Economy:
The Fed lowered the federal funds rate by .25%. The new FF range is 1.75% to 2%. In commenting on the U.S. economy, the FED mad mostly positive comments: "the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports have weakened." Federal Reserve Board - Federal Reserve issues FOMC statement
There were 3 dissents in a 7 to 3 decision. The Esther L. George and Eric S. Rosengren wanted no change in the FF rate while James Bullard wanted a .5% decrease.
Fed 'insurance' cut gets cold shoulder from markets
With yields already so low, reducing the FF rate further when the economy needs a boost during a recession will have minimal stimulus effect.
The federal government is likely to be restrained in adding fiscal stimulus as well, making the government response to the next serious recession problematic.
The government is already running an annual budget deficit of around $1 trillion in the 11th year of an economic expansion.
I do not foresee that any Fed rate cuts now will have a net positive impact on the economy. I discuss some of my reasons in a comment published last Wednesday.
Conflicted Don, who wants to lower his own heavy debt service costs more, blasted the FED as expected:
The Fed lowered the federal funds rate by .25%. The new FF range is 1.75% to 2%. In commenting on the U.S. economy, the FED mad mostly positive comments: "the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports have weakened." Federal Reserve Board - Federal Reserve issues FOMC statement
There were 3 dissents in a 7 to 3 decision. The Esther L. George and Eric S. Rosengren wanted no change in the FF rate while James Bullard wanted a .5% decrease.
Fed 'insurance' cut gets cold shoulder from markets
With yields already so low, reducing the FF rate further when the economy needs a boost during a recession will have minimal stimulus effect.
The federal government is likely to be restrained in adding fiscal stimulus as well, making the government response to the next serious recession problematic.
The government is already running an annual budget deficit of around $1 trillion in the 11th year of an economic expansion.
I do not foresee that any Fed rate cuts now will have a net positive impact on the economy. I discuss some of my reasons in a comment published last Wednesday.
Conflicted Don, who wants to lower his own heavy debt service costs more, blasted the FED as expected:
The reports on August industrial production and housing starts were positive.
US industrial production August 2019 (up .6% vs. +.2 consensus estimate)
US industrial production August 2019 (up .6% vs. +.2 consensus estimate)
The Fed - Industrial Production and Capacity Utilization - G.17:
US housing starts total 1.364 million in August, vs 1.250 million expected
China’s industrial growth slowed to new 17-year low in August, even before new US trade war tariffs took effect | South China Morning Post
Japan's exports fall more than expected in August - MarketWatch (down 8.2%)
EU says no-deal Brexit would be the U.K.’s own fault - MarketWatch
The Political Will to Avert a No-Deal Brexit Is Ebbing Fast
Trump on China 9/20/19: "“Obviously, China is a threat to the world in a sense, because they’re building a military faster than anybody.” “I’m looking for a complete deal, I’m not looking for a partial deal.”
Chinese trade negotiators cancel US farm visit, cut trip short Donald claimed that the negotiations made progress on Thursday and Friday.
Trump says he doesn’t need a U.S.-China trade deal before 2020 election - The Washington Post
Uncertainty has growing number of executives expecting a recession
+++
Markets and Market Commentary:
Investors are too complacent about inflation and low interest rates, says Schwab strategist - MarketWatch
Investors believe that problematic U.S. inflation is dead and will not return for at least 30 years based on the break-even spreads of 5 to 30 year TIPs. A persistent rise in inflation over 3% that proves sticky and more likely to increase than decrease would be a major shock event.
30-year Breakeven Inflation Rate-St. Louis Fed
The breakeven inflation rate is viewed as the market's prediction of an annual average inflation rate.
As of 9/20/20, the 30 year TIP breakeven inflation rate was 1.67% derived by subtracting the real yield from the nominal yield: Daily Treasury Real Yield Curve Rates; Daily Treasury Yield Curve Rates An investor buying the 30 TIP with a .5% yield would need an average annual inflation rate of 1.67% to breakeven with the buyer of the 2.17% 30 year nominal treasury.
Investors believe that problematic U.S. inflation is dead and will not return for at least 30 years based on the break-even spreads of 5 to 30 year TIPs. A persistent rise in inflation over 3% that proves sticky and more likely to increase than decrease would be a major shock event.
30-year Breakeven Inflation Rate-St. Louis Fed
The breakeven inflation rate is viewed as the market's prediction of an annual average inflation rate.
As of 9/20/20, the 30 year TIP breakeven inflation rate was 1.67% derived by subtracting the real yield from the nominal yield: Daily Treasury Real Yield Curve Rates; Daily Treasury Yield Curve Rates An investor buying the 30 TIP with a .5% yield would need an average annual inflation rate of 1.67% to breakeven with the buyer of the 2.17% 30 year nominal treasury.
There’s a cash shortage on Wall Street-and it’s forcing the Fed to stem a surge in repo rates - MarketWatch
FedEx stock falls double digits after company lowers outlook on trade tensions - MarketWatch; Cramer says FedEx call was extremely 'dispiriting' about the economy
Gundlach says the Fed may have to start 'QE-lite' to boost reserves
Powell doesn't see the Fed ever using negative interest rates, even in times of crisis I doubt that it would be legal without a law change anyway. How low can we go? The prospects for negative interest rates | PBS NewsHour; Reducing the IOER Rate: An Analysis of Options
We are in an earnings recession, and it is expected to get worse - MarketWatch SPX E.P.S. numbers received a one time year-over-year boost in 2018 due to the corporate income tax cut.
