Economy:
Pending Home Sales See 0.7 Percent Drop in November- www.nar.realtor ("year-over-year contract signings dropped 7.7 percent, making this the eleventh straight month of annual decreases.")
Goldman Sachs cuts growth forecast for first half of 2019 GS cut its GDP growth estimate from 2.4% to 2% for the first half and growth would stall at below 2% in the second half. That sounds like a reasonable forecast.
Trump hails call with China's Xi, says trade talks are making progress; Trump Expresses Optimism for China Deal With Ties at Crossroads - Bloomberg Trump can not be trusted to tell the truth about anything. We can only hope that progress is being made.
Corporate debt could cause 'reckoning' in 2020 says Mark Zandi
Corporate debt could cause 'reckoning' in 2020 says Mark Zandi
++++++
Markets and Market Commentary:
While last Monday avoided being the final day in the Trigger Event day count, today is shaping up as the last day. The decline today is probably due to this news item: US Trade Rep. reportedly thinks more tariffs needed to get meaningful concessions from China The rally last Monday was caused by Donald claiming that trade discussions were going well.
I mentioned in a recent comment that there has been a yield inversion where the two, three, five and seven year treasury note yields are lower than the 1 year treasury bill.
While last Monday avoided being the final day in the Trigger Event day count, today is shaping up as the last day. The decline today is probably due to this news item: US Trade Rep. reportedly thinks more tariffs needed to get meaningful concessions from China The rally last Monday was caused by Donald claiming that trade discussions were going well.
I mentioned in a recent comment that there has been a yield inversion where the two, three, five and seven year treasury note yields are lower than the 1 year treasury bill.
If Dow breaks this level in first quarter, 'watch out,' Jeff Saut says He is referring to the DJIA low this month being taken out to the downside during the 2019 first quarter. That low was at 21,713.
'Investors are coming back to their senses': Market bull Ed Yardeni
Yardeni has a number of valuable charts available at his website: Yardeni Research
Roubini: President Trump is flirting with mutually assured economic destruction - MarketWatch
Expect more 1,000-point swings for the Dow in 2019: Mohamed El-Erian - MarketWatch
Joseph LaVorgna, chief U.S. economist at Natixis: “We aren’t in a good spot, and there aren’t many cushions left if we fall further. The Fed can’t cut interest rates as much as it did in past slowdowns. We just passed a tax cut, so we aren’t going to do that again. And we won’t pass any new legislation in this political environment.”
'Investors are coming back to their senses': Market bull Ed Yardeni
Yardeni has a number of valuable charts available at his website: Yardeni Research
Roubini: President Trump is flirting with mutually assured economic destruction - MarketWatch
Expect more 1,000-point swings for the Dow in 2019: Mohamed El-Erian - MarketWatch
Joseph LaVorgna, chief U.S. economist at Natixis: “We aren’t in a good spot, and there aren’t many cushions left if we fall further. The Fed can’t cut interest rates as much as it did in past slowdowns. We just passed a tax cut, so we aren’t going to do that again. And we won’t pass any new legislation in this political environment.”
++++
Trump:
Lying Don claimed there is a 10 foot wall around Obama's home:
There is no wall. Obama wall around house: Trump's claims are false, and a surprise to neighbors - The Washington Post
Lying Don claimed there is a 10 foot wall around Obama's home:
Trump issues executive order freezing federal workers' pay in 2019 - CNN The pay increase would have been 2.1%.
