Gundlach estimates that there is a 40% to 45% chance of a recession within the next six months and 65% within one year. Bond king Jeffrey Gundlach: 'I am certainly long gold' The Stock Jocks assign a zero percent possibility to a recession within 18 months IMO based on current stock market levels.
Empire State Manufacturing Index just saw its biggest drop in 18 years The reference is to the New York Fed's Empire Manufacturing Index which fell to -8.6% from +17.8 last month. A reading below zero indicates contraction. New orders collapsed by 22 points to -12.
Stock investors are convinced that a .5% to 1% cut in the FF rate over the next 12 months or so will be the magic elixir, when mixed with the tax cuts, that drives the U.S. economy to 3+% real GDP growth with less than 2% inflation until the end of days. We shall see in the fullness of time.
In my opinion, the current problem with the U.S. economy has nothing to do with interest rates.
Nonetheless, the Stock Jocks believe that the FED can alter the current economic course by cutting the federal funds rate.
In addition to the decline in interest rates yesterday, the Stock Jocks were encouraged by Donald's tweet that he would be having an extended discussion with China's President at the G-20 meeting. U.S., China rekindle trade talks ahead of Trump-Xi G20 meeting - Reuters There was an immediate leap of faith that something positive and concrete will happen at this meeting.
Empire State Manufacturing Index just saw its biggest drop in 18 years The reference is to the New York Fed's Empire Manufacturing Index which fell to -8.6% from +17.8 last month. A reading below zero indicates contraction. New orders collapsed by 22 points to -12.
Stock investors are convinced that a .5% to 1% cut in the FF rate over the next 12 months or so will be the magic elixir, when mixed with the tax cuts, that drives the U.S. economy to 3+% real GDP growth with less than 2% inflation until the end of days. We shall see in the fullness of time.
In my opinion, the current problem with the U.S. economy has nothing to do with interest rates.
Nonetheless, the Stock Jocks believe that the FED can alter the current economic course by cutting the federal funds rate.
In addition to the decline in interest rates yesterday, the Stock Jocks were encouraged by Donald's tweet that he would be having an extended discussion with China's President at the G-20 meeting. U.S., China rekindle trade talks ahead of Trump-Xi G20 meeting - Reuters There was an immediate leap of faith that something positive and concrete will happen at this meeting.
Trump Tariffs Are Short-Term Pain Without Long-Term Gain, Economists Say
China prepared for long trade fight with the U.S.: party journal - Reuters
Trump 'perfectly happy' to slap further tariffs on China: Wilbur Ross
India to impose retaliatory tariff on 28 U.S. goods from Sunday: government statement - Reuters
China is not sounding like it will take a knee anytime soon: US-China trade: Beijing wants world to think Washington will back down Their current approach may be simply to wait for the Duck to fold first.
U.S. firms say China tariffs will raise costs, see few sourcing alternatives - Reuters
The Rate Cut the Economy Doesn’t Need — but the Markets Do - Barron's (subscription publication). The Stock Jocks really do not "need" a rate cut since the economy does not need one now.
What is the reason when the economy has a 3.6% unemployment rate, 2%+ real GDP growth and CPI hovering around 2%.
The current FF range is 2.25% to 2.5% with the FED clearly indicating that no increase is in sight. That is not a problem for the real economy. Lowering the rate to 1.5% is not going to help either. Interest rates are already ridiculously low by any historical standard.
E.G.
Chart 10-Year US Treasury Note Yield Since 1790 Through 2014- Business Insider
10 Year Treasury Rate - 54 Year Historical Chart | MacroTrends
30 Year Treasury Rate - 39 Year Historical Chart | MacroTrends
I would note that the 10 year treasury yield was higher during the Great Depression than now.
The 10 year did sink below where it is now during another period of Fed manipulation that started after WWII and ended in 1950 with inflation numbers running hot. Before the Accord: U.S. Monetary-Financial Policy, 1945-51
Yields are cratering
Rates & Bonds - Bloomberg
If the FED does not give the Stock Jocks at least a .5% cut this year, they will surely throw a temper tantrum (hissy fit may be a better phrase). Making stocks the only game in town for investors is the main objective.