Here are 5 things to know about the recent repo market operations - MarketWatch I suspect that this problem has contributed to an uptick in money market yields for those funds that use repo agreements.
++++FedEx stock falls double digits after company lowers outlook on trade tensions - MarketWatch; Cramer says FedEx call was extremely 'dispiriting' about the economy
Gundlach says the Fed may have to start 'QE-lite' to boost reserves
Powell doesn't see the Fed ever using negative interest rates, even in times of crisis I doubt that it would be legal without a law change anyway. How low can we go? The prospects for negative interest rates | PBS NewsHour; Reducing the IOER Rate: An Analysis of Options
We are in an earnings recession, and it is expected to get worse - MarketWatch SPX E.P.S. numbers received a one time year-over-year boost in 2018 due to the corporate income tax cut.
Here are 5 things to know about the recent repo market operations - MarketWatch I suspect that this problem has contributed to an uptick in money market yields for those funds that use repo agreements.
Iran, U.S. and Saudi Arabia:
Saudi Arabia: Drone and missile debris proves Iranian role in attack 25 Iranian made missiles and drones were used in the attack.
According to news report, the attack was launched from an Iranian airbase near the Iraq border and was approved by Iran's Supreme Leader provided it could be done in such a way that did not point back to Iran. Saudi oil attack was approved by Iran's supreme leader, U.S. official says - CBS News
Iran is already heavily sanctioned by the U.S. which is causing it to test U.S. resolve in defending Saudi Arabia and other U.S. allies in the region. I do not regard the new sanctions as material as a practical matter.
Pompeo called the SA attack an Act of War, which is, of course, the case.
Low flying missiles and drones would be difficult to shoot down, even when the individuals are manning the defensive batteries are alert 24/7 and competent, which is probably not the case in SA.
Most of the missile defense systems, like the Patriot missile defense system, are not designed to shoot down low flying and relatively cheap missiles and drones but ballistic missiles and aircraft. How Saudi Arabia failed to protect itself from drones, missile attacks Russia believes that its S-400 missile system is better than what the U.S. offers SA. Could Russian S-400s have protected Saudi Arabia?-The Washington Post Possibly some system, similar to what is on navy ships, that are activated automatically by radar would be an answer.
I seriously doubt that SA could repel another similar attack on its infrastructure facilities without major changes.
If there is no military retaliation, which is probable but not certain, that would be a clear signal that SA lacks confidence in its ability to protect its energy production facilities.
Iran is playing a dangerous game since the attack really does call for a similar response unless Iran agrees to pay for the damage soon.
While Iran could probably destroy SA's energy infrastructure and production in a major escalation, it would also lose all of its facilities as well. Apparently, that point did not lodge in the Supreme Leader's brain which itself is troubling.
While Iran could probably destroy SA's energy infrastructure and production in a major escalation, it would also lose all of its facilities as well. Apparently, that point did not lodge in the Supreme Leader's brain which itself is troubling.
Iran has been taking the measure of Donald for months now and found him to be full of vile and bluster and nothing else. One commentator in Tehran referred to Donald as a jack rabbit rather than a lion. Hard-Liners in Iran See No Drawback to Bellicose Strategy - The New York Times
The Iranian military attacks, including those on shipping, SA facilities, and the U.S. drone in international waters, and the actual responses from the U.S. and SA, have sent a clear message so far to Iran that it can get away with a lot without suffering the consequences.
That is a dangerous message to send and for Iran to receive and act upon which is what it has being doing now for months.
That is a dangerous message to send and for Iran to receive and act upon which is what it has being doing now for months.
++++++
Trump:
The GOP is a pro-global warming party. Trump administration sued by 23 states over revocation of California right to set its own emissions standards - MarketWatch
The GOP does not want the Environmental Protection Agency ("EPA") to reduce greenhouse gases. Instead, in Trump's America, the EPA needs to investigate the homeless people in San Francisco for polluting the environment. Trump says EPA will cite San Francisco for pollution stemming from homelessness issues | TheHill
Trump: Homeless people hurt the ‘prestige’ of Los Angeles, San Francisco - The Washington Post Donald is going to correct homelessness by doing something that will be disclosed later or not at all.
I was impressed with the articulate teenager from Sweden, Greta Thunberg, who has a perfect command of English and more poise than most adults. Greta Thunberg on the "gift" of Asperger's in fighting climate change - CBS News
Bolton unloads on Trump’s foreign policy behind closed doors
Trump administration to revoke California’s power to set stricter auto emissions standards-The Washington Post; Trump to Revoke California’s Authority to Set Stricter Auto Emissions Rules This is in keeping with the GOP's support for more global warming. Republicans will make it impossible, or at best extremely difficult, for the U.S. to effectively respond until it is too late. I do not regard that as a statement of opinion but an obvious fact. Facts and science are Fake News-true is false and false is true.