The Raving Demagogue Don blamed the Democrats for the children who died in the custody of his administration's border patrol. President Trump blames Democrats for deaths of children at U.S.-Mexico border - MarketWatch
Trump constantly just makes stuff up, which works when his main audience knows nothing: Trump wrong on size and timing of military pay increases | PolitiFact (pants on fire rating)
Trump constantly just makes stuff up, which works when his main audience knows nothing: Trump wrong on size and timing of military pay increases | PolitiFact (pants on fire rating)
++++++
1. Income Generation With Potentially Long Term Exchange Traded Bonds (issuer may redeem at its option prior to maturity):
Exchange Traded Baby Bonds
Exchange Traded Baby Bonds
A. Bought 50 THGA at $24.94 and 10 at $24.13-Used Commission Free Trades:
 |
| 50 Shares Bought Before Ex Interest Date |
 |
| 10 Shares Bought After Ex Interest Date |
Issuer: Hanover Insurance Group (THG)
THG Analyst Estimates
Hanover Insurance Group-Profile Page at Reuters
2017 Annual Report (debt discussed starting at page 110)
The Hanover Reports Third Quarter Net Income and Operating Income of $2.33 and $1.97 per Diluted Share, Respectively; Third Quarter Combined Ratio of 95.1%; Combined Ratio, Excluding Catastrophes, of 90.9%
Security:
PROSPECTUS
Par Value: $25
Interest Payments: Quarterly/Trades Flat
Issuer Optional Redemption: At anytime now
Maturity Date: 3/30/53 unless redeemed early by issuer
Hanover Insurance Group-Profile Page at Reuters
2017 Annual Report (debt discussed starting at page 110)
The Hanover Reports Third Quarter Net Income and Operating Income of $2.33 and $1.97 per Diluted Share, Respectively; Third Quarter Combined Ratio of 95.1%; Combined Ratio, Excluding Catastrophes, of 90.9%
Security:
PROSPECTUS
Par Value: $25
Interest Payments: Quarterly/Trades Flat
Issuer Optional Redemption: At anytime now
Maturity Date: 3/30/53 unless redeemed early by issuer
Stopper Clause: Yes, see page S-15 of the prospectus
Last Ex-Interest Date: 12/13/18 (shortly after 50 share purchase)
The preceding snapshot incorrectly classifies the payment as a dividend.
Hanover may defer interest payments for up to 5 years, provided it first eliminates the common share dividend. "During an Optional Deferral Period, interest will continue to accrue on the debentures, and deferred interest payments will accrue additional interest at the then applicable interest rate on the debentures, compounded quarterly as of each interest payment date to the extent permitted by applicable law." Those provisions are standard fare in Trust Preferred securities that are in effect junior bonds.
Last Ex-Interest Date: 12/13/18 (shortly after 50 share purchase)
The preceding snapshot incorrectly classifies the payment as a dividend.
Hanover may defer interest payments for up to 5 years, provided it first eliminates the common share dividend. "During an Optional Deferral Period, interest will continue to accrue on the debentures, and deferred interest payments will accrue additional interest at the then applicable interest rate on the debentures, compounded quarterly as of each interest payment date to the extent permitted by applicable law." Those provisions are standard fare in Trust Preferred securities that are in effect junior bonds.
Realized Gains to Date: $259.61
Prior Round-Trips:
Item # 5.A. Sold 50 THGA at $25.69-Roth IRA Account and 50 THGA at $25.72 in Taxable Account (9/11/17 Post)-South Gent's Comment Blog # 6: Bought 50 THGA in Roth IRA at $24.7 and South Gent's Comment Blog # 6: Bought 50 THGA at $24.87
Item # 4 Sold 50 THGA at $25.36 (1/29/17 Post)-Item # 4 Bought Back THGA at $24.98: Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As Of 1/22/16 - South Gent | Seeking Alpha
Item # 3 Roth IRA: Bought 50 THGA at $21.58 (11/6/13 Post)-Sold THGA: 50 Shares at $23.46-Roth IRA and 50 Shares Taxable Account at $23.67 (5/17/14 Post)
Related Trades:
Trust Certificates: There were two trust certificates (PKM and KRH) containing a junior Hanover Insurance bond. PKM had a 8% coupon, while KRH was .25% lower. Both had the same junior bond with a 8.207% coupon maturing in 2027 as their respective underlying security. Both were called by their call warrant owners. That bond is still outstanding, Finra.
Item # 3 Bought 150 TC PKM at 17.8 & 17.5 June 2009; Item # 3 Pared PKM-Sold 50 at $20.11 July 2009; Bought 50 PKM at $24.84 September 2010; PKM Called; Item # 4 Sold 100 of 150 PKM at $25.93 January 2011
Bought: KRH at $24.85 Bought 50 of the TC KRH at $19 November 2009- KRH-Exercise of Call Warrant December 2010
Bought 50 KRH at $18.62 in IRA-Sold 50 KRH at 24.6 (October 2010)
Realized Gains PKM and KRH = $1,151.6
$1K Par Value Bond: Hanover Insurance 4.5% SU Maturing on 4/15/26
I currently own 2 bonds. Item # 3.C. (6/7/2018 Post)
B. Bought 70 of the First Mortgage Bond EMP at $21.76:
Quote Entergy Mississippi LLC 4.9% First Mortgage Bond
This is an average down from a 30 share purchase bought with a Schwab commission free trade. Since I wanted to average down and have no commission free trades left in that account, I elected to round up to 100 shares in one commissionable trade.
