Economy:
Jobs report July 2023: 187,000 jobs added, fewer than expected The DJ estimate was for 200,000.
"The change in total nonfarm payroll employment for May was revised down by 25,000, from +306,000 to +281,000, and the change for June was revised down by 24,000, from +209,000 to +185,000. With these revisions, employment in May and June combined is 49,000 lower than previously reported." Employment Situation Summary - 2023 M07 Results The unemployment rate was at 3.5%. Average hourly earnings for private sector employees rose by $.14 to $33.74. Over the past 12 months, average hourly earnings increased by 4.4% which is higher than the current annual CPI increase. The average workweek fell .1 to 34.3 hours. The U-6 rate declined by .2 to 6.7%. Table A-15. Alternative measures of labor underutilization - 2023 M07 Results
The decline in the average workweek, the slowing number of jobs created, and the lowering of jobs created in prior months are negatives. The total number of jobs created, even with prior revisions, and the wage growth are not consistent with an ongoing recession or one soon to start.
The ADP reported that the private sector added 324,000 jobs last month. The consensus estimate was at 175,000. Private sector added 324,000 jobs in July, well above expectations, ADP says
Banks say conditions for business and consumer loans will get tougher
The Fed - The July 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices:
Euro zone inflation July and second-quarter GDP economic growth data
99-year old trucking company Yellow shuts down, putting 30,000 out of work | CNN Business During the Trump administration, Yellow received a $700M government loan despite the fact that it was facing charges of defrauding the government on shipments for the U.S. military.
Fitch Downgrades the United States' Long-Term Ratings to 'AA+' from 'AAA'; Outlook Stable I discussed the Fitch downgrade in a comment.
Blackstone CEO Stephen Schwarzman on Fitch downgrade: The numbers justify it, regrettably - YouTube
Warren Buffett says he’s not worried about Fitch’s U.S. downgrade Berkshire is buying treasury bills.
The CBO estimates that interest on the U.S. debt will be about $745B for the fiscal year ending in September 2024.
A.P. Moller - Maersk Q2 2023 results: 72% profit plunge, beats expectations Expects container volume to fall more than previously expected.
+++++
Allocation Shifts Discussed in this Post:
Corporate Bonds: $8,000 in principal amount
Treasuries: $20,000 in principal amount
Outflow Common Stocks: -$3,045.45
(consisting of $3,366.13 in proceeds minus $320.68 in purchases)
Stock CEF = +$80.16
Net Outflow Stocks/Stock Funds: -$2,965.29
Bank Holding Equity Preferred Stocks: +$613.43 (yield at 7.66%)
"Preferred" Stock ETF: $56.5
2023 Net Outflow Common Stocks/Stock Funds: -$35,080.51
++++
Putin and His Orwellian State:
Last week, Ukraine launched a drone attack on a Moscow office building late at night when no person was likely at risk of injury or death. A few windows were blown out. The damage to the building was minor.
The Orcs responded by launching a missile attack at an apartment building in Zelenksy's hometown of Kryvyi Rih. Russian missile strike on Ukraine apartment building kills at least 5 in Zelenskyy's hometown - YouTube The Nazis murdered at least 6 civilians in the apartment attack, including a 10 year girl and her mother. Russia-Ukraine war news: Kryvyi Rih missile strikes kill 5 after drone attacks in Moscow, Crimea - The Washington Post If Russians want to find Nazis in Ukraine, they only need to look in the mirror.
The Orcs have been destroying Ukrainian apartment buildings since launching the invasion, preferring to hit the apartments with long range missiles late at night when civilians are sleeping. Russia, as a terrorist state, does not need an excuse to murder civilians while they are sleeping in their apartments.
The Orcs also launched an attack on a Kherson Hospital, killing a doctor and a nurse, and wounding other medical personnel. Doctor Killed In Kherson Hospital Attack The Russians attacked a surgery center at this hospital.
Russia has routinely targeted Ukrainian healthcare facilities, including hospitals and maternity wards since launching its imperialistic invasion in February 2022 that was supposed to end in 3 days according to Russia's plan.
The U.N. is tracking those war crimes. WHO records more than 1000 attacks on health care in Ukraine over the past 15 months of full-scale war. That tally was only through May 2023.
The Orcs continued their attacks on the world's grain supply through a drone attack on a facility located in the inland port city of Izmail, located on the Romanian border with Ukraine. Russia strikes Ukraine's Danube port, sending global grain prices higher | Reuters
Wagner mercenaries reportedly near vulnerable Baltic corridor, Polish Prime Minister says | CNN I referenced this narrow strip of land separating Poland from Lithuania, known as the Suwalki Corridor, in my last post. If Russia seizes that corridor, it cuts off all land routes from a NATO country to Lithuania. Suwałki Gap - Wikipedia Wagner is keeping in power several authoritarian leaders in Africa in return for exploitation of natural resources in those nations.
The Belarus dictator for life, Alexander Lukashenko, is suffering from the same delusions as his boss in Moscow. The Belarus state "news" agency Belta quoted the following statement made by Lukashenko: The Poles "should pray that we’re holding onto (the Wagner fighters) and providing for them. Otherwise, without us, they would have seeped through and smashed up Rzeszow and Warsaw in no small way. So they shouldn’t reproach me, they should say thank you." Poland rushes troops to border, Belarus denies helicopter violation-Reuters Poland confirmed that Belarus helicopters invaded Polish airspace.
The U.S. Ambassador reminded the Orcs that any attack against a NATO member made by Wagner forces would be considered an attack by Russia: “And we have to ensure that the message is clear that any attacks by the Wagner Group will be seen as an attack by the Russian government." Nervous NATO nations are beefing up security due to Wagner fighters across their borders in Belarus - ABC News This has to be made clear as a deterrent to Russian aggression using the Wagner forces as a proxy army.