The GOP does not want the Environmental Protection Agency ("EPA") to reduce greenhouse gases. Instead, in Trump's America, the EPA needs to investigate the homeless people in San Francisco for polluting the environment. Trump says EPA will cite San Francisco for pollution stemming from homelessness issues | TheHill
Trump: Homeless people hurt the ‘prestige’ of Los Angeles, San Francisco - The Washington Post Donald is going to correct homelessness by doing something that will be disclosed later or not at all.
I was impressed with the articulate teenager from Sweden, Greta Thunberg, who has a perfect command of English and more poise than most adults. Greta Thunberg on the "gift" of Asperger's in fighting climate change - CBS News
Bolton unloads on Trump’s foreign policy behind closed doors
New reporting details how FBI limited investigation of Kavanaugh allegations Donald requested that the Department of Justice come to Kavanaugh's assistance. Donald also recommended that Kavanaugh file a libel suit against his accusers which would probably be the worst advice possible for Kavanaugh to follow.
The NYT published an opinion article that disclosed another alleged incident involving Kavanaugh's sexual misconduct while a Yale undergraduate. Brett Kavanaugh: the new allegation and its impact, explained - Vox
The source was an eye witness, Max Stier, but the NYT opinion article initially failed to mention that the alleged victim did not recall the incident according to her friends.
This alleged incident was similar to the one recounted by Deborah Ramirez who claimed that Kavanaugh thrust his penis into her face. Kavanaugh’s Yale Classmate Deborah Ramirez | The New Yorker
Donald and other republicans who support Kavanaugh do not mention the eye witness account when criticizing the NYT.
Max Stier certainly appears to be a credible witness. Max Stier: 5 Fast Facts You Need to Know | Heavy.com
The FBI was informed of Mr. Stier's willingness to provide information before Kavanaugh was confirmed by the Senate, but refused to follow up claiming that the White House had restrained the scope of their investigation. Sen. Chris Coons told FBI last year about Kavanaugh allegation in NYT - Axios; Senator told FBI last fall of new information about Kavanaugh - The Washington Post
Times reporters blame editors for omission in Kavanaugh story The authors of the new book about Kavanaugh name the person who allegedly was the previously unknown victim, Tracy Harmon Joyce, who refused to be interviewed. New Allegations Against Brett Kavanaugh Detailed in NYT Book This is not the kind of book that I would buy. The Education of Brett Kavanaugh: An Investigation: Robin Pogrebin, Kate Kelly Predictably, the Trumpsters give it negative 1 star reviews without reading it.
Kavanaugh will be a Supreme Court justice for a long time. Republicans will never vote to impeach him, no matter how many women come forward complaining of prior sexual assaults that contradict Kavanaugh's sworn testimony. After all, 62,984,828 voted for Donald even though he admitted on tape to sexual assaults and a number of women came forward with consistent testimony to that admission. Even in our hyper partisan and tribal political system, those allegations are rare.
Just more tweets proving Trump's mental instability:
Trump recommends congressional investigations into Obama family book and Netflix deals Those deals were signed after Obama left office. Even AG Barr may be reluctant to launch an investigation of Obama's book deal signed after leaving office as instructed by the Duck.
Trump orders two former aides to defy House subpoenas - MarketWatch
Trump: "Nobody loves the hispanics more". Trump in New Mexico: 'Who do you love more — the country, or Hispanics?'
++++++++++
1. Added 100 FIE:CA at C$6.74 (C$1 IB Commission):
Quote: iShares Canadian Financial Monthly Income ETF
Closing Price Last Friday: FIE.TO C$7.11 +C$0.04 +0.57%
This ETF owns Canadian banks, insurance companies and REITs.
Sponsor's Website: iShares Canadian Financial Monthly Income ETF
Expense Ratio: High at .65% (.97% when expenses of the two owned ETFs are included)
The two ETFs are the top two holdings: iShares S&P/TSX Canadian Preferred Share Index ETF (CPD); iShares Canadian Corporate Bond Index ETF (XCB)
Holdings:
Quote: iShares Canadian Financial Monthly Income ETF
Closing Price Last Friday: FIE.TO C$7.11 +C$0.04 +0.57%
This ETF owns Canadian banks, insurance companies and REITs.
Sponsor's Website: iShares Canadian Financial Monthly Income ETF
Expense Ratio: High at .65% (.97% when expenses of the two owned ETFs are included)
The two ETFs are the top two holdings: iShares S&P/TSX Canadian Preferred Share Index ETF (CPD); iShares Canadian Corporate Bond Index ETF (XCB)
Holdings:
Recent Buy Discussions: Item # 1 Added 100 FIE:CA at C$6.84 .(7/13/19 Post); Item # 2. Bought 100 FIE:CA at C$6.92 (4/7/19 Post)
Sell Discussions: Item # 5. Sold 300 FIE:CA at C$7.64 (11/26/17 Post)(profit snapshot = C$160); Item # 5. Sold 300 FIE:CA at C$7.64 (11/26/17 Post) (profit snapshot=C$35)(contains snapshots of prior round-trip trades= USD$391.32 for 1500 shares and USD$58.07 for 300 shares; C$166 for 200 shares) All trades were in CADs but the profit snapshots for trades made at Fidelity are calculated using USD values) I quit trading stocks on foreign exchanges at Fidelity due to its much higher cost compared to Interactive Brokers, both the commissions for currency exchange and for trades.