Don the Authoritarian is considering demoting (or possibly firing) Chairman Powell unless the FED gives into his demands for lower rates.
Trump on demoting Fed Chair Jerome Powell: 'Let's see what he does';
White House Explored Legality of Demoting Fed Chairman Powell - Bloomberg;
On eve of critical Fed meeting, Trump suggests he might remove Chair Jerome H. Powell - The Washington Post
China prepared for long trade fight with the U.S.: party journal - Reuters
Trump 'perfectly happy' to slap further tariffs on China: Wilbur Ross
India to impose retaliatory tariff on 28 U.S. goods from Sunday: government statement - Reuters
China is not sounding like it will take a knee anytime soon: US-China trade: Beijing wants world to think Washington will back down Their current approach may be simply to wait for the Duck to fold first.
U.S. firms say China tariffs will raise costs, see few sourcing alternatives - Reuters
The Rate Cut the Economy Doesn’t Need — but the Markets Do - Barron's (subscription publication). The Stock Jocks really do not "need" a rate cut since the economy does not need one now.
What is the reason when the economy has a 3.6% unemployment rate, 2%+ real GDP growth and CPI hovering around 2%.
The current FF range is 2.25% to 2.5% with the FED clearly indicating that no increase is in sight. That is not a problem for the real economy. Lowering the rate to 1.5% is not going to help either. Interest rates are already ridiculously low by any historical standard.
E.G.
Chart 10-Year US Treasury Note Yield Since 1790 Through 2014- Business Insider
10 Year Treasury Rate - 54 Year Historical Chart | MacroTrends
30 Year Treasury Rate - 39 Year Historical Chart | MacroTrends
I would note that the 10 year treasury yield was higher during the Great Depression than now.
The 10 year did sink below where it is now during another period of Fed manipulation that started after WWII and ended in 1950 with inflation numbers running hot. Before the Accord: U.S. Monetary-Financial Policy, 1945-51
Yields are cratering
Rates & Bonds - Bloomberg
If the FED does not give the Stock Jocks at least a .5% cut this year, they will surely throw a temper tantrum (hissy fit may be a better phrase). Making stocks the only game in town for investors is the main objective.
Don the Authoritarian is considering demoting (or possibly firing) Chairman Powell unless the FED gives into his demands for lower rates.
Trump on demoting Fed Chair Jerome Powell: 'Let's see what he does';
White House Explored Legality of Demoting Fed Chairman Powell - Bloomberg;
On eve of critical Fed meeting, Trump suggests he might remove Chair Jerome H. Powell - The Washington Post
+++++
Markets and Market Commentary:
The German 10 year bond closed at a -.32% yield yesterday. Germany 10 Year Government Bond Overview The U.S. 10 year looks juicy in comparison at a 2.06% yield.
The yield curve remains inverted starting at the 3 month treasury bill through the 10 year treasury note, notwithstanding the decline in short term rates.
The 3 month treasury bill has the highest yield through the 10 year treasury note.
The German 10 year bond closed at a -.32% yield yesterday. Germany 10 Year Government Bond Overview The U.S. 10 year looks juicy in comparison at a 2.06% yield.
The yield curve remains inverted starting at the 3 month treasury bill through the 10 year treasury note, notwithstanding the decline in short term rates.
The ‘Buffett Yardstick’ may be signaling the worst risk-reward setup ever - MarketWatch The valuation yardstick discussed is the value of the U.S. stock market to GDP. Using that valuation measure, the analyst predicts that stocks will have a zero rate of return over the next 10 years with dividends reinvested: ' “In all, long-term investors are risking roughly a 60% decline to try to capture a 0% rate of return over the coming decade in the stock market, one of the worst risk-to-reward setups in history,” This Is One Of The Worst Risk/Reward Setups In History – The Felder Report
Buffett Indicator: The percent of total market cap relative to Gross National Product? (As of 6/12/19, "the Total Market Index is at $ 29698.7 billion, which is about 141.1% of the last reported GDP." Using this valuation measure, the "US stock market is positioned for an average annualized return of -1.9%, estimated from the historical valuations of the stock market", which includes dividends." Fair value is a ratio between 75%-90%).