Ukrainian sea drone attack: Russian warship seen listing in Black Sea | CNN; Russian ship hit in Novorossiysk, Black Sea drone attack, Ukraine sources say - BBC News; Video appears to show sea drone strike Russian ship -YouTube
Even though there are videos showing the Russian ship, Olenegorsky Gornyak, being hit by a sea drone with a gaping hole in the hull and being towed while listing to one side, the Russian Defense Ministry claimed that the drone was destroyed prior to hitting the ship and caused no damage. Videos Show Russia Is Lying About Ukraine’s Secret Attack on its Ship The Russian ship was hit in the Russian port at Novorossiysk which is crucial to Russian exports including crude oil. What to Know About Novorossiysk, the Russian Port Attacked by Ukraine - The New York Times Putin spent substantial resources to construct a naval base at that port which is now vulnerable to Ukrainian drone attacks.
A Ukrainian sea drone packs up to 661 pounds of explosives and can travel up to 500 miles. Exclusive: Rare access to Ukraine's sea drones, part of Ukraine's fightback in the Black Sea
Russian supply ships and warships are legitimate targets.
War is coming soon to Crimea. Ukraine will have Himars close enough soon to hit Russian military bases there.
Ukraine Shows Clip of HIMARS Strike on Russians Gathering on Beach (the Russian soldiers had gathered on a beach located a Dzharylhach, a sand bank in the Kherson Oblast near Crimea.
++++
Trump and His Cult:
READ: Trump indictment in 2020 election and Jan. 6 probe
Trump’s Threat to Democracy Is Now Systemic - The Atlantic ("Each time GOP leaders have had the opportunity to move away from Trump, the party has sped past the off-ramp.")
Dark and sinister rhetoric drenches right-wing media amid Trump indictments
21 Donald Trump election lies listed in his new indictment
Trump calls for Supreme Court to 'intercede' after third indictment
Trump response to the latest indictment is designed to incite his cult members against the "Radical Left Thugs", meaning anyone trying to hold Trump accountable for his conduct:
'I’m coming after you!' Donald Trump issues threat on Truth Social
Bill Barr obliterates Trump's defense: 'He knew well that he had lost the election'
Who are the 6 Trump co-conspirators in the 2020 election interference indictment? They include the attorneys Rudy Giuliani, John Eastman, Jeffrey Clark, Sidney Powell, and Kenneth Chesebro. The identify of the 6th alleged co-conspirator is not certain, but the NYT says some evidence points to Boris Epshteyn, a strategic adviser to the Trump campaign in 2020. Messages Point to Identity of Co-Conspirator 6 in Trump Indictment - The New York Times That person is identified as “a political consultant who helped implement a plan to submit fraudulent slates of presidential electors to obstruct the certification proceeding” who is also tied to the fake elector slate in Pennsylvania.
A Brazen, Dead-Serious Attack on American Democracy - The Atlantic
Republican politicians leaped to Trump's defense, blaming the "weaponization" of the DOJ by the Biden administration for the latest indictment and the earlier ones.
Several republicans including the House Speaker McCarthy (R-CA), Governor Ron DeSantis (R-FL) and Senator Tim Scott (R-SC) parroted the "weaponization" of the DOJ claim, which has been and is now the most salient talking point used to defend Trump without actually addressing any facts supporting the criminal charges against him or making an effort to rebut those facts with evidence. Facts do not matter to them anyway so why bother discussing real ones.
The Fox "News" anchor Jesse Walters called the Indictment a "political war crime".
Another favorite republican talking point is the assertion that Biden is using the DOJ to hurt Trump in the 2024 rematch. An example is the comment made by the thoroughly Trumpified Elise Stefanik (R-NY), the House Republican Conference Chair, who said the indictment was an "illegal attempt" to interfere in the 2024 election. She will be voting for Trump in 2024 and believes he will win.
A republican voter, interviewed by the WSJ, had this to say: "They are just trying to protect themselves because Trump is exposing it all." This is what is generally known as the "Deep State" conspiracy theory.
Another line of defense offered by Trumpsters is that Trump's comments are protected by the First Amendment. Trump Election Charges Set Up Clash of Lies Versus Free Speech - The New York Times The First Amendment does not apply to speech that is an integral part of a crime. They Are Still With Him - The Atlantic
GOP Reacts to Third Trump Indictment - YouTube
Trump of course started to fundraise off the latest indictment news, offering limited edition T Shirts for as low as $47. Trump’s campaign is selling $47 T-shirts commemorating his latest indictment | The Independent
In Trump's America, an Alternate Reality (AR) permanently occupied by tens of millions, he has done nothing wrong.
Trump is viewed as honest in that AR, even anointed by God to rule America, and a victim of dark forces out to get him.
The fact that Trump is the Dark Force will never occur to the Trumpsters with very few exceptions.
His constant stream of reprehensible actions and statements only make republicans adore and support him even more.
Donald's support among republicans is likely to increase in the coming months as it did in response to previous indictments and the jury verdict finding that he sexual assaulted Jean Carroll. Senator Tuberville (R-AL) responded to that verdict by saying it made him want to vote for Trump twice which says a lot in a succinct manner and is consistent with Trump's Access Hollywood tape. Tuberville says Trump liable verdict in E. Jean Carroll case ‘makes me want to vote for him twice’ - al.com; Donald Trump Makes Lewd Remarks About Women On Video-YouTube
Donald Trump Has an Absurd Amount of Support From Republicans Who Believe He Committed “Serious Federal Crimes”: Poll | Vanity Fair It is interesting that a significant minority of republicans (22%) believe Donald committed serious felonies but support him anyway.
The Trump Indictment Puts the GOP on Trial - The Atlantic ("There was a time when even a fraction of Donald Trump’s record of lawlessness and depravity would have shattered a person’s political career, rendered his party ashamed of its association with him, and left him humiliated and seeking forgiveness. But that day is long gone, at least if you’re a Republican.")
RealClearPolitics - 2024 Republican Presidential Nomination Trump still has a commanding lead for the republican nomination.