Dividend: Monthly at $.04 per share
Last Ex Dividend Date: 8/26/19
Dividend Reinvestment: No
Consider to Sell: Greater than $7.30
The consider to sell would be for my highest cost 200 shares or the entire position.
Dividend Yield at C$6.74 = 7.12%
Current Position: 600 Shares
Maximum Position: 1000 Shares
Goal: Yield and any net profit on the shares
Highest Cost Lots in Current Chain: Item # 1.A. Bought 100 FIE:CA at C7.28 (4/12/18 Post); Item # Added 100 FIE:CA at C$7.12 (11/7/18 Post)
2. Small Ball-Income Generation (all commission free trades):
A. Added 50 TCRD at $6.7:
Quote: THL Credit Inc. (TCRD)
TCRD SEC Filings
Investor resources | THL Credit, Inc.
Closing Price Last Friday: TCRD $6.90 +$0.23 +3.45%
That was a pop near the close last Friday which I would ignore unless there is a major positive event disclosed over the weekend.
Category: Lottery Ticket Basket Strategy
TCRD is a deservedly hated BDC IMO.
Although I did previously say that I would not buy more, I decided that the only way to meet my goal, a total return in excess of the dividend yield, was to lower my average cost per share with this additional purchase.
I removed the maximum share limit to 150 shares from 100, plus shares purchased with dividends which have been used to buy more shares. In effect, shares purchased with dividends have lowered my average cost per share due to the persistent share decline.
I waived for this purchase my small ball buying program restriction, since the prior purchase was at $6.2. Item # 1.A. Bought 20 TCRD at $6.2-Used Commission Free Trade (1/27/19 Post)
5 Year Financial History: Pathetic
2018 Annual Report at page 71 (note the decline in net asset value per share from $13.08 to $9.15 as of 12/31/18)
If there was justice in the world, the external management company would return all of the fees paid by shareholders since the IPO as the first step. The second step would be to pay a $5M fine to the company, resign and then commit seppuku as the only honorable exit strategy.
This BDC needs to die by selling its assets to another company. The market cap at last Friday's closing price is about $214.35M.
Net Asset Value Per Share:
6/30/19 $ 8.49 10-Q
3/31/19 $ 8.96 10-Q
12/31/18 $ 9.15
12/31/17 $10.51
12/31/16 $11.82
12/31/15 $12.58
12/31/14 $11.76
12/31/13 $13.36 Form 10-K
12/31/12 $13.20
IPO Price to Public (2011): $13 (net to TCRD at $12.52) Final Prospectus
Average Cost Before Add: $7.42
Average Cost After Add: $7.2
Dividend: Quarterly at $.21 per share ($.84 annually)
Dividend History: Highly Unfavorable
THL Credit, Inc. (TCRD) Dividend Date & History - Nasdaq
Dividend Yield at Average Total Cost = 11.67%
Last Ex Dividend: 9/13/19 (after purchase)
Dividend Reinvestment: Yes until likely reinvestment price exceeds my average cost per share
Recent Earnings Report (Q/E 6/30/19):
Net asset value per share was reported at $8.49, down from $8.96 as of 3/31/19.
As of 6/30/19, the investment portfolio was allocated "64 percent in first lien senior secured debt (including unitranche investments), 18 percent in the Logan JV, 5 percent in second lien debt, 1 percent in subordinated debt, and 12 percent in equity securities and warrants."
"For the three months ended June 30, 2019, THL Credit recognized a net realized loss on portfolio investments of $24.1 million, primarily related to the LAI International Inc. exit." (emphasis added) For accounting purposes, TCRD had already written down the loan and the realized loss was largely "offset by a corresponding change in unrealized appreciation and a $1.5 million exit fee."
During the quarter, TCRD took a total loss on the following Charming Charlie loans.
The good news is that TCRD can not lose anymore on those 2 loans.
Those Charming Charlie loans had been assigned a $11.404M "fair value" as of 12/31/18 even though they were on non-accrual. The true value on 12/31/18 was zero as shown by the bankruptcy filing. Charming Charlie going out of business, to close stores in bankruptcy Charming Charlie's assets are being liquidated.
As of 6/30/19, the nonaccrual loans had a total cost of $39.6M and had been marked down in value to $8.4 or 1.8% of the portfolios "fair value".
"From July 1, 2019 through August 7, 2019, THL Credit repurchased 353,986 shares of common stock for a total cost of $2.4 million."
5 Year Annual Average Total Return to 9/5/19 = -2.93% (a starting investment of $10,000 on 9/5/14 would be worth $8,617.67 as of 9/5/19 with dividends reinvested)
DRIP Returns Calculator | Dividend Channel
If I manage a successful escape, which is certainly questionable, I will avoid this BDC in the future. A successful escape is defined as selling the shares at a net profit, no matter how small.
B. Added 50 PNNT at $6.21:
Quote: PennantPark Investment Corp. (PNNT) - MarketWatch
Closing Price Last Friday: PNNT $6.29 +$0.07 +1.13%
Fiscal Year Annual Report 10-k (risk factor summary starts at page 14 and ends at page 30)
Category: Lottery Ticket Basket Strategy
I would classify PNNT as a borderline deservedly hated BDC. A reasonable and fact based disagreement could exist between two investors, with one claiming it was borderline deservedly hated and the other that it was deservedly hated.