I would emphasize that most traditional valuation measures, including the "Buffett Indicator" and the Shiller CAPE P/E ratio, have been flashing danger signals for years.
The proponents of those valuation measures may crow during the next market meltdown but they have been eating crow for years.
Those valuation measures may be more valuable in timing an entry point during a catastrophic market decline.
Trump’s trade war has cost the market trillions; we’ll get half back, says JPMorgan-MarketWatch The JPM analyst argues that it would be "rational" for Donald to settle the China trade conflict before the 2020 election. If the disputes are not settled and a recession occurs before the election, too many voters will call it the Trump recession precipitated by his tariff wars. Therefore, it would be "rational" to settle the conflict before that actually happens. The JPM analyst believes that a settlement would translate into a quick 5% or so rally in the stock market and a 10% to 20% rally in "value and high beta" names.
Broadcom slaps down hopes for a second-half rebound in chips - MarketWatch
I would emphasize that most traditional valuation measures, including the "Buffett Indicator" and the Shiller CAPE P/E ratio, have been flashing danger signals for years.
The proponents of those valuation measures may crow during the next market meltdown but they have been eating crow for years.
Those valuation measures may be more valuable in timing an entry point during a catastrophic market decline.
However, the primary reason for a bull market remaining "overvalued" for extended periods, using those valuation indicators, may also be the reason that causes or contributes significantly to a Catastrophic Event and/or onset of a long term bear market.
The seeds for a long term bear market are generally planted during the bull cycles. That was the case in the 1982-2000 long term secular stock bull market when GDP and earnings growth were fueled in significant part by spending borrowed money.
The First Age of Leverage in the U.S. started in the early 1980s. Spending increasing amounts of borrowed money energized the long expansion cycles and kept them going. It took about 22 years for the U.S. consumer debt expansion to implode.
The seeds for a long term bear market are generally planted during the bull cycles. That was the case in the 1982-2000 long term secular stock bull market when GDP and earnings growth were fueled in significant part by spending borrowed money.
The First Age of Leverage in the U.S. started in the early 1980s. Spending increasing amounts of borrowed money energized the long expansion cycles and kept them going. It took about 22 years for the U.S. consumer debt expansion to implode.
The culprit for a new long term bear market would most likely be excess spending fueled by exponential growth in debt which was the cause of the last one as well.
The U.S. government is fueling GDP growth now by spending close to $1 trillion per year more than its revenues, roughly the amount of the federal government's total debt in 1979.
Growth funded by increasing amount of government and/or consumer debt will juice GDP growth and corporate earnings and that may continue for an extended period.
The traditional valuation measures have not been working IMO due in large part to the unparalleled growth in spending fueled by parabolic increases in debt coupled with extended periods of extremely abnormal central bank monetary policies that keep interest rates far below normal historical levels.
The traditional valuation measures have not been working IMO due in large part to the unparalleled growth in spending fueled by parabolic increases in debt coupled with extended periods of extremely abnormal central bank monetary policies that keep interest rates far below normal historical levels.
It is certainly possible, even likely, that market historians will look back in 20 or so years and conclude that the traditional valuation measures did not give the right signal, until it was too late, due to the economic distortions created by excessive deficit spending as well as extremely abnormal central bank policies maintained for well over a decade.
When an economy becomes as large as the U.S., even a trillion dollars of deficit spending per year will only move the growth needle up some. Even more debt will have to be added to have the same GDP impact.
And, in a final note, the debt rubber band could be pulled a long way starting in the early 1980s since government and consumer debt were both at reasonable levels.
The U.S. consumer total debt to disposable income ratio was within the long term range of about 60% to 65% in 1985. The bubble burst when the ratio crossed 130% which took a very long time. The ratio now is near 100% or about where it was in 2001.
100*Households and nonprofit organizations; debt securities and loans; liability, Level/Disposable Personal Income | FRED | St. Louis Fed And, the decline in interest rates, particularly on mortgage debt, have lowered debt service costs. Household Debt Service and Financial Obligations Ratios
In short, the traditional valuation measures can not be relied upon to time the market and may remain at elevated levels for as long as interest rates remain well below historical norms and spending increasing amounts of borrowed central bank created "funny money" has only positive economic consequences.