New poll reveals the sheer extent to which Fox News viewers remain loyal to Trump
RealClearPolitics - Election 2024 - General Election: Trump vs. Biden
Revised Trump indictment in the documents case raises new questions about lawyer conflicts of interest Trump's PAC is paying John Irving's law firm who is representing Oliveira in the documents case.
Trump pays millions in legal fees, aides allegedly asked about loyalty - The Washington Post (“Someone just wants to make sure Carlos is good,” Nauta allegedly said in a call with another Trump employee, who like Taveras is not named in the indictment. That employee assured Nauta that De Oliveira was “loyal” and “would not do anything to affect his relationship with Trump.” Oliveira's loyalty to Trump was confirmed later "in a private message app" by the same Trump employee.)
Trump PAC Down to $4 Million Cash on Hand After Legal Fees - The New York Times Trump's "Save America" PAC started 2023 with more than $100M but was down to $3.6M as of 6/30/23. The last indictment will replenish his coffers.
Donald Trump Is In a Category 4 Legal S--tstorm—That Could Soon Become Category 5 | Vanity Fair
Trump attorney Alina Habba calls him ‘the most ethical American I know’ in wake of superseding indictment | The Hill That says a great deal about Ms. Habba and her acquaintances.
Video: Arizona doctor says people are getting burned falling to the ground | CNN
Last Week in the Republican Party - August 1, 2023 - YouTube One woman said she was proud to be a member of Trump's cult.
So "what about" Joe Biden and the purported two tiered justice system, one for Don the Con and the other for Sleepy Joe. I hear republicans parroting those phases daily now.
Based on what James Comer (R-KY) had been representing to Americans, I thought that the testimony of Devon Archer, a former business partner of Hunter Biden, was going to put a few nails in Joe's impeachment coffin, assuming I thought Comer was an honest person which is not something that I will ever do.
While Archer confirmed that Biden sometimes called his son during business meetings, Archer said that nothing important was ever discussed and he was aware of no wrongdoing by Joe. Devon Archer says Joe Biden never talked business on calls: transcript; Devon Archer says Joe Biden discussed 'nothing' important with Hunter Biden business associates, transcript shows; Devon Archer said the opposite of what Republicans claimed - The Washington Post; New Transcript: Star Hunter Biden Witness Refuted Every GOP Talking Point
The House republicans who refused to vote for Donald's impeachment based on what happened on January 6th or linking military aid for Ukraine to finding or manufacturing dirt on Biden before the 2020 election will vote to impeach Biden based on calling his son almost daily and talking about nothing important, buttressed in their minds by the alleged hearsay, double or triple hearsay statements of someone who is dead and someone who has just been indicted on multiple felony charges. And, it looks like Rudy Giuliani was behind gathering those statements just before the 2020 election.
Gal Luft: US-Israeli citizen charged with arms trafficking, acting as Chinese agent; The G.O.P. Backed Gal Luft on Hunter Biden Claims. Now He’s Indicted. - The New York Times; Southern District of New York | U.S. Attorney Announces Charges Against Co-Director Of Think Tank For Acting As An Unregistered Foreign Agent, Trafficking In Arms, Violating U.S. Sanctions Against Iran, And Making False Statements To Federal Agents | United States Department of Justice
Giuliani Says Key Biden Informant Is Dead The Giuliani alleged informant was the wife of a Burisma executive. She died in a car accident in 2011.
Rudy Giuliani Transcripts Reveal Racist, Sexist Remarks; Disciplinary panel calls for Rudy Giuliani’s disbarment - POLITICO
Go ahead and pursue Biden's impeachment while continuing to Stand with Donald and see what happens in competitive congressional elections in 2024.
+++
1. Treasury Bills Purchased at Auction: $20,000 in principal amount
The purchases in my Schwab account were sourced from proceeds from securities that matured on 7/31. Those proceeds included $10K received in a corporate bond maturity.
I discussed in a 7/30/23 comment the possibility of buying the 3 year treasury note at last Wednesday auction. I elected to pass for now given the yield (4.5%) compared to existing short term treasury bill rates that were almost 1% higher. I will reconsider buying the 3 year note in subsequent auctions.
The 1 month through the 6 month T Bills have flatlined in the 5.5%-5.55% range.
 |
| 83% Probability of No Hike at 9/20/23 Meeting |
10 Year TIP Breakeven Inflation Rate: 2.38%
30 Year TIP Breakeven Inflation Rate: 2.34%
Average Inflation Rate Since 1914: 3.3%, United States Inflation Rate - July 2023 Data - 1914-2022 Historical - August Forecast
A. Bought 5 Treasury Bills at the 7/31/23 Auction-Schwab and Fidelity Accounts:
%2011:2:23%20.png) |
| Fidelity Account |
%2011:2:23.png){kind=small} |
| Schwab Account |
Matures on 11/2/23
Interest: $66.73
Investment Rate: 5.441%
The 6 month T Bill auctioned that day had a slightly higher IR at 5.504%.
B. Bought 5 Treasury Bills at the 8/2/23 Auction- Schwab Account:
%2012:5:23%20.png){kind=small}
119 Day Bill
Matures on 12/5/23
Interest: $87.6
Investment Rate: 5.484%
C. Bought 10 Treasury Bills at the 8/3/23 Auction-Schwab Account:
%2010:3:23%20.png){kind=small}
56 Day Bill
Matures on 10/3/22
Interest: $82.21
Investment Rate: 5.418%
2. Corporate Bonds: $8,000 in principal amount
A. Bought 2 Kimco 3.3% SU Maturing on 2/1/25 at a Total Cost of 96.014:
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KIM SEC Filed Earnings Press Release for the Q/E 6/30/23
New Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa1/BBB+
YTM at Total Cost: 6.122%
Current Yield at TC = 3.437%
B. Bought 2 Timken 3.875% SU Maturing on 9/1/24 at a Total Cost of 97.678:
%203.975%25%209:1:24.png)
Issuer: Timken Co. (TKR)
TKR Analyst Estimates | MarketWatch
TKR SEC Filed Earnings Press Release for the Q/E 3/31/23 ("Timken posted net income in the first quarter of $122.3 million or a record $1.67 per diluted share.")
New Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB-
YTM at Total Cost: 6.12%
Current Yield at TC = 3.967%
I now own 4 bonds.
C. Bought 1 National Rural Utilities Cooperative Finance 5% SU Maturing on 2/15/25:
%205%25%202:15:25%20MI%20.png)
Interest paid monthly.
Bought at par value through Fidelity's Corporate Bond Offerings
Credit Ratings: A2/A-
Credit Ratings (links credit reports from Moody's, S&P and Fitch)
Fitch has an "A" rating. Fitch Affirms National Rural Ratings at 'A'/'F1'; Outlook Stable
The last time that I bought a SU bond from this issuer the monthly interest rate was 3%.
Website: National Rural Utilities Cooperative Finance Corporation (CFC)
D. Bought 2 Marathon Petroleum 3.625% SU Maturing on 9/15/24 at a Total Cost of 97.485:
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Issuer Marathon Petroleum Corp (MPC)
MPC Analyst Estimates | MarketWatch
Earnings will be highly erratic. MPC owns refineries and sales refineed products. MPC also has an ownership interest in the MLP known as MPLX L.P. (MPLX) that owns "a network of crude oil, natural gas and refined product pipelines and has joint ownership interests in crude oil, refined products and other pipelines" MPC owns the general partner and about 65% of the MPLX partnership units.
MPC SEC Filed Earnings Press Release for the Q/E 6/30/23 (net income of $2.2B)
New Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB
YTM at Total Cost: 5.892%
At the time of purchase, the 1 year T Bill yield was at 5.4%.
The yield advantage for the MPC bond, using the YTM and before any adjustment for state income taxes, was .492%.
If I had to pay a state income tax on the corporate bond interest, which I do not since Tennessee has no personal state income tax, I would forego buying corporate bonds that have that kind of yield advantage over comparable maturity treasuries.
And, if I was concerned about the MPC paying off this bond at maturity, I would not have purchased it.
Current Yield at TC = 3.72%
The 9/24 maturity MPC SU is the first one to mature:
 |
| 2022 MPC Annual Report |
2022 MPC Annual Report at page 33
I now own 4 bonds.
E. Bought 1 Site Centers 3.625% SU Maturing on 2/1/25 at a Total Cost of 95.105:
%203.625%25%202:1:2025%20.png)
Issuer: SITE Centers Corp. (SITE)
SEC Filed Report for the Q/E 6/30/23
New Finra Page: Bond Page | FINRA.org
Credit Rating: Baa3
YTM at Total Cost: 7.136%
Current Yield at TC = 3.81%
I now own 3 bonds.
3. Small Ball Sells:
A. Eliminated HZO - Sold 11 at $42.29:
Quote: MarineMax Inc. (HZO)
Proceeds: $465.19
"As the world’s largest lifestyle retailer of recreational boats and yachts, as well as yacht concierge and superyacht services, MarineMax (NYSE: HZO) is United by Water. We have 130 locations worldwide, including 78 dealerships and 59 marinas. Our integrated business includes IGY Marinas, which operates luxury marinas in yachting and sport fishing destinations around the world; Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies; Cruisers Yachts, one of the world’s premier manufacturers of premium sport yachts and motor yachts; and Intrepid Powerboats, a premier manufacturer of powerboats. To enhance and simplify the customer experience, we provide financing and insurance services as well as leading digital technology products that connect boaters to a network of preferred marinas, dealers, and marine professionals through Boatyard and Boatzon. In addition, we operate MarineMax Vacations in Tortola, British Virgin Islands, which offers our charter vacation guests the luxury boating adventures of a lifetime."
HZO Analyst Estimates | MarketWatch (E.P.S. peaked at $8.36 last year)
10-Q for the Q/E 6/30/23 (Short term debt and long term borrowings discussed starting at page 18. Long term debt increased to $399+M from $45+M. HZO acquired IGY Marinas in October 2022 for $480M. MarineMax To Acquire IGY Marinas Significantly Expanding Global Marina and Services Business)
Profit Snapshot: Net of +$50.67
Dividend: None and none expected
Last Earnings Report (F/Q ending 6/30/23): SEC Filed Earnings Press Release This is the third fiscal quarter.
Diluted E.P.S. = $1.98, down from $3.17 in the 2022 second quarter.
Adjusted E.P.S. = $2.07, down from $3.23
Consensus at
Revenue: $721.844M, up from $688.537M
Interest expense increased by $14.8M compared to $1M in the prior-year period, "reflecting higher interest rates as well as the increase in long-term debt associated with the IGY Marinas acquisition and greater inventory."
Fiscal 2023 Guidance: Adjusted E.P.S. range of $5.10 to $5.5. At the midpoint of $5.3 and a $42.29 stock price, the P/E is 7.98.
The low P/E in 2022 caused me to buy the stock but the negative Y-O-Y earnings numbers have proved to be a major restraint on this non-dividend paying stocks total return potential near term.
I will take another look in about a year or so to see whether the IGY Marinas purchase was worth the cost.
B. Eliminated FCLD - Sold 9 at $20.4:
Quote: Fidelity Cloud Computing ETF Overview
Proceeds: $183.6
Profit Snapshot: Net of +$10.99
Sponsor's website: FCLD
Expense Ratio: .39%
Dividend: Paid Semiannually
Last 2 Dividends: $.029 per share
My willingness to hold stock and stock fund positions that pay no or nominal dividends is at a low ebb.
Top 10 Holdings as of 6/30/23:
This has been a disappointing holding. The ETF declined by 41.32% last year and was up 38.02% YTD through 7/28/23.
When looking at the P/E ratios for the top 25 holdings, most of those ratios are far too high for my liking. FCLD – Portfolio – Fidelity® Cloud Computing ETF | Morningstar
C. Eliminated Duplicate DCOM Position - Sold 5+ shares at $21.34:
Quote: Dime Community Bancshares Inc. (DCOM)
Proceeds: $108.01
DCOM Analyst Estimates | MarketWatch
Investment Category: Regional Bank Basket Strategy
Profit Snapshot: $20.51
For DCOM, I am going to limit my taxable purchases to my Fidelity account.