Prior Discussion: Item # 4.A. Bought 30 EMP at $24.04-Used Commission Free Trade (5/28/18 Post)
Current and Maximum Position: 100 shares
Average Total Cost Per Share: $22.49
Interest Yield at Average Total Cost = 5.45%
Interest Payments: Quarterly
Last Ex Interest Date: 12/28/18 (after this last purchase)
Par Value: $25
Optional Issuer Call Date: at anytime on or after 10/1/21
Security: First Lien on Substantially all of issuer's assets
Credit Ratings (copied from Schwab account):
Prior EMP Round-Trip: Item # 2.A. Sold 50 EMP at $24.47 (7/22/17 Post)(profit snapshot = $66.98)-Item # 2.A. Sold 50 EMP at $24.47 (7/22/17 Post)
I also own 3 Entergy Mississippi 3.1% First Mortgage bonds maturing on 7/1/23 ($1K par value bonds traded in the bond market). That one is hard to trade. When I bought EMP, the bid/ask spread was 21.75/21.76 which was narrower than normal. I placed a limit order at the ask price.
When I placed the EMP order, the order book for the 2023 bond had a wide bid-ask spread. While there was a buyer for 1 bond at 97.210, I would not sell at that price and would consider buying another one. The ask prices were more than I want to pay for another purchase now, and none of them would have accepted a one bond purchase anyway:
2. Short Term Bond/CD Ladder Basket Strategy:
Item # 5.A. Sold 50 THGA at $25.69-Roth IRA Account and 50 THGA at $25.72 in Taxable Account (9/11/17 Post)-South Gent's Comment Blog # 6: Bought 50 THGA in Roth IRA at $24.7 and South Gent's Comment Blog # 6: Bought 50 THGA at $24.87
Item # 4 Sold 50 THGA at $25.36 (1/29/17 Post)-Item # 4 Bought Back THGA at $24.98: Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As Of 1/22/16 - South Gent | Seeking Alpha
Item # 3 Roth IRA: Bought 50 THGA at $21.58 (11/6/13 Post)-Sold THGA: 50 Shares at $23.46-Roth IRA and 50 Shares Taxable Account at $23.67 (5/17/14 Post)
Related Trades:
Trust Certificates: There were two trust certificates (PKM and KRH) containing a junior Hanover Insurance bond. PKM had a 8% coupon, while KRH was .25% lower. Both had the same junior bond with a 8.207% coupon maturing in 2027 as their respective underlying security. Both were called by their call warrant owners. That bond is still outstanding, Finra.
Item # 3 Bought 150 TC PKM at 17.8 & 17.5 June 2009; Item # 3 Pared PKM-Sold 50 at $20.11 July 2009; Bought 50 PKM at $24.84 September 2010; PKM Called; Item # 4 Sold 100 of 150 PKM at $25.93 January 2011
Bought: KRH at $24.85 Bought 50 of the TC KRH at $19 November 2009- KRH-Exercise of Call Warrant December 2010
Bought 50 KRH at $18.62 in IRA-Sold 50 KRH at 24.6 (October 2010)
Realized Gains PKM and KRH = $1,151.6
$1K Par Value Bond: Hanover Insurance 4.5% SU Maturing on 4/15/26
I currently own 2 bonds. Item # 3.C. (6/7/2018 Post)
B. Bought 70 of the First Mortgage Bond EMP at $21.76:
Quote Entergy Mississippi LLC 4.9% First Mortgage Bond
This is an average down from a 30 share purchase bought with a Schwab commission free trade. Since I wanted to average down and have no commission free trades left in that account, I elected to round up to 100 shares in one commissionable trade.
Prior Discussion: Item # 4.A. Bought 30 EMP at $24.04-Used Commission Free Trade (5/28/18 Post)
Current and Maximum Position: 100 shares
Average Total Cost Per Share: $22.49
Interest Yield at Average Total Cost = 5.45%
Interest Payments: Quarterly
Last Ex Interest Date: 12/28/18 (after this last purchase)
Par Value: $25
Optional Issuer Call Date: at anytime on or after 10/1/21
Security: First Lien on Substantially all of issuer's assets
Credit Ratings (copied from Schwab account):
I also own 3 Entergy Mississippi 3.1% First Mortgage bonds maturing on 7/1/23 ($1K par value bonds traded in the bond market). That one is hard to trade. When I bought EMP, the bid/ask spread was 21.75/21.76 which was narrower than normal. I placed a limit order at the ask price.