Shiller P/E Ratio: Where Are We with Market Valuations? (historical mean at 16.1); Shiller PE Ratio and CAPE Calculator on the S&P 500, Plus History - DQYDJAnd, in a final note, the debt rubber band could be pulled a long way starting in the early 1980s since government and consumer debt were both at reasonable levels.
The U.S. consumer total debt to disposable income ratio was within the long term range of about 60% to 65% in 1985. The bubble burst when the ratio crossed 130% which took a very long time. The ratio now is near 100% or about where it was in 2001.
100*Households and nonprofit organizations; debt securities and loans; liability, Level/Disposable Personal Income | FRED | St. Louis Fed And, the decline in interest rates, particularly on mortgage debt, have lowered debt service costs. Household Debt Service and Financial Obligations Ratios
In short, the traditional valuation measures can not be relied upon to time the market and may remain at elevated levels for as long as interest rates remain well below historical norms and spending increasing amounts of borrowed central bank created "funny money" has only positive economic consequences.
Trump’s trade war has cost the market trillions; we’ll get half back, says JPMorgan-MarketWatch The JPM analyst argues that it would be "rational" for Donald to settle the China trade conflict before the 2020 election. If the disputes are not settled and a recession occurs before the election, too many voters will call it the Trump recession precipitated by his tariff wars. Therefore, it would be "rational" to settle the conflict before that actually happens. The JPM analyst believes that a settlement would translate into a quick 5% or so rally in the stock market and a 10% to 20% rally in "value and high beta" names.
Broadcom slaps down hopes for a second-half rebound in chips - MarketWatch
++++
Trump:
President Trump has made 10,796 false or misleading claims over 869 days - The Washington Post
Demagogue Don is well on his way to making more false statements during his first term than all prior Presidents combined multiplied by at least 10.
Since honesty is a conservative value, is the modern day GOP a conservative party? In answering that question, ask yourself first why Donald, who is clearly and obviously a lying authoritarian demagogue who manipulates voters through engendering fear and hate, enjoys a 90% approval rating among republicans.
According to most republicans, the Bond Spur Bloviator is both honest and a role model for their children. (question # 2, 66% of republicans view Donald as honest; question #11, 54% believe the Duck is a good role model for their children: National (US) Poll - March 5, 2019 - 64 Percent Of U.S. Voters Say | Quinnipiac University Connecticut) 97% of Democrats and 75% of independents say no to the role model question. Donald is of course the antithesis of a good role model.
Trump Warns of Epic Stock Market Crash If He's Not Re-Elected I think that he is predicting a repeat of what happened in Bush's 8th year as President.
Trump says supporters might ‘demand’ that he serve more than two terms as president
Demagogue Don is well on his way to making more false statements during his first term than all prior Presidents combined multiplied by at least 10.
Since honesty is a conservative value, is the modern day GOP a conservative party? In answering that question, ask yourself first why Donald, who is clearly and obviously a lying authoritarian demagogue who manipulates voters through engendering fear and hate, enjoys a 90% approval rating among republicans.
According to most republicans, the Bond Spur Bloviator is both honest and a role model for their children. (question # 2, 66% of republicans view Donald as honest; question #11, 54% believe the Duck is a good role model for their children: National (US) Poll - March 5, 2019 - 64 Percent Of U.S. Voters Say | Quinnipiac University Connecticut) 97% of Democrats and 75% of independents say no to the role model question. Donald is of course the antithesis of a good role model.
Trump Warns of Epic Stock Market Crash If He's Not Re-Elected I think that he is predicting a repeat of what happened in Bush's 8th year as President.
