K banking operations, Santander UK PLC, which has an "A" rating from S & P.
Credit Ratings: Moody's at Baa1 (see Finra page linked above)
Bought at a Total Cost of 99.882
YTM at TC Then at 2.958%
Current Yield at TC = 2.878%
C. Bought 2 Treasury 1.5% Coupon Maturing on 4/15/20:
YTM = 2.384%
I now own 4 bonds.
D. Bought 5 56 Day Treasury Bills Maturing on 7/9/19 at Auction:
IR = 2.429%
Auction Results:
E. DuPont Early Redemption of Early Redemption of 2.2% SU Maturing on 5/1/20:
This bond made just made its semi-annual interest payment, so there was not much accrued interest to pay upon redemption.
Profit Snapshot: +$21.82
Item # 2.A. Bought 2 Dupont 2.2% SU at a Total Cost of 98.909 (9/2/18 Post)
3. Eliminations:
I mentioned selling the following stocks in a comment posted on 5/6/19.
A. Eliminated PBCT-Sold 101+ at $17.57:
Quote: People's United Financial Inc (PBCT)
PBCT Consensus Analyst E.P.S. Estimates
Closing Price Yesterday: PBCT $16.39 +$0.14 +0.86%
Category: Regional Bank Basket Strategy
History This Account:
Profit Snapshot: +$182.26 (order filled with multiple odd lots)
Item # 3.A. Bought 100 PBCT at $15.65(11/28/18 Post)
Dividend: Quarterly at $.1775 per share
Last Ex Dividend Date: 4/30/19
Recent Earnings Report (Q/E 3/31/19):
People's United Financial Reports First Quarter Net Income of $114.6 Million, or $0.30 per Common Share
I would call this report okay "under the circumstances".
Operating diluted E.P.S. was reported at $.33 per share and at $.3 using GAAP. The adjustment to operating was a net after tax $11.9M merger related expense. The GAAP E.P.S. number in the 2018 first quarter was also $.3.
The net charge off to average loans ratio remains excellent at .06% annualized.
Return on average assets is meaningfully below average at .96%. Return on Average Assets for all U.S. Banks-St. Louis Fed
The return on average tangible equity was reported at 13% which is okay, but below what I would like to see. The 7% return on average equity is well below the national average. Return on Average Equity for all U.S. Banks-St. Louis Fed
The total risk based capital ratio of 12.4% is below what I would like to see.
The efficiency ratio was reported at 57.3%, which is viewed as acceptable since it is below 60%. I prefer a number closer to 50%.
The common dividend payout ratio was at 58.6% using GAAP earnings and at 53% using operating earnings, which I view as modestly high and a likely restraint on future dividend increases.
The NPA ratios is okay at .54%, but not stellar for this stage in the credit cycle.
NIM was okay under the circumstances at 3.2%.
Last Round-Trip: Item # 4 Sold 100 PBCT at $14.61 (9/21/13 Post)-Item # 1 Bought 100 PBCT at $11.47 (6/14/12 Post)
I have been a net seller of my already insignificant regional bank stock basket due to the persistent flat yield curve which is likely to continue.
B. Sold 100 ADX at $15.24-Used Commission Free Trade:
Quote: Adams Diversified Equity Fund Inc. (ADX)
Sponsor's Website: Adams Funds
Closing Price Yesterday: ADX $14.98 +$0.09 +0.60%
Profit Snapshot = +$112.32
Item # 4 Bought 100 ADX at $14.12-Used Commission Free Trade (3/3/19 Post)(snapshots of largest realized profits + some links to prior posts)
Data Date of Trade (5/6/19)
Closing Net Asset Value Per Share = $17.6
Closing Market Price = $15.26
Discount = -13.3%
Average Discounts:
3 Years -15.02%
5 Years -14.85%
Sourced: ADX Adams Diversified Equity CEF Connect
Last Elimination: Item # 2.C. (3/4/17 Post)
Realized Profits 2014 to Date: $3,172.46
Since I sold a 467+ share position in 2015, I have been buying and selling 100 share lots. The total return for those 100 shares lots has been generated mostly from capital gain distributions paid in December that totaled $4.48 per share (2015-2018) My realized profit numbers do not include dividends and capital gains distributions but only the profit from selling the shares.