As with TCRD I am just trying to get out with a total return in excess of the dividend yield.
Average Cost Before Add = $6.78
Average Cost After Add = $6.52
Dividend: Quarterly at $.18 per share ($.72 annually)
IMO, the dividend is in danger of being cut unless there is an improvement in NII.
Dividend Yield at Total Average Cost = 11.04%
Dividend Reinvestment: Yes as long as reinvestment price is likely to be lower than the total average cost per share which is standard for small ball trading using commission free trades.
Last Ex Dividend: 9/16/19 (after purchase)
Last Sell Discussion: Item # 1.B. Sold 50 PNNT at $7.35-Highest Cost Lot (6/7/18 Post)(profit snapshot = $10.44) In effect, I just bought that lot back at $6.21.
Last Substantive Buy Discussions: Item # 1.A. Bought 15 PNNT at $6.69 (5/14/18 Post); Item # 1.B. (3/5/18 Post)
Historical Net Asset Values Per Share: Sourced 10-Qs
06/30/19 $8.74
12/31/18 $ 9.05
12/31/17 $ 9.1
12/31/16 $ 9.11
12/31/15 $ 9.02
9/30/15 $ 9.82
12/31/14 $10.43
9/20/14 $11.03
12/31/13 $10.8
12/31/12 $10.38
12/31/10 $11.14
9/30/10 $10.69
12/31/09 $11.86
12/31/08 $10.24
12//31/07 $12.07
9/30/07 $12.83
IPO at $15 Prospectus April 2007
Chart: PNNT has an unappealing long term chart The stock crashed and burned during the Near Depression
5 Year Annual Average Total Return as of 9/6/19 = +1.31%
Pathetic IMO
DRIP Returns Calculator | Dividend Channel
Last Earnings Report (Q/E 6/30/19): PennantPark Investment Corporation Announces Financial Results for the Quarter Ended June 30, 2019
Net Asset Value Per Share = $8.74
Net Investment Income = $.17 per share (below quarterly dividend rate of $.18)
"As of June 30, 2019, our portfolio totaled $1,274.8 million and consisted of $750.0 million of first lien secured debt, $288.1 million of second lien secured debt, $58.3 million of subordinated debt and $178.4 million of preferred and common equity. Our debt portfolio consisted of 88% variable-rate investments and 12% fixed-rate investments. As of June 30, 2019, we had one portfolio company on non-accrual, respectively representing 1.5% and 0.7% of our overall portfolio on a cost and fair value basis. Overall, the portfolio had net unrealized depreciation of $58.9 million as of June 30, 2019."
The fair value estimate for the non-DIP Hollander Sleep loan may be too high at $9.068+M (filed for BK and on non-accrual):
Prior Trades Net profit (after loss): +$94.43
Sold Roth IRA: 100 PNNT at $9.535 (2/17/15 Post)
Item # 5 Sold 50 PNNT at $11.92 (12/17/13 Post)
3. Elimination:
A. Sold 50 SCM at $13.72 ((IB $1 Commission):
Quote: Stellus Capital Investment Corp. (SCM)
Profit Snapshot: +3.75
Item # 1 Bought 50 SCM at $13.6 (6/19/19 Post)
As discussed in my 8/14/19 post, I was not pleased with SCM's second quarter report that was released after this last purchase. (Scroll to BDC Earnings Reports; Stellus Capital Investment Corporation Reports Results for its second fiscal quarter ended June 30, 2019) The decision was made then to exit the position and then try again when and if the price sinks somewhere in the $12 to $13 range.
SCM Info Day of Sell:
Chart Since IPO:
Dividend: Monthly at $.1133 ($1.36 annually rounded)
Next Ex Dividend Date: 9/27/19
Dividend Yield at $13.71 = 9.92%
2018 Annual Report risk factor summary starts at page 31 and ends at page 59)
SCM Trading Profits to Date: $543.99 ($540.24 in prior trades)
Item # 1.B. Sold 32+ SCM at $14.22-Used Commission Free Trade (2/2/19 Post)(profit snapshot = $78.09); Item # 1.A. Sold Highest Cost Lot-50 Shares at $12.63 (5/3/18 Post)(profit snapshot = $34.24); Item 2.B. Sold 100 SCM at $14.23 (2/27/17 Post)(profit snapshot=$285.96); Item # 2 Sold 100 SCM at $13.02 (1/12/17 Post)(profit snapshot= $141.96)
Goal: Total Return in excess of the dividend yield which has been accomplished for this BDC stock
5 Year Annual Average Total Return (9/19/19) 11.05%
This total return number would have received an assist from reinvesting the dividend during the significant time periods that the share price was lower than the current price.