Trump says supporters might ‘demand’ that he serve more than two terms as president
++++
1. Bought 50 of the BDC SCM at $13.6 ($1 IB commission):
Quote: Stellus Capital Investment Corp. (SCM)
Closing Price Yesterday: SCM $14.05 -$0.03 -0.21%
2018 Annual Report risk factor summary starts at page 31 and ends at page 59)
Last Elimination: Item # 1.B. Sold 32+ SCM at $14.22-Used Commission Free Trade (2/2/19 Post)(profit snapshot = $78.09)
SCM Trading Profits to Date = $540.24 (all small lots)
Last Substantive Buy Discussion: Item # 1.C. (11/25/18 Post)
Last Sell Discussions: 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)
The goal is simply to earn a total return in excess of the dividend yield.
Dividend: Monthly at $.1133 ($1.36 annually rounded)
SCM is not currently covering this dividend with interest income and does not expect to do so this year. However, realized capital gains on investments will be sufficient, according to the company, to cover the dividend payment this year:
"we will likely not fully cover the dividend from net investment income over the next few quarters as we work to invest additional capital raise during the quarter. This would be consistent with our previous equity offering in April 2017. We do expect, however, to more than cover the dividend for the year from the realized . . . long-term capital gains"(Emphasis added; Page 2 Stellus Capital Investment Corporation (SCM) CEO Robert Ladd on Q1 2019 Results - Earnings Call Transcript | Seeking Alpha)
Dividend Yield at $13.6 = 10%
Last Common Stock Offering: Last March, SCM sold 2,750,000 shares to underwriters at $14.43 per share with the standard greenshoe option. The external management company paid the underwriters' discount of $935,000 or $.34 per share. Prospectus The greenshoe allotment was partially exercised resulting in another 202,149 shares of common stock being sold.
Historical Net Asset Values Per Share (relatively stable for a BDC):
3/31/19: $14.32
12/31/18: $14.09
12/31/17: $13.81
12/31/16 $13.69
12/31/15: $13.19
12/31/14: $13.94
12/31/13: $14.54
November 2012: IPO at $15 ($14.46 after underwriters discount)
Five Year Historical Results Through 2018:
Page 61 2018 Annual Report
Last Earnings Report: Stellus Capital Investment Corporation Reports Results for Its First Fiscal Quarter Ended March 31, 2019
Net investment income was reported at $.34 per share. However, this number does not include a $1.2M accrued incentive fee which reduces the per share income GAAP NII number to $.27 per share. SCM generated $10.2 million in long term capital gains ($.63 per share) from equity investments during the quarter, and had realized $2+M in realized gains during the second quarter up to the date of the conference call. Pages 1-2- Earnings Call Transcript | Seeking Alpha
"As of March 31, 2019, our portfolio included approximately 61% of first lien debt, 28% of second lien debt, 5% of unsecured debt and 6% of equity investments at fair value. Our debt portfolio consisted of 91% floating rate investments (subject to interest rate floors) and 9% fixed rate investments." (emphasis added)
The problem with coupons that pay a spread over 1 or 3 month Libor rates now is that those short term rates are coming down and may fall further, which is a negative for BDCs that have a preponderance of floating rate loans.
3-Month London Interbank Offered Rate (LIBOR), based on U.S. Dollar | FRED | St. Louis Fed (already starting to roll over after topping out last December)
Libor floors, which are generally around 1%, provide some downside protection from falling short term Libor rates.
Three loans were on non-accrual as of 3/31/19. Those loans were to Refac, Grupo, and Wise. The loan to Wise had almost been completely written down as of 3/31/19:
Wise:
Refac:
Grupo:
Pages 7, 10 and 10: 10-Q for the Q/E 3/31/19
Asset Quality According to Management:
10-Q for the Q/E 3/31/19
1. Bought 50 of the BDC SCM at $13.6 ($1 IB commission):
Quote: Stellus Capital Investment Corp. (SCM)
Closing Price Yesterday: SCM $14.05 -$0.03 -0.21%
2018 Annual Report risk factor summary starts at page 31 and ends at page 59)
Last Elimination: Item # 1.B. Sold 32+ SCM at $14.22-Used Commission Free Trade (2/2/19 Post)(profit snapshot = $78.09)
SCM Trading Profits to Date = $540.24 (all small lots)
Last Substantive Buy Discussion: Item # 1.C. (11/25/18 Post)
Last Sell Discussions: 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)
The goal is simply to earn a total return in excess of the dividend yield.