When I placed the EMP order, the order book for the 2023 bond had a wide bid-ask spread. While there was a buyer for 1 bond at 97.210, I would not sell at that price and would consider buying another one. The ask prices were more than I want to pay for another purchase now, and none of them would have accepted a one bond purchase anyway:
2. Short Term Bond/CD Ladder Basket Strategy:
Purchases: $5K
A. Bought 3 Treasury Six Month T Bills at Auction Maturing on 6/20/19:
IR = 2.552%
Auction Results:
B. Bought 2 Amphenol 2.2% SU Maturing on 4/1/20:
A. Bought 3 Treasury Six Month T Bills at Auction Maturing on 6/20/19:
IR = 2.552%
Auction Results:
B. Bought 2 Amphenol 2.2% SU Maturing on 4/1/20:
FINRA Page: Bond Detail (prospectus linked)
Issuer: Amphenol Corp. Cl A (APH)
APH Analyst Estimates
Website: Enabling The Electronics Revolution | Amphenol
Third Quarter 2018 Record Results Reported by Amphenol Corporation
2017 Annual Report (debt listed and discussed starting at page 53)
APH SEC Filings
Credit Ratings:
Bought at a Total Cost of 98.495
YTM at Total Cost Then at 3.404%
Current Yield at TC = 2.2336%
3. Equity REIT Common and Preferred Stock Basket Strategy:
A. Bought 50 DLRPRJ at $21.16 and 10 at $20.48-Used Commission Free Trades:
I discuss buying this security in this comment.
A. Bought 50 DLRPRJ at $21.16 and 10 at $20.48-Used Commission Free Trades:
 |
| 50 shares |
 |
| 10 Shares |
The 50 share lot was bought shortly before the quarterly ex dividend date and the 10 share lot was bought shortly after that date.
Quote: Digital Realty Trust Inc. 5.25% Cumulative Preferred Series J
Issuer Digital Realty Trust Inc (DLR)
SEC Filings
2017 Annual Report
SEC Filed Earnings Release for the Q/E 9/30/18
Last Stock Offering (September 2018): Prospectus (8.5M shares + greenshoe at $113)
Last Bond Offering (June 2018) $650M of 4.45% SU Notes Maturing in 2028
Security Description:
Prospectus (sold to the public at $25 in August 2017)
Category: Equity Preferred Stock
Capital Structure Placement: Senior only to common stock
Issuer Optional Call: On or after 8/7/22
Maturity Date: None, potentially perpetual
Dividends: Quarterly, Cumulative and non-qualified
Stopper Clause: Yes, see bottom of page S-34 and top page S-35 of the prospectus
Dividend Yield at Total Cost Per Share = 6.2%
Maximum Position: 100 Shares
Next Purchase: Will consider buying in 10 share increments using Small Ball Rule
Likely Sell: Over $23+ for the 50 share lot
4. Income Generation-BDCs:
A. Added 10 GARS at $7.13 and 15 at $6.3-Used Commission Free Trades:
Quote: GARS-Garrison Capital Inc.
Last Discussed: Item # 1.A. Bought 50 GARS at $7.7-Used Commission Free Trade (12/2/18 Post)
GARS is a deservedly hated, externally managed BDC.
SEC Filings
Dividends: Quarterly at $.23 per share (recently reduced)
Last Ex Dividend Date: 12/6/18 (50 shares received the dividend and did not reinvest that dividend)
Dividend Yield at Total Cost Per Share: 12.48%
Current Position: 80 Shares
Maximum Position: 100 Shares (one 20 share buy is the limit)
Average Cost Per Share: $7.37
B. Added 10 ARCC at $14.86-Used Commission Free Trade:
Quote: Ares Capital Corp. (ARCC)
Website: ARCC
2017 Annual Report
Current Position: 20 Shares (currently I do not own shares in any other account)
Prior 10 Lot Purchase Discussion: Item # 2.A. (3/25/18 Post)
Average Cost Per Share = $15.12
Maximum Position in this Account: 100 Shares
Purchase Restriction: Small Ball Rule (may buy up to 100 shares in another account)
Regular Dividend: Quarterly at $.39 per share ($1.56 per share annually)
ARCC-Dividends
Ares Capital Corporation Announces Tax Reporting Information for Calendar Year 2017
Dividend Yield at Total Cost = 10.32%
Last Ex Dividend Date: 12/13/18
Last Earnings Report: 9/30/18
Ares Capital Corporation Declares Fourth Quarter 2018 Dividend of $0.39 Per Share and Announces September 30, 2018 Financial Results | Business Wire
Net Asset Value Per Share History: Better than Most Externally Managed BDCs
9/30/18: $17.16
12/21/17: $16.65
Item # 1.C. Sold 50 ARCC at $16.98 (6/18/18 Post);
Item 2.A. Eliminated ARCC-Sold Remaining 50 Shares at $17.25 (2/15/17 Post);
Item # 1, Sold 102+ ARCC at $15.32 and 50 at $15.26: Update For Portfolio Positioning And Management As Of 8/21/16 - South Gent | Seeking Alpha
Sold 100 ARCC at $17.195 (4/28/15 Post);
Item # 3 Sold 100 ARCC Roth IRA at $17.05 (2/25/15 Post); Sold 100 ARCC at $17.54-IRAs in Two 50 Share Lots (9/13/12 Post)
Other Buy Discussions: While a $14.86 buy price is not my lowest purchase price, it is lower than all but one of my prior purchases.