Sourced: DRIP Returns Calculator | Dividend Channel
Sell Discussions: Item # 5. Sold 300 FIE:CA at C$7.64 (11/26/17 Post)(profit snapshot = C$160); Item # 5. Sold 300 FIE:CA at C$7.64 (11/26/17 Post) (profit snapshot=C$35)(contains snapshots of prior round-trip trades= USD$391.32 for 1500 shares and USD$58.07 for 300 shares; C$166 for 200 shares) All trades were in CADs but the profit snapshots for trades made at Fidelity are calculated using USD values) I quit trading stocks on foreign exchanges at Fidelity due to its much higher cost compared to Interactive Brokers, both the commissions for currency exchange and for trades.
Dividend: Monthly at $.04 per share
Last Ex Dividend Date: 8/26/19
Dividend Reinvestment: No
Consider to Sell: Greater than $7.30
The consider to sell would be for my highest cost 200 shares or the entire position.
Dividend Yield at C$6.74 = 7.12%
Current Position: 600 Shares
Maximum Position: 1000 Shares
Goal: Yield and any net profit on the shares
Highest Cost Lots in Current Chain: Item # 1.A. Bought 100 FIE:CA at C7.28 (4/12/18 Post); Item # Added 100 FIE:CA at C$7.12 (11/7/18 Post)
2. Small Ball-Income Generation (all commission free trades):
A. Added 50 TCRD at $6.7:
Quote: THL Credit Inc. (TCRD)
TCRD SEC Filings
Investor resources | THL Credit, Inc.
Closing Price Last Friday: TCRD $6.90 +$0.23 +3.45%
That was a pop near the close last Friday which I would ignore unless there is a major positive event disclosed over the weekend.
Category: Lottery Ticket Basket Strategy
TCRD is a deservedly hated BDC IMO.
Although I did previously say that I would not buy more, I decided that the only way to meet my goal, a total return in excess of the dividend yield, was to lower my average cost per share with this additional purchase.
I removed the maximum share limit to 150 shares from 100, plus shares purchased with dividends which have been used to buy more shares. In effect, shares purchased with dividends have lowered my average cost per share due to the persistent share decline.
I waived for this purchase my small ball buying program restriction, since the prior purchase was at $6.2. Item # 1.A. Bought 20 TCRD at $6.2-Used Commission Free Trade (1/27/19 Post)
5 Year Financial History: Pathetic
If there was justice in the world, the external management company would return all of the fees paid by shareholders since the IPO as the first step. The second step would be to pay a $5M fine to the company, resign and then commit seppuku as the only honorable exit strategy.
This BDC needs to die by selling its assets to another company. The market cap at last Friday's closing price is about $214.35M.
Net Asset Value Per Share:
6/30/19 $ 8.49 10-Q
3/31/19 $ 8.96 10-Q
12/31/18 $ 9.15
12/31/17 $10.51
12/31/16 $11.82
12/31/15 $12.58
12/31/14 $11.76
12/31/13 $13.36 Form 10-K
12/31/12 $13.20
IPO Price to Public (2011): $13 (net to TCRD at $12.52) Final Prospectus
Average Cost Before Add: $7.42
Average Cost After Add: $7.2
 |
| Snapshot Day of Trade 9/5/19 |
Dividend History: Highly Unfavorable
THL Credit, Inc. (TCRD) Dividend Date & History - Nasdaq
Dividend Yield at Average Total Cost = 11.67%
Last Ex Dividend: 9/13/19 (after purchase)
Dividend Reinvestment: Yes until likely reinvestment price exceeds my average cost per share
Recent Earnings Report (Q/E 6/30/19):
Net asset value per share was reported at $8.49, down from $8.96 as of 3/31/19.
As of 6/30/19, the investment portfolio was allocated "64 percent in first lien senior secured debt (including unitranche investments), 18 percent in the Logan JV, 5 percent in second lien debt, 1 percent in subordinated debt, and 12 percent in equity securities and warrants."
"For the three months ended June 30, 2019, THL Credit recognized a net realized loss on portfolio investments of $24.1 million, primarily related to the LAI International Inc. exit." (emphasis added) For accounting purposes, TCRD had already written down the loan and the realized loss was largely "offset by a corresponding change in unrealized appreciation and a $1.5 million exit fee."
During the quarter, TCRD took a total loss on the following Charming Charlie loans.
 |
| Original Cost 1st Number/Fair Value Last Number |
Those Charming Charlie loans had been assigned a $11.404M "fair value" as of 12/31/18 even though they were on non-accrual. The true value on 12/31/18 was zero as shown by the bankruptcy filing. Charming Charlie going out of business, to close stores in bankruptcy Charming Charlie's assets are being liquidated.
As of 6/30/19, the nonaccrual loans had a total cost of $39.6M and had been marked down in value to $8.4 or 1.8% of the portfolios "fair value".
"From July 1, 2019 through August 7, 2019, THL Credit repurchased 353,986 shares of common stock for a total cost of $2.4 million."
5 Year Annual Average Total Return to 9/5/19 = -2.93% (a starting investment of $10,000 on 9/5/14 would be worth $8,617.67 as of 9/5/19 with dividends reinvested)
DRIP Returns Calculator | Dividend Channel
If I manage a successful escape, which is certainly questionable, I will avoid this BDC in the future. A successful escape is defined as selling the shares at a net profit, no matter how small.