C. Sold 100 RVT at $14.51-Used Commission Free Trade:
Profit Snapshot: +$87.61
Item # 1 Bought 100 RVT at $13.63-Used Commission Free Trade (3/31/19 Post)
I may buy this one back with a price decline below the last $13.63 purchase price.
Last Quarterly Dividend: $.29 per share
Royce Value Trust, Inc. (RVT) Dividend Date & History - Nasdaq
Last Ex Dividend Date: 3/8/19
Closing Price Yesterday: RVT $13.78 +$0.19 +1.40%
Last Elimination: Item # 1 Sold 505+ RVT at $15.89 (8/3/13 Post)
Data Day of Trade (5/6/19):
Closing Net Asset Value Per Share: $16.22
Closing Market Price = $14.51
Discount: -10.54
Average Discounts:
3 Years -11.33%
5 Years -12.01%
Source: RVT Royce Value Trust-CEF Connect
4. Bought 50 of the Deservedly Hated BDC GARS at $6.93-Used Commission Free Trade (Category: Small Ball-Income Generation):
Quote: GARS-Garrison Capital Inc.
SEC Filings
2018 Annual Report (risk factor discussion starts at page 31 and ends at page 60)
Closing Price Yesterday: GARS $6.89 -$0.03 -0.43%
Management: External
Current Position: 130 Shares
Dividend: Quarterly at $.23 (recently reduced from $.28 which was reduced from $.35 per share effective for the 2016 4th quarter)
Garrison Capital BDC - Investor Relations - Dividends & Distributions
Average Cost Per Share = $7.2
Dividend yield at average total cost = 12.78% (assumes no dividend cut which I now view as more likely than not within 12 months)
Next Ex Dividend Date: 6/6/19
Highest Cost Lot: 50 at $7.77 (11/13/18)-Item # 1.A. Bought 50 GARS at $7.7-Used Commission Free Trade (12/2/18 Post)
Last Discussed: Item #4.A. Bought 10 GARS at $7.13 and 15 at $6.3-Used Commission Free Trades (1/2/19 Post)
Last Earnings Report Prior to Purchase (Q/E 12/31/18): Not comforting
Subsequent to this last purchase, GARS reported reported results for the 2019 first quarter. I viewed this report as unsatisfactory but not as bad as some others. 10-Q for the Q/E 3/31/19
The Board declared a $.23 per share quarterly dividend.
Net asset value per share continued to decline, but only by 8 cents to $10.44 compared to the Q/E 12/31/18. For this deservedly hated BDC, that is what passes for progress.
NII per share was reported at $.2, unchanged from the prior quarter, and below the quarterly dividend of $.23 per share. The dividend may soon have to be cut again without an increase in net income per share.
The company reported a realized loss of $7.133M which is unacceptable given its long string of realized losses.
The company identified the primary culprit in its 10-Q: "The net realized loss on investments for the three months ended March 31, 2019 was primarily comprised of a $6.9 million loss incurred upon the sale of our investment in Profusion Industries, LLC.", at page 53.
The 2018 Annual Report identifies that $9.188M at cost loan as non-performing than valued at $2.33M, Page 91. As of 12/31/17, GARS valued the loan at $8.621M, page 86. I do not see the loan in the 2016 Annual report, but noted that it was valued above its par value in the 10-Q for the Q/E 3/31/17. I consequently estimate that the loan went on non-accrual within two years after made.
BDCs will have loan losses but GARS has too many and too much IMO indicating to me poor underwriting and bad judgment. It needs to be emphasized that the economy has been good during the period that GARS has been a public company.
I will not buy more shares except through dividend reinvestment. I will start dividend reinvestment with the next payment. The hope is that I will be able to sell the highest cost lot profitably at some point.
When speculating in deservedly hated BDCs, positions will always be immaterial and a return in excess of the dividend yield problematic.
The key to earning a return in excess of the dividend is to catch a period when the BDC stops incinerating assets and reports some minor improvement in net investment income and net asset value per share.
This may then create a ray of light that will allow harvesting of a capital gain. Averaging down some, using commission free trades, is frequently required to improve the chances of a successful exit.
5 Year Operating History: Disgusting IMO
Page 63: 2018 Annual Report filed with the SEC
Assuming my addition is correct, the external manager was paid $44.23 million over this five year period (base and incentive fees). My question is why is anyone paid anything for this performance.