Item # 1 Bought 50 ARCC at $14: Update For Portfolio Positioning And Management As Of 7/9/16 - South Gent | Seeking Alpha;
Bought 50 ARCC at $15.41-A Typical Small Lot Purchase Of An Externally Managed BDC Stock - South Gent | Seeking Alpha;
Item # 4 Added 50 ARCC at $16.9-Regular IRA (5/21/11 Post)
Item # 3 Bought 50 ARCC at $16.89 (12/3/2010 Post)
Realized Gains to Date: $525.41
I view ARES as the best of breed among externally managed BDCs.
5. Small Ball Income Generation Through Commission Free ETFs:
A. Added 5 FENY at $17.19 and at 5 $14.68-Commission Free for Fidelity Customers:
Quote Fidelity MSCI Energy Index ETF
Sponsor's Webpage: FENY | ETF Snapshot - Fidelity (expense ration .084%)
The recent free fall in crude oil prices has resulted in a free fall in energy stocks with no clear bottom yet in place IMO. Cushing, OK WTI Spot Price FOB (Dollars per Barrel)
Current Position: 20 shares
Average Cost Per Share = $18.16
Maximum Position: 100 Shares
Chart: Bear Market Trend (duration = unknowable)
Last Substantive Discussion: Re-Entry into FENY: Bought 10 at $18.77 and 5 at $17.9 (11/21/18 Post)
Dividends: Quarterly at a variable rate
Last Ex Dividend Date: 12/21/18
Sell Discussions: Item # 4.A. Eliminated FENY-Sold 60 shares at $18.83 (10/26/17 Post)(+$127.78); Item # 5 Sold 50 FENY at $27.81 (8/6/14)(+$115.96)
Realized Gains to Date: +$234.92
B. Added 5 DES at $26.26; 5 at $25.25; 5 at $24.2 and 5 at $23.4 -Commission Free for Vanguard Customers:
Quote: WisdomTree U.S. SmallCap Dividend Fund Overview
Sponsor's Website: WisdomTree U.S. SmallCap Dividend Fund
Morningstar currently has a 4 star rating.
Dividends: Monthly at a variable rate
Last Ex Dividend Date: 12/24/18
Dividend Reinvestment: Yes
Current Position: 70+ shares
Maximum Position: 300 Shares
Purchase Restriction: Small Ball Rule
Small caps are in a bear market of unknown duration.
6. ADDED To Some Mutual Fund Positions After Annual Dividend Payments:
A. Added $50 to MCDFX at $14.43:
The preceding snapshot shows my last elimination of this fund at $17.95. Item # 3 Eliminated MCDFX-Sold 111+ at $17.95 (4/12/18 Post)
Quote: Matthews China Dividend Fund;Investor Overview
MCDFX Matthews China Dividend Investor Fund-Morningstar
Last Substantive Discussion: Item # 1 MCDFX
Sponsor's Website: Overview-Matthews China Dividend Fund
Current Position: 31+ shares
Average Cost Per Share = $15.39
Realized Gains to Date: $1,137.18
B. Added $250 to VGHCX at $189.57:
Annual Dividend Payment Taken in Cash: $836.17
When I start paring down or eliminating my stock mutual fund positions, and take the dividend and capital gain distributions in cash, I am obviously becoming more defensive in my stock allocation. I eliminated several stock mutual fund positions last year with the largest being the Vanguard Equity Income Fund:Admiral mutual fund. Item # 1 (7/5/18 Post)
Last Substantive Discussion: Item # 3.B (7/2/18 Post)
Last Pare: Item # 3.B. Sold 47+ VGHCX at $205.2 (2/13/17)(profit snapshot = $426.53)
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.