B. Added 50 PNNT at $6.21:
Quote: PennantPark Investment Corp. (PNNT) - MarketWatch
Closing Price Last Friday: PNNT $6.29 +$0.07 +1.13%
Fiscal Year Annual Report 10-k (risk factor summary starts at page 14 and ends at page 30)
Category: Lottery Ticket Basket Strategy
I would classify PNNT as a borderline deservedly hated BDC. A reasonable and fact based disagreement could exist between two investors, with one claiming it was borderline deservedly hated and the other that it was deservedly hated.
As with TCRD I am just trying to get out with a total return in excess of the dividend yield.
Average Cost Before Add = $6.78
Average Cost After Add = $6.52
Dividend: Quarterly at $.18 per share ($.72 annually)
IMO, the dividend is in danger of being cut unless there is an improvement in NII.
Dividend Yield at Total Average Cost = 11.04%
Dividend Reinvestment: Yes as long as reinvestment price is likely to be lower than the total average cost per share which is standard for small ball trading using commission free trades.
Last Ex Dividend: 9/16/19 (after purchase)
Last Sell Discussion: Item # 1.B. Sold 50 PNNT at $7.35-Highest Cost Lot (6/7/18 Post)(profit snapshot = $10.44) In effect, I just bought that lot back at $6.21.
Last Substantive Buy Discussions: Item # 1.A. Bought 15 PNNT at $6.69 (5/14/18 Post); Item # 1.B. (3/5/18 Post)
Historical Net Asset Values Per Share: Sourced 10-Qs
06/30/19 $8.74
12/31/18 $ 9.05
12/31/17 $ 9.1
12/31/16 $ 9.11
12/31/15 $ 9.02
9/30/15 $ 9.82
12/31/14 $10.43
9/20/14 $11.03
12/31/13 $10.8
12/31/12 $10.38
12/31/10 $11.14
9/30/10 $10.69
12/31/09 $11.86
12/31/08 $10.24
12//31/07 $12.07
9/30/07 $12.83
IPO at $15 Prospectus April 2007
Chart: PNNT has an unappealing long term chart The stock crashed and burned during the Near Depression
5 Year Annual Average Total Return as of 9/6/19 = +1.31%
Pathetic IMO
DRIP Returns Calculator | Dividend Channel
Last Earnings Report (Q/E 6/30/19): PennantPark Investment Corporation Announces Financial Results for the Quarter Ended June 30, 2019
Net Asset Value Per Share = $8.74
Net Investment Income = $.17 per share (below quarterly dividend rate of $.18)
"As of June 30, 2019, our portfolio totaled $1,274.8 million and consisted of $750.0 million of first lien secured debt, $288.1 million of second lien secured debt, $58.3 million of subordinated debt and $178.4 million of preferred and common equity. Our debt portfolio consisted of 88% variable-rate investments and 12% fixed-rate investments. As of June 30, 2019, we had one portfolio company on non-accrual, respectively representing 1.5% and 0.7% of our overall portfolio on a cost and fair value basis. Overall, the portfolio had net unrealized depreciation of $58.9 million as of June 30, 2019."
The fair value estimate for the non-DIP Hollander Sleep loan may be too high at $9.068+M (filed for BK and on non-accrual):
Prior Trades Net profit (after loss): +$94.43
Sold Roth IRA: 100 PNNT at $9.535 (2/17/15 Post)
Item # 5 Sold 50 PNNT at $11.92 (12/17/13 Post)
3. Elimination:
A. Sold 50 SCM at $13.72 ((IB $1 Commission):
Profit Snapshot: +3.75
Item # 1 Bought 50 SCM at $13.6 (6/19/19 Post)
As discussed in my 8/14/19 post, I was not pleased with SCM's second quarter report that was released after this last purchase. (Scroll to BDC Earnings Reports; Stellus Capital Investment Corporation Reports Results for its second fiscal quarter ended June 30, 2019) The decision was made then to exit the position and then try again when and if the price sinks somewhere in the $12 to $13 range.
SCM Info Day of Sell:
Chart Since IPO:
Dividend: Monthly at $.1133 ($1.36 annually rounded)
Next Ex Dividend Date: 9/27/19
Dividend Yield at $13.71 = 9.92%
2018 Annual Report risk factor summary starts at page 31 and ends at page 59)
Item # 1.B. Sold 32+ SCM at $14.22-Used Commission Free Trade (2/2/19 Post)(profit snapshot = $78.09); Item # 1.A. Sold Highest Cost Lot-50 Shares at $12.63 (5/3/18 Post)(profit snapshot = $34.24); Item 2.B. Sold 100 SCM at $14.23 (2/27/17 Post)(profit snapshot=$285.96); Item # 2 Sold 100 SCM at $13.02 (1/12/17 Post)(profit snapshot= $141.96)
Goal: Total Return in excess of the dividend yield which has been accomplished for this BDC stock
5 Year Annual Average Total Return (9/19/19) 11.05%
This total return number would have received an assist from reinvesting the dividend during the significant time periods that the share price was lower than the current price.
Sourced: DRIP Returns Calculator | Dividend Channel
4. Short Term Bond/CD Ladder Basket Strategy:
A. Sold 2 Mondelez 3% SU Maturing on 5/7/20-In a Roth IRA Account:
Profit Snapshot: +$17.12
This bond was bought in December 2018. Item # 3.C. Bought 2 MDLZ 2020 SU at a Total Cost of 99.586 (12/23/18 POST) The YTM was then at 3.302%.