5. Small Ball-Commission Free ETFs:
A. Bought 10 IEUR at $46.16:
Quote: iShares Core MSCI Europe ETF Overview
Closing Price Yesterday: IEUR $46.26 +$0.37 +0.81%
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Top Ten Holdings as of 5/5/19:
Recent Dividend History: Semi-annual (larger payment in June)
Purchase Restriction: Small Ball Rule
Maximum Position: 50 shares
Current Position: 10 Shares
Rated 3 Stars by Morningstar
I was looking around for an ETF that had performed poorly over the past several years compared to the S & P 500 and naturally thought about European stock ETFs.
I have avoided European ETFs altogether for over 3 years or so.
I mentioned buying IEUR in a January 2016 where I was sprinkling money in a variety of stocks and stock ETF on major down days. Update For Portfolio Positioning And Management As Of 1/12/2016 - South Gent | Seeking Alpha I was buying into a volatility spike. That is something that I do now. I eliminated the position in 2017.
Through 5/15/19, the annual average total return was 7.34% over the past three years. After posting slightly negative total returns in 2015 and 2016, the fund did produce a +26.75% total return in 2017 before losing 14.85% last year. iShares Core MSCI Europe ETF (IEUR) Total Returns European stock ETFs have just been a hard place to make money, but the severe underperformance of those ETFs compared to SPY at least sets up the possibility of outperformance over the next several years.
IEUR was launched in 2014. Just to highlight how poor USD price European stock ETFs have fared over the past 5 and 10 years compared to SPY, I would point to VGK: Vanguard FTSE Europe Index Fund ETF Shares (VGK) Total Returns
Through 5/15/19, the total annual average 5 year total return for VGK was .99% and 7.58% compared to 10.93% and 14.67% respectively for SPY. SPDR® S&P 500 ETF (SPY) Total Returns
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.
2. Short Term Bond/CD Ladder Basket Strategy:
$10K in adds
-$2K Early Redemption
A. Bought 2 General Motors Finance 2.65% SU Maturing on 4/13/20:
FINRA Page: Bond Detail (prospectus linked)
GM 2018 Annual Report
GM Earnings for the Q/E 3/31/19
GM Financial 10-Q for the Q/E 3/31/19
Credit Ratings:
Fitch at BBB for General Motors Financial's Senior Unsecured Debt (same as GM rating; Fitch Affirms GM and GM Financial at 'BBB'; Outlook Stable)
Bought at a Total Cost of 99.910
YTM At Total Cost Then at 2.747%
Current Yield at TC = 2.6524%
I am rolling in advance the expected proceeds from a GM Financial SU maturing next October.
B. Bought 1 Banco Santander UK Group Holding PLC 2.875% SU Maturing on 10/16/20:
Issuer: This issuer is a holding company for Banco Santander's U.K banking operations, Santander UK PLC, which has an "A" rating from S & P.
Credit Ratings: Moody's at Baa1 (see Finra page linked above)
Bought at a Total Cost of 99.882
YTM at TC Then at 2.958%
Current Yield at TC = 2.878%
C. Bought 2 Treasury 1.5% Coupon Maturing on 4/15/20:
YTM = 2.384%
D. Bought 5 56 Day Treasury Bills Maturing on 7/9/19 at Auction:
IR = 2.429%
Auction Results:
E. DuPont Early Redemption of Early Redemption of 2.2% SU Maturing on 5/1/20:
Profit Snapshot: +$21.82
Item # 2.A. Bought 2 Dupont 2.2% SU at a Total Cost of 98.909 (9/2/18 Post)
3. Eliminations:
I mentioned selling the following stocks in a comment posted on 5/6/19.
A. Eliminated PBCT-Sold 101+ at $17.57:
Quote: People's United Financial Inc (PBCT)
PBCT Consensus Analyst E.P.S. Estimates
Closing Price Yesterday: PBCT $16.39 +$0.14 +0.86%
Category: Regional Bank Basket Strategy
History This Account:
Profit Snapshot: +$182.26 (order filled with multiple odd lots)
Item # 3.A. Bought 100 PBCT at $15.65(11/28/18 Post)
Dividend: Quarterly at $.1775 per share
Last Ex Dividend Date: 4/30/19
Recent Earnings Report (Q/E 3/31/19):
People's United Financial Reports First Quarter Net Income of $114.6 Million, or $0.30 per Common Share
I would call this report okay "under the circumstances".