Dividend: Monthly at $.1133 ($1.36 annually rounded)
SCM is not currently covering this dividend with interest income and does not expect to do so this year. However, realized capital gains on investments will be sufficient, according to the company, to cover the dividend payment this year:
"we will likely not fully cover the dividend from net investment income over the next few quarters as we work to invest additional capital raise during the quarter. This would be consistent with our previous equity offering in April 2017. We do expect, however, to more than cover the dividend for the year from the realized . . . long-term capital gains"(Emphasis added; Page 2 Stellus Capital Investment Corporation (SCM) CEO Robert Ladd on Q1 2019 Results - Earnings Call Transcript | Seeking Alpha)
Dividend Yield at $13.6 = 10%
Last Common Stock Offering: Last March, SCM sold 2,750,000 shares to underwriters at $14.43 per share with the standard greenshoe option. The external management company paid the underwriters' discount of $935,000 or $.34 per share. Prospectus The greenshoe allotment was partially exercised resulting in another 202,149 shares of common stock being sold.
Historical Net Asset Values Per Share (relatively stable for a BDC):
3/31/19: $14.32
12/31/18: $14.09
12/31/17: $13.81
12/31/16 $13.69
12/31/15: $13.19
12/31/14: $13.94
12/31/13: $14.54
November 2012: IPO at $15 ($14.46 after underwriters discount)
Five Year Historical Results Through 2018:
Last Earnings Report: Stellus Capital Investment Corporation Reports Results for Its First Fiscal Quarter Ended March 31, 2019
Net investment income was reported at $.34 per share. However, this number does not include a $1.2M accrued incentive fee which reduces the per share income GAAP NII number to $.27 per share. SCM generated $10.2 million in long term capital gains ($.63 per share) from equity investments during the quarter, and had realized $2+M in realized gains during the second quarter up to the date of the conference call. Pages 1-2- Earnings Call Transcript | Seeking Alpha
"As of March 31, 2019, our portfolio included approximately 61% of first lien debt, 28% of second lien debt, 5% of unsecured debt and 6% of equity investments at fair value. Our debt portfolio consisted of 91% floating rate investments (subject to interest rate floors) and 9% fixed rate investments." (emphasis added)
The problem with coupons that pay a spread over 1 or 3 month Libor rates now is that those short term rates are coming down and may fall further, which is a negative for BDCs that have a preponderance of floating rate loans.
 |
| 3 Month Libor January 2015 to 6/18/19 |
Libor floors, which are generally around 1%, provide some downside protection from falling short term Libor rates.
Three loans were on non-accrual as of 3/31/19. Those loans were to Refac, Grupo, and Wise. The loan to Wise had almost been completely written down as of 3/31/19:
Wise:
Grupo:
Pages 7, 10 and 10: 10-Q for the Q/E 3/31/19
Asset Quality According to Management:
10-Q for the Q/E 3/31/19
2. Intermediate Term Bond Ladder Basket Strategy:
A. Sold 2 Voya 3.125% SU Maturing on 7/15/24:
Profit Snapshot: +$8
This was a less than optimal buy. On the purchase date, the ten year treasury yield closed at a 2.26% yield. Daily Treasury Yield Curve Rates I will look for an opportunity to buy this bond back at less than 96 which is not going to happen anytime soon.