DCOM is a symbol change and name change from Bridge Bancorp (BDGE). Almost all of my profits realized in this stock originated when the company was called Bridge. Dime Community (DCOM) was acquired by Bridge who then changed its name and symbol after completing the acquisition.
Realized Gains BDGE/DCOM: $2,638.21 The largest annual gain was in 2017 at $2,154.52 (159+ shares):
Current Position Fidelity Account: 41+ shares at an average cost of $18.18 per share. The current dividend yield at that AC is 5.5%. I am not likely to buy more shares, barring a major price collapse, until I see significant Y-O-Y improvement in E.P.S. and NIM.
Last Discussed: Item # 1.C. Added to DCOM in Fidelity Account - Bought 5 at $17.85 (7/1/23 Post); Item # 2.E. Added 7 DCOM at $18.79 (6/10/23 Post)(discussing the first quarter earnings report, SEC Filed Earnings Press Release)
Dividend: Quarterly at $.25 per share
DCOM Dividend History | Seeking Alpha
Last Ex Dividend: 7/14/23
Last Earnings Report (Q/E 6/30/23): This report was released after I sold this 5+ share lot.
SEC Filed Earnings Press Release for the Q/E 6/30/23
The stock rallied 2.22% on 7/28 in response to this report. I viewed the report unfavorably and do not view earnings reports that are less bad than expected as a reason to rejoice.
Comparisons are to the 2022 second quarter:
E.P.S. $.66, down from $.94
Adjusted E.P.S. $.68
Non-GAAP Consensus at $.6 per Schwab
NIM: 2.5%, down from 3.29%
Adjusted Efficiency Ratio: 56.2%, up from 45.9% (non-adjusted at 57.6%)
Coverage Ratio: 273.42%
NPA Ratio: .2%
ROE: 11.04%, down from 17.08%
Tangible Book Value per share: $23.82
If someone was willing to ignore the negative impact on TBV caused by unrealized losses arising from owned securities, TBV per share would be $26.51. That number is reflected in the column titled "Tangible common book value per share excluding AOCI". Accumulated Other Comprehensive Income (AOCI) - Overview, Breakdown
Deposits: "Period end total deposits (excluding mortgage escrow deposits) at June 30, 2023 were $10.45 billion, compared to $10.46 billion at March 31, 2023 and $10.18 billion at December 31, 2022. Period end total mortgage escrow deposits at June 30, 2023 were $70.6 million, compared to $110.1 million at March 31, 2023 and $69.6 million at December 31, 2022, reflecting normal seasonal escrow payment activity."
Loan to Deposit Ratio: 103.4%
D. Eliminated Duplicate Position in CMCSA - Sold 7 at $45.6:
Quote: Comcast Corp. Cl A
Proceeds: $319.21
CMCSA Analyst Estimates | MarketWatch
Profit Snapshot: $35.56
Current Position: 25+ shares in Fidelity Account, average cost per share at $43.04. Yield at that AC per share is currently at 2.695%.
Purchase Restriction in Fidelity Account: Each subsequent purchase will be limited to 1 to 5 shares with each purchase required to be at the lowest price in the chain. The last purchase was at .
Dividend: Quarterly at $.29 per share ($1.16 annually), last raised from $.27 effective for the 2023 first quarter. The quarterly rate was at $.195 in 2013.
Yield at Sale Price: 2.54%
Dividend Growth History: Slow and not expected to double IMO in 10 years. Assuming annual 2 cent per share quarterly starting in the 2024 first quarter, the 2013 rate of $.195 will double in about 2028.
Next Ex Dividend: 10/3/23
Last Earnings Report (Q/E 6/30/23): SEC Filing
E.P.S. $1.02
Adjusted E.P.S. = $1.13
E.P.S. was adjusted by increasing net income by $444M for "amortization of acquisition-related intangible assets".
Consensus at $.97 per Fidelity
Free Cash Flow: $3.4B
Total Revenue: $18.068, down from $18.131 in the 2022 second quarter.
E. Eliminated 1 of 2 Duplicate Positions in STWD - Sold 13 at $20.72:
Quote: Starwood Property Trust Inc. (STWD)
Proceeds: $269.30
Management: External
4 Business Segments:
10-Q for the Q/E 6/30/23 at page 11
Assets and Liabilities: P. 4
 |
| P. 20 |
Starwood Property Trust, Inc. - Home
Profit Snapshot: +$87.37
The lots were bought during a price meltdown in 2020.
Goal: Any total return in excess of the dividends
Last Discussed: Item # 1.C. Added to STWD in Schwab Account- Bought 1 at $17.56; 1 at $16.59; (4/1/23 Post) The next elimination of a STWD duplicate position will be in this account.
I view STWD as a more risky stock than it was prior to the pandemic due to its exposure to commercial real estate, debt and other liabilities and the increase in debt refinancing costs. The complexity of this company is also a matter of concern for me.
I characterize the company as a hybrid REIT which simply means that it owns paper and real assets.
SU Debt: Rated at Ba3/BB- (low junk ratings)
Fitch has a BB+ rating. Fitch Affirms Starwood Property Trust at 'BB+'; Outlook Stable
Dividend: Quarterly at $.48 per share ($1.92 annually), last raised to $.48 from $.46 effective for the 2014 first quarter payment. Given the dividend coverage issued discussed below, a dividend raise is out of the question until distributable E.P.S. materially increases. I view a dividend cut as more likely than a dividend raise, but the company may keep the current rate as long as it is covered by distributable E.P.S. which is so far the case.
Starwood Property Trust, Inc. (STWD) Dividend History | Seeking Alpha
Last Ex Dividend: 6/29/23 (owned as of)
First Quarter Earnings Report (Q/E 3/31/23): SEC Filing This is the one that I had when I sold these shares.