Operating diluted E.P.S. was reported at $.33 per share and at $.3 using GAAP. The adjustment to operating was a net after tax $11.9M merger related expense. The GAAP E.P.S. number in the 2018 first quarter was also $.3.
The net charge off to average loans ratio remains excellent at .06% annualized.
Return on average assets is meaningfully below average at .96%. Return on Average Assets for all U.S. Banks-St. Louis Fed
The return on average tangible equity was reported at 13% which is okay, but below what I would like to see. The 7% return on average equity is well below the national average. Return on Average Equity for all U.S. Banks-St. Louis Fed
The total risk based capital ratio of 12.4% is below what I would like to see.
The efficiency ratio was reported at 57.3%, which is viewed as acceptable since it is below 60%. I prefer a number closer to 50%.
The common dividend payout ratio was at 58.6% using GAAP earnings and at 53% using operating earnings, which I view as modestly high and a likely restraint on future dividend increases.
The NPA ratios is okay at .54%, but not stellar for this stage in the credit cycle.
NIM was okay under the circumstances at 3.2%.
Last Round-Trip: Item # 4 Sold 100 PBCT at $14.61 (9/21/13 Post)-Item # 1 Bought 100 PBCT at $11.47 (6/14/12 Post)
I have been a net seller of my already insignificant regional bank stock basket due to the persistent flat yield curve which is likely to continue.
B. Sold 100 ADX at $15.24-Used Commission Free Trade:
Quote: Adams Diversified Equity Fund Inc. (ADX)
Sponsor's Website: Adams Funds
Closing Price Yesterday: ADX $14.98 +$0.09 +0.60%
Profit Snapshot = +$112.32
Item # 4 Bought 100 ADX at $14.12-Used Commission Free Trade (3/3/19 Post)(snapshots of largest realized profits + some links to prior posts)
Data Date of Trade (5/6/19)
Closing Net Asset Value Per Share = $17.6
Closing Market Price = $15.26
Discount = -13.3%
Average Discounts:
3 Years -15.02%
5 Years -14.85%
Sourced: ADX Adams Diversified Equity CEF Connect
Last Elimination: Item # 2.C. (3/4/17 Post)
Realized Profits 2014 to Date: $3,172.46
Since I sold a 467+ share position in 2015, I have been buying and selling 100 share lots. The total return for those 100 shares lots has been generated mostly from capital gain distributions paid in December that totaled $4.48 per share (2015-2018) My realized profit numbers do not include dividends and capital gains distributions but only the profit from selling the shares.
C. Sold 100 RVT at $14.51-Used Commission Free Trade:
Profit Snapshot: +$87.61
Item # 1 Bought 100 RVT at $13.63-Used Commission Free Trade (3/31/19 Post)
I may buy this one back with a price decline below the last $13.63 purchase price.
Last Quarterly Dividend: $.29 per share
Royce Value Trust, Inc. (RVT) Dividend Date & History - Nasdaq
Last Ex Dividend Date: 3/8/19
Closing Price Yesterday: RVT $13.78 +$0.19 +1.40%
Last Elimination: Item # 1 Sold 505+ RVT at $15.89 (8/3/13 Post)
Data Day of Trade (5/6/19):
Closing Net Asset Value Per Share: $16.22
Closing Market Price = $14.51
Discount: -10.54
Average Discounts:
3 Years -11.33%
5 Years -12.01%
Source: RVT Royce Value Trust-CEF Connect
4. Bought 50 of the Deservedly Hated BDC GARS at $6.93-Used Commission Free Trade (Category: Small Ball-Income Generation):
Quote: GARS-Garrison Capital Inc.
SEC Filings
2018 Annual Report (risk factor discussion starts at page 31 and ends at page 60)
Closing Price Yesterday: GARS $6.89 -$0.03 -0.43%
Management: External
Current Position: 130 Shares
Dividend: Quarterly at $.23 (recently reduced from $.28 which was reduced from $.35 per share effective for the 2016 4th quarter)
Garrison Capital BDC - Investor Relations - Dividends & Distributions
Average Cost Per Share = $7.2
Dividend yield at average total cost = 12.78% (assumes no dividend cut which I now view as more likely than not within 12 months)
Next Ex Dividend Date: 6/6/19
Highest Cost Lot: 50 at $7.77 (11/13/18)-Item # 1.A. Bought 50 GARS at $7.7-Used Commission Free Trade (12/2/18 Post)
Last Discussed: Item #4.A. Bought 10 GARS at $7.13 and 15 at $6.3-Used Commission Free Trades (1/2/19 Post)
Last Earnings Report Prior to Purchase (Q/E 12/31/18): Not comforting
Subsequent to this last purchase, GARS reported reported results for the 2019 first quarter. I viewed this report as unsatisfactory but not as bad as some others. 10-Q for the Q/E 3/31/19
The Board declared a $.23 per share quarterly dividend.