FINRA Page: Bond Detail
Issuer: Voya Financial Inc. (VOYA)
Sold at 100
YTM at 100 = 3.125%
3. Short Term Bond/CD Ladder Basket Strategy:
$10K in an add
A. Bought 10 Citizens Bank 2.45% CDs Maturing on 12/12/19 (6 month CD)-A Roth IRA Account:
Issuer: Operating bank for Citizens Financial Group (CFG)
CFG | Citizens Financial Group Inc. Analyst Estimates
Citizens Financial Group, Inc. Reports First Quarter Net Income of $439 million and EPS of $0.92
$10K in an add
A. Bought 10 Citizens Bank 2.45% CDs Maturing on 12/12/19 (6 month CD)-A Roth IRA Account:
Issuer: Operating bank for Citizens Financial Group (CFG)
CFG | Citizens Financial Group Inc. Analyst Estimates
Citizens Financial Group, Inc. Reports First Quarter Net Income of $439 million and EPS of $0.92
4. Eliminated DXPRB-Sold 50 at $24.67 (used commission free trade):
Profit Snapshot: +$44.98
Item # 4 Bought 50 DXPRB at $23.77-Used Commission Free Trade (2/2/19 Post)
Quote: Dynex Capital Inc. 7.625% Cumulative Preferred Series B Stock
Security Description:
Prospectus
Par Value: $25
Issuer: Dynex Capital Inc. (DX
Issuer SEC Filings
Coupon: 7.625%
Dividends: Quarterly, Non-Qualified and Cumulative
Last Ex Dividend Date: 3/29/19
Yield at Total Cost = 8.02%
Optional Call Date: At anytime now
Dividend Stopper: Yes (company must eliminate a cash dividend to common shareholders before deferring the preferred stock dividends)
I generally discuss the risks of MREIT preferred stocks in Item # 2 (4/11/17 Post).
I view MREIT preferred stocks with disfavor.
Given the leverage of mortgage REITs and their business models, I view their equity preferred stocks to be among the most dangerous in the preferred stock universe.
I would expect the recovery to be zero in a bankruptcy which would be the same result for bank holding company preferred stocks when their operating bank is seized by the FDIC.
I will consequently flip MREIT preferred stocks for total returns in excess of the dividend yields.
I have already substituted two equity REIT preferred stocks for the MREIT preferred stocks that I have sold recently. I will be discussing those purchases in the next two posts.
5. Small Ball ETF "Buying Program" Strategy-Bought 10 REET at $27.16 (commission free for Fidelity brokerage customers):
Quote: REET | iShares Global REIT ETF Overview
Sponsor's Website: iShares Global REIT ETF | REET
Expense Ratio: .14%
This is my first purchase.
Last Ex Dividend Date: 6/17/19 (after purchase)
Recent REET Dividend History: Quarterly at a variable rate
Current Position: 10 Shares
Purchase Restriction: Small Ball Rule
Maximum Position: 100 shares.
Top 10 Holdings as of 6/13/19:
Number of Holdings: 301 as of 6/13/19
Profit Snapshot: +$44.98
Item # 4 Bought 50 DXPRB at $23.77-Used Commission Free Trade (2/2/19 Post)
Quote: Dynex Capital Inc. 7.625% Cumulative Preferred Series B Stock
Security Description:
Prospectus
Par Value: $25
Issuer: Dynex Capital Inc. (DX
Issuer SEC Filings
Coupon: 7.625%
Dividends: Quarterly, Non-Qualified and Cumulative
Last Ex Dividend Date: 3/29/19
Yield at Total Cost = 8.02%
Optional Call Date: At anytime now
Dividend Stopper: Yes (company must eliminate a cash dividend to common shareholders before deferring the preferred stock dividends)
I generally discuss the risks of MREIT preferred stocks in Item # 2 (4/11/17 Post).
I view MREIT preferred stocks with disfavor.
Given the leverage of mortgage REITs and their business models, I view their equity preferred stocks to be among the most dangerous in the preferred stock universe.
I would expect the recovery to be zero in a bankruptcy which would be the same result for bank holding company preferred stocks when their operating bank is seized by the FDIC.
I will consequently flip MREIT preferred stocks for total returns in excess of the dividend yields.
I have already substituted two equity REIT preferred stocks for the MREIT preferred stocks that I have sold recently. I will be discussing those purchases in the next two posts.
5. Small Ball ETF "Buying Program" Strategy-Bought 10 REET at $27.16 (commission free for Fidelity brokerage customers):
Quote: REET | iShares Global REIT ETF Overview
Sponsor's Website: iShares Global REIT ETF | REET
Expense Ratio: .14%
This is my first purchase.
Last Ex Dividend Date: 6/17/19 (after purchase)
Recent REET Dividend History: Quarterly at a variable rate
Purchase Restriction: Small Ball Rule
Maximum Position: 100 shares.
Top 10 Holdings as of 6/13/19:
Number of Holdings: 301 as of 6/13/19
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.