"The Company’s first quarter 2023 GAAP net income was $52.0 million, and Distributable Earnings (a non-GAAP financial measure) was $157.2 million."
Distributable E.P.S. = $.49, 1 cent in excess of the dividend.
The entries used in this calculation highlight the complexity:
Having made that point, I am generally impressed with the competence of management.
Earnings Report for the Q/E 6/30/23: SEC Filed Press Release
GAAP E.P.S. = $.54
Distributable Earnings Per Share: $.49
Other Buy Discussions: Item # 1.H. Added STWD in Fidelity Taxable Account-Bought 2 STWD at $17.18; 2 at $16.91; 1 at $15.24, 1 at $10.36; 1 at $9.3; 1 at $8.74; 1 at $12.45 ( 4/18/20 Post); Item # 1.C. Added to STWD in Fidelity Taxable Account-Bought 1 at $15.66, 1 at $15.12, 1 at $14.82; 1 at $13.74 (7/25/20 Post); Item # 2.D. Added to STWD in Fidelity Taxable-Bought 1 at $14.29 (12/5/20 Post)
Other Sell Discussions: Item # 3.I. Pared STWD -Sold 5.105 at $25.43 (5/14/21 Post) (profit snapshot = $32.18); Item # 1.O. Sold 5 STWD at $25.22 (3/20/21 Post)(profit snapshot = $27.84); Item #1.N. Pared 7 STWD at $23.74 (3/13/21 Post)(profit snapshot = net at $14.56); Items 2.C. Pared STWD in Vanguard taxable-Sold 10 at $20.44 and 2.D. Pared STWD in Fidelity Taxable-Sold 10 at $20.95 (3/6/21 Post); Item # 1.A. Sold 10 STWD at $25.96 (2/16/2020 Post)(profit snapshot = $47.74)
Last Bond Offering (6/23): Prospectus for $350M 6.7% Convertible SU
F. Eliminated 1 of 2 Duplicate Positions in MFIC - Sold 50 at $13.64:
Quote: MidCap Financial Investment Corp. - A BDC
Proceeds of $682
Remaining Positions - Taxable Accounts:
Fidelity: 36+ shares with an average cost per share of $12.15
Schwab: 72+ shares with an average cost per share of $12.81.
The next position that I will eliminate is 36+ shares held in my Fidelity taxable account.
Management: External
Profit Snapshot: Net of +$30.12
Dividend: Quarterly at $.38
MFIC Dividend History | Seeking Alpha
Last Ex Dividend: 6/12/23 (owned as of)
Last Earnings Report (Q/E 6/30/23): Released the day of this sell.
NII per share: $.44
NAV per share: $15.2
Portfolio: Floating Rate Loans at 100%
Liquidity:
G. Eliminated VNO - Sold 32+ at $22.7:
Website: Vornado Realty Trust | A Fully Integrated Real Estate Investment Trust (REIT)
This elimination is my response to VNO suspending its common share dividend payments.
Profit Snapshot: Net of $19.43
Several shares were sold at a loss.
{VNO Preferred Stock: I will continue to buy small ball lots in cumulative equity preferred stock VNOPRM. Vornado Realty Trust 5.25% Cumulative Preferred Series M. The yield at yesterday's closing price of $13.9 is 9.44% vs. zero currently for the common. I will discuss that preferred stock in my next post. The next ex dividend date is 9/14/23. Vornado is currently paying its preferred stock dividends and is legally required to do so under the stopper clause as long as it continues using cash to buy common stock. There is currently no other legal restraint on deferring the preferred stock dividend since no cash dividend is being paid on a junior security. The resumption of a cash dividend on that junior security (only common stock is more junior) would require the payment of any deferred stock dividend. Cumulative preferred dividends can not be eliminated outside of a bankruptcy but only deferred. Non-cumulative preferred dividends may be eliminated with no future obligation to pay provided the elimination does not violate the Stopper Clause.}
Common Stock Dividend History: Extremely Poor.
Vornado Realty Trust (VNO) Dividend History | Seeking Alpha
The last common share dividend was $.375 per share and was paid in the 2023 first quarter. The quarterly rate was at $.66 in 2019 and for the first two quarters of 2020.
Last Earnings Report (Q/E 6/30/23):
"On April 26, 2023, Vornado announced the postponement of dividends on its common shares until the end of 2023, at which time, upon finalization of its 2023 taxable income, including the impact of asset sales, it will pay the 2023 dividend in either (i) cash, or (ii) a combination of cash and securities, as determined by its Board of Trustees. Cash retained from dividends or from asset sales will be used to reduce debt and/or to fund the share repurchase program discussed below."
GAAP taxable income for the first 6 months was reported at $.27. If VNO means that a year end distribution may be made based on taxable income, then no dividend or an insignificant one will be paid since the first quarter dividend was $.375.
SEC Filed Press Release and Supplemental
Under the circumstances, I thought this report was okay. However, my willingness to wait for a recovery is pretty much demolished by the common share dividend elimination.
FFO per share: $.72, down from $.83
FFO is not adjusted down for pretend revenues created by the straight line accounting convention and to account for cash expenses for routine maintenance. To evaluate dividend coverage, a proper AFFO calculation would reduce FFO by those items. In my opinion, FFO is not the relevant cash flow number for an Office REIT.
Another issue with VNO, which I have previously discussed, is its excessive reliance on variable rate debt.
H. Eliminated FFNW - Sold 10 at $12:
Quote: First Financial Northwest Inc. (FFNW)
Proceeds = $120
The last earnings report was too unsatisfactory. Even though the stock is selling well below tangible book value per share, and the NPL and Charge Off ratios are excellent, those items are IMO an insufficient reason to buy or own the stock when E.P.S. and NIM are in significant declines year-over-year and the efficiency ratio remains at far too high levels.