Net asset value per share continued to decline, but only by 8 cents to $10.44 compared to the Q/E 12/31/18. For this deservedly hated BDC, that is what passes for progress.
NII per share was reported at $.2, unchanged from the prior quarter, and below the quarterly dividend of $.23 per share. The dividend may soon have to be cut again without an increase in net income per share.
The company reported a realized loss of $7.133M which is unacceptable given its long string of realized losses.
The company identified the primary culprit in its 10-Q: "The net realized loss on investments for the three months ended March 31, 2019 was primarily comprised of a $6.9 million loss incurred upon the sale of our investment in Profusion Industries, LLC.", at page 53.
The 2018 Annual Report identifies that $9.188M at cost loan as non-performing than valued at $2.33M, Page 91. As of 12/31/17, GARS valued the loan at $8.621M, page 86. I do not see the loan in the 2016 Annual report, but noted that it was valued above its par value in the 10-Q for the Q/E 3/31/17. I consequently estimate that the loan went on non-accrual within two years after made.
BDCs will have loan losses but GARS has too many and too much IMO indicating to me poor underwriting and bad judgment. It needs to be emphasized that the economy has been good during the period that GARS has been a public company.
I will not buy more shares except through dividend reinvestment. I will start dividend reinvestment with the next payment. The hope is that I will be able to sell the highest cost lot profitably at some point.
When speculating in deservedly hated BDCs, positions will always be immaterial and a return in excess of the dividend yield problematic.
The key to earning a return in excess of the dividend is to catch a period when the BDC stops incinerating assets and reports some minor improvement in net investment income and net asset value per share.
This may then create a ray of light that will allow harvesting of a capital gain. Averaging down some, using commission free trades, is frequently required to improve the chances of a successful exit.
5 Year Operating History: Disgusting IMO
 |
| Net Asset Values Per Share: $15.58 on 12/31/14 and $10.52 on 12/31/18 |
Assuming my addition is correct, the external manager was paid $44.23 million over this five year period (base and incentive fees). My question is why is anyone paid anything for this performance.
5. Small Ball-Commission Free ETFs:
A. Bought 10 IEUR at $46.16:
Quote: iShares Core MSCI Europe ETF Overview
Closing Price Yesterday: IEUR $46.26 +$0.37 +0.81%
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Top Ten Holdings as of 5/5/19:
Recent Dividend History: Semi-annual (larger payment in June)
Purchase Restriction: Small Ball Rule
Maximum Position: 50 shares
Current Position: 10 Shares
Rated 3 Stars by Morningstar
I was looking around for an ETF that had performed poorly over the past several years compared to the S & P 500 and naturally thought about European stock ETFs.
I have avoided European ETFs altogether for over 3 years or so.
I mentioned buying IEUR in a January 2016 where I was sprinkling money in a variety of stocks and stock ETF on major down days. Update For Portfolio Positioning And Management As Of 1/12/2016 - South Gent | Seeking Alpha I was buying into a volatility spike. That is something that I do now. I eliminated the position in 2017.
Through 5/15/19, the annual average total return was 7.34% over the past three years. After posting slightly negative total returns in 2015 and 2016, the fund did produce a +26.75% total return in 2017 before losing 14.85% last year. iShares Core MSCI Europe ETF (IEUR) Total Returns European stock ETFs have just been a hard place to make money, but the severe underperformance of those ETFs compared to SPY at least sets up the possibility of outperformance over the next several years.
IEUR was launched in 2014. Just to highlight how poor USD price European stock ETFs have fared over the past 5 and 10 years compared to SPY, I would point to VGK: Vanguard FTSE Europe Index Fund ETF Shares (VGK) Total Returns
Through 5/15/19, the total annual average 5 year total return for VGK was .99% and 7.58% compared to 10.93% and 14.67% respectively for SPY. SPDR® S&P 500 ETF (SPY) Total Returns
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.