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Mondelez International Inc. Cl A (MDLZ)
MDLZ Analyst Estimates
MDLZ SEC Filings
2019 2nd Quarter Earnings Report
A. Sold 2 Mondelez 3% SU Maturing on 5/7/20-In a Roth IRA Account:
Profit Snapshot: +$17.12
This bond was bought in December 2018. Item # 3.C. Bought 2 MDLZ 2020 SU at a Total Cost of 99.586 (12/23/18 POST) The YTM was then at 3.302%.
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Mondelez International Inc. Cl A (MDLZ)
MDLZ Analyst Estimates
MDLZ SEC Filings
2019 2nd Quarter Earnings Report
I still own 2 bonds and will keep them until redeemed by the issuer.
B. Sold 1 Deere Capital 2.375% SU Maturing on 7/14/20-In A Roth IRA Account:
Profit Snapshot: +$11.91
Stocks, Bonds & Politics: Item # 3.A. Bought 1 Deere Capital 2020 SU at a Total Cost of 98.98 (5/31/18 Post) The YTM was then at 2.859%.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Wholly owned subsidiary of Deere & Co. (DE) who does not guarantee the bond
DE Analyst Estimates
Sold at 100.271
YTM at 100.271 = 2.06%
C. Bought at Auction 5 Treasury 3Mo Bills Maturing 12/12:
1.962%IR
Auction Results:
B. Sold 1 Deere Capital 2.375% SU Maturing on 7/14/20-In A Roth IRA Account:
Profit Snapshot: +$11.91
Stocks, Bonds & Politics: Item # 3.A. Bought 1 Deere Capital 2020 SU at a Total Cost of 98.98 (5/31/18 Post) The YTM was then at 2.859%.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Wholly owned subsidiary of Deere & Co. (DE) who does not guarantee the bond
DE Analyst Estimates
Sold at 100.271
YTM at 100.271 = 2.06%
C. Bought at Auction 5 Treasury 3Mo Bills Maturing 12/12:
1.962%IR
Auction Results:
5. Intermediate Term Bond Basket Ladder Strategy:
A. Sold 1 Discover Financial 4% SU Maturing on 11/15/25:
Profit Snapshot: +$21.77
Item # 1.D. Bought 1 DFS 2025 SU at a TC of 99.926 (7/29/17 Post)(noting in that post that this bond will be hard to sell)
FINRA Page: Bond Detail (prospectus linked)
Sold at 102.213
YTM at = 3.586%
Proceeds at 102.113 (after $1 commission)
Discover Financial bonds are hard to sell since most of them have small floats. I decided to lighten up on my exposure by selling this bond since the rare opportunity to sell arose.
6. Small Ball-Commission Free ETFs:
I have been buying commission free ETFs in very small lots using the small ball purchase restriction, a risk mitigation trading technique. Each subsequent ETF purchase has to be at the lowest price in the chain.
This is a summary list of my current positions with the lowest price paid to date for each ETF.
Currently, my total dollar exposure is probably near $20K, give or take $5K, which is another way of saying that the total is not yet relevant since I haven't bothered to spend a few minutes calculating the actual number.
A. Bought 5 VDE at $81.69 In a Roth IRA Account-Commission Free for Vanguard Brokerage Customers:
Quote: VDE | Vanguard Energy ETF Overview | MarketWatch
Sponsor's Website: VDE - Vanguard Energy ETF | Vanguard
Expense Ratio: .10%
Number of Stocks as of 7/31/19: 139
Some Top Holdings as of 7/31/19:
Dividends:
I have a small ball "buying program" in the Fidelity MSCI Energy Index ETF (FENY), which is similar to VDE, and can be bought by Fidelity brokerage customers commission free.
The energy sector has had a rough 5 years and has substantially underperformed the S & P 500.
Vanguard Energy ETF (VDE) Performance as of 9/20/19 | Morningstar: 5 year annual average total return = -6.96%
6. Small Ball-Commission Free ETFs:
I have been buying commission free ETFs in very small lots using the small ball purchase restriction, a risk mitigation trading technique. Each subsequent ETF purchase has to be at the lowest price in the chain.
This is a summary list of my current positions with the lowest price paid to date for each ETF.
Currently, my total dollar exposure is probably near $20K, give or take $5K, which is another way of saying that the total is not yet relevant since I haven't bothered to spend a few minutes calculating the actual number.
A. Bought 5 VDE at $81.69 In a Roth IRA Account-Commission Free for Vanguard Brokerage Customers:
Sponsor's Website: VDE - Vanguard Energy ETF | Vanguard
Expense Ratio: .10%
Number of Stocks as of 7/31/19: 139
Some Top Holdings as of 7/31/19:
Dividends:
I have a small ball "buying program" in the Fidelity MSCI Energy Index ETF (FENY), which is similar to VDE, and can be bought by Fidelity brokerage customers commission free.
The energy sector has had a rough 5 years and has substantially underperformed the S & P 500.
Vanguard Energy ETF (VDE) Performance as of 9/20/19 | Morningstar: 5 year annual average total return = -6.96%
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.