Investment Category: Regional Bank Basket Strategy
Profit Snapshot: +$16.5
Last Buy Discussion: Item # 2.F. Restarted FFNW - Bought 10 at $10.35 (6/10/23 Post)
Last Sell Discussion: Item # 1.C. Eliminated FFNW - Sold 27+ at $16.6 (2/17/22 Post)(profit snapshot = $196.73)
Dividend: Quarterly at $.13 per share ($.52 annually)
First Financial Northwest, Inc. (FFNW) Dividend History | Seeking Alpha
Last Ex Dividend: 6/8/23 (owned as of)
Last Earnings Report (Q/E 6/30/23): SEC Filed Earnings Press Release
Comparisons are to the 2022 second quarter.
Net Income $1.5M, down from $2.8M
The quarter included "$419,200 in legal, accounting and other fees related to the unsuccessful negotiation of a potential business combination with another financial institution." Even if I excluded that item, earnings would have been down substantially.
E.P.S. = $.16, down from $.31
NIM: 2.84%, down from 3.53%
"The decrease in net interest margin for the quarter ended June 30, 2023, compared to the quarter ended March 31, 2023, was due primarily to the cost of interest-bearing liabilities increasing more than the yields on interest-earnings assets, with a 57-basis point increase in the Company’s average cost of interest-bearing liabilities to 3.01% from 2.44%, partially offset by a 14-basis point increase in the average yield on interest-earning assets to 5.43% from 5.29%."
Efficiency Ratio: 89.95%
NPL Ratio: .02%
NPA Ratio: .01%
Charge off ratio: zero
Tangible Book Value per share: $17.2
Deposits:
Consider to repurchase price: 10 shares at less than $10 with some quarter-to-quarter improvement in E.P.S. and NIM.
I. Eliminated MATV - Sold 25+ at $17.98:
4. Small Ball Buys - CEFs, ETFs and Common Stocks:
A. Added to GRX - Bought 8 at $10.02:
Leveraged: Yes, with preferred stock. The preferred stock has a fixed coupon of 4% and is subject to mandatory redemption on 12/26/25.
SEC Filings - Holding as of 3/31/23
Top 10 Holdings as of 6/29/23:
I do not have individual positions in those stocks. I have owned in the past only Nestle, JNJ, and Abbvie.
Website: Healthcare and Wellness Rx Trust
Gabelli Health & Wellness (GRX)-Morningstar (currently rated 2 stars)
Gabelli Health & Wellness (GRX) Portfolio | Morningstar (lists top 12 holdings with forward P/E ratios) Among the top 25 holdings, there are 3 companies that I have zero familiarity: Yakult Honsha, Bell Ring Brands and Kikkoman.
Last Discussed: Item # 2.J. Added to GRX - Bought 20 at $9.78 (6/10/23 Post)
Average Cost per share: $10.90 (110+ shares)
Dividend: Quarterly at $.15 per share (regular)
The last distribution in excess of the regular dividend was $.36 per share that was paid in December 2021.
I am reinvesting the dividend for as long as the likely reinvestment price is at a greater than 10% discount to net asset value per share and the share purchase will reduce my AC per share.
Yield at AC: 5.5%
Last Ex Dividend: 6/14/23
Data Date of 7/28/23 Trade:
Closing Net Asset Value per share: $12.18
Closing Market Price: $10
Discount: -17.9%
Average 3 Year Discount: -13.81%
Sourced: GRX-CEF Connect (Click "Pricing Information" Tab)
Maximum Position: 300 shares
Purchase Restriction: Each subsequent purchase must reduce my average cost per share. Lot sizes will be in the 5 to 20 share range.
B. Added to PGX - Bought 5 at $11.3:
Quote: PGX | Invesco Preferred ETF Overview
Last Discussed: Item # 2.B. Bought 5 PGX at $11.04 (5/27/23 Post)
Sponsor's website: Invesco Preferred ETF
Expense ratio: .5%
I am averaging down in small lots when the purchase reduces my average cost per share.
Invesco Preferred ETF (PGX) Dividend History | Seeking Alpha Dividends are paid monthly at a variable rate.
Last Ex Dividend: 7/24/23
Morningstar: PGX – Invesco Preferred ETF – ETF Stock Quote | Morningstar
Sell Discussions: Item # 5 Sold: 200 PGX at $14.38 (11/12/2010); Item # 3.A. Eliminated PGX - Sold 100 at $14.51 (8/1/2020); Item # 1.A Sold 50 PGX at $14.35 (3/3/19 Post)
Equity preferred stocks had been in a downtrend with the rise in intermediate term interest rates. Many bank holding preferred stocks were hit after the bank failures earlier this year. Office REIT preferred stocks have been negatively impacted by credit concerns.
C. Added to DEA - Bought 3 at $14.59; 5 at $14.49:
"As of March 31, 2023, the Company or its joint venture (the “JV”) owned 86 operating properties in the United States encompassing approximately 8.6 million leased square feet, including 85 operating properties that were leased primarily to U.S. Government tenant agencies and one operating property that is entirely leased to a private tenant."
Properties | Easterly Government Properties, Inc.
DEA 2022 SEC Filed Annual Report
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
DEA 10 Year Chart as of 7/31/23:
Possible bottom near $14.
New Average cost per share: $17.1 (150+ shares)
Dividend: Quarterly at $.265 per share ($1.06 annually)
Easterly Government Properties, Inc. (DEA) Dividend History | Seeking Alpha
I am reinvesting the dividend.
Yield at New AC: 6.2%
Next Ex Dividend: 8/16/23
I discussed the last earnings report in this post.Item # 2.K. Added to DEA - Bought 5 at $14.54 (6/17/23 Post); SEC Filed Press Release
The second quarter report is scheduled for release on 8/8.
Largest Gain: Item # 1.A. Sold 21+ DEA at $28.81 (6/6/20 Post)(profit snapshot = $272.36)
D. Added 3 NNN at $41.42; 2 at $40.1:
Quote: NNN REIT Inc.
"NNN REIT invests primarily in high-quality retail properties subject generally to long-term, net leases. As of June 30, 2023, the company owned 3,479 properties in 49 states with a gross leasable area of approximately 35.5 million square feet and with a weighted average remaining lease term of 10.2 years. NNN is one of only three publicly traded REITs to have increased annual dividends for 34 or more consecutive years."
I discussed this REIT in my last post. Item # 3.C. Started NNN - Bought 5 at $43.75; 2 at $43.61; 3 at $43; 2 at $42.56 (7/29/23 Post)
Retail Properties | Our Portfolio | NNN REIT
New Average Cost per share: $42.5 (19 shares)
Dividend: Quarterly at $.565 per share ($2.26 annually)
Yield at New AC = 5.32%
Last Ex Dividend: 7/28/23 (owned 7 shares as of)
Last Earnings Report (Q/E 6/30/23): Released on 8/2 after my prior purchases.
SEC Filed Earnings Press Release
The Stock Jocks reacted negatively to this report. I thought it was okay even though AFFO per share declined by $.01 compared to the 2022 second quarter.
Occupancy: 99.4%
12.3 year weighted average debt maturity for unsecured debt
I would attribute some of the decline since my first purchase to the rise in interest rates which will pressure REIT cash flow and make the dividend yield less appealing. The extent of the cash flow pressure will depend on a number of variables, including the amount of variable debt priced at spreads to short term rates, rent increases which are usually small for triple net lease REITs, and the timing and cost of fixed rate refinancings including mortgages and senior unsecured debt.
5. Bank Holding Company Equity Preferred Stocks:
The three equity preferred stocks discussed below were issued by bank holding companies and pay non-cumulative dividends. The stocks are thinly traded and usually have wide bid/ask spreads.
A. Bought 10 WTFCM at $22.9- Fixed to Floating Rate:
Quote: Wintrust Financial Corp. Fixed/Floating Non-Cumulative Preferred Series D (WTFCM)
Cost: $229
Issuer: Wintrust Financial Corp. (WTFC) - A Bank Holding Company
WTFC SEC Filed Earnings Press Release for the Q/E 6/30/23 ("quarterly net income of $154.8 million or $2.38 per diluted common share for the second quarter of 2023")
Par Value: $25
Fixed-to-Floating Rate Equity Preferred Stock:
Dividends: Paid quarterly, qualified and non-cumulative
Fixed coupon: 6.5% to but excluding 7/15/25
Next Ex Dividend: 9/28/23
Yield at 6.5% and $22.9 TC = 7.1%
Floating Rate: 3 month Libor +4.06%
Alternate Rate Mechanism (p. S-21): The 3 month Libor has been phased out. The alternate benchmark rate will be used, provided the issuer doe not redeem on or after 7/15/25.
While I am not certain, the most likely option would be the 3 month CME Term SOFR rate + a "tenor" spread adjustment of of .26161%. That is the alternate rate that CFG announced for its fixed-to-floating rate preferred stock CFG.PRD. Citizens Financial Group, Inc. Announces Transition of U.S. LIBOR-linked Preferred Stock to Term SOFR Replacement Rate | Business Wire The current tenor spread is designed to equalized the 3 month Libor with the 3 month SOFR. Term SOFR - CME Group
Optional Redemption: At par value + accrued and unpaid dividends on any dividend payment date on or after 7/15/25.
Stopper Clause (page S-21): Standard. Before eliminating the noncumulative preferred stock dividend, the bank must first eliminate the common stock cash dividend and thereafter avoid using cash to buy common stock.
B. Bought 10 CNOBP at $16.95:
Quote: ConnectOne Bancorp Inc. 5.25% Preferred Series A (CNOBP)
Fixed-to-floating rate
Cost: $169.5
Issuer: ConnectOne Bancorp Inc. (CNOB)
This bank holding company does pay a common share cash dividend CNOB Dividend History-Seeking Alpha
CNOB SEC Filed Earnings Report for the Q/E 6/30/23
Prospectus (August 2021)
Par Value: $25
Fixed Coupon: 5.25% to and excluding 9/1/2026
Floating Rate: From and including 9/1/2026 at the 5 year treasury rate + 4.42%
Reset Period: 5 years
Dividends: Paid Quarterly, Qualified, and Non-Cumulative
Yield at $16.95: 7.74%
Optional Redemption: On or after 9/1/26 on a dividend payment date.
Next Ex Dividend: 8/14/23
C. Bought 10 BWBBP at $18; 2 at $17.46:
Cost: $214.93
Issuer: Bridgewater Bancshares Inc. (BWB)
BWB Analyst Estimates | MarketWatch
Bank Locations:
Sourced: 2022 Annual Report at p. 47
SEC Filed Earnings Press Release for the Q/E 6/30/23 (net income of $9.8M or $.31 per share; NIM at 2.4%; "Deposits increased by $166.8 million, or 19.6% annualized, from the first quarter of 2023, including an increase of core deposits of $45.3 million, or 7.4% annualized"; NPL Ratio = .02%; Charge off ratio at zero)
Prospectus (August 2021)
Par Value: $25
Coupon: 5.875% paid on the $25 par value
Average cost per share: $17.91 (12 shares)
Dividends: Paid Quarterly, Qualified and Non-Cumulative
Yield at $17.91 = 8.16%
Next Ex Dividend: 8/14/23
Maturity: None, potentially perpetual
Issuer Optional Redemption: At par + accrued and unpaid dividend on or after 8/17/26. I view an optional redemption as unlikely given the favorable coupon rate to the bank.
Stopper Clause: Standard
Since there is no cash common stock dividend, the only legal restraint on eliminating the non-cumulative preferred dividend is using cash to buy common stock. The lack of a common share dividend and dividend history creates an enhanced danger to the preferred shareholder which is mitigated some by a history of paying preferred dividends, the current financial of the bank holding company, and the increase in cash available for distribution to the preferred shareholder resulting from no cash common share dividend being paid.
Disclaimer: I am not a financial advisor, but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sale of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals, and situational risks. I can only make that kind of assessment for myself and my family members.
