Economy:
The U.S. has started to collect a 15% tariff on more than $125B of China's exports on 9/1/19. China, U.S. kick off new round of tariffs in trade war - Reuters Trump stated last Friday that those tariffs will go into effect. There will be no grace period of goods in transit.
The GOP's tariff tax will be paid by U.S. consumers and businesses. Trump has repeatedly claimed that China pays the U.S. tariffs which is a demonstrably false claim intended to mislead the public.
A 15% tariff will be collected on about $160B in exports, including cellphones, laptops and flat panel TV, starting on 12/15/19. Trump's Fall 2019 China Tariff Plan: Five Things You Need to Know | PIIE
The foregoing tariffs are separate from the 25% tariffs already in place on about $250B other products that will be increased to 30% soon. Retailers howl as U.S. trade agency locks in 15% tariffs on Sept. 1 - Reuters; The trade war has already cost electronics companies $10 billion
The market overreacted IMO last Thursday to this news story: China says it's willing to resolve trade war with a 'calm attitude'
China basically invited the "Extremely Stable Genius" to calm down which is more of a criticism of Donald's hyperbolic and highly acerbic negotiating style than an indication that negotiations are now bearing fruit.
With China, Donald is not dealing with a small business supplier of products or services where litigation and threats of litigation could force them to accept less than what Donald owed them or with individuals who told the truth about Donald and were then browbeat with frivolous libel or slander litigation designed to intimate them and silence others who have damaging information on him. Donald Trump Has a History of Not Paying His Bills. That Offers Some Insights Into His Personality.; Donald J. Trump Is A Libel Bully But Also A Libel Loser; American Bar Association blasts Donald Trump as ‘libel bully’ and ‘loser’ who never won a free-speech suit - New York Daily News
China did not say, as widely reported last Thursday, that it will refrain from retaliating if the U.S. imposes new tariffs on 9/1. (see, e.g. China Indicates It Won’t Retaliate Against Newest U.S. Tariffs - Bloomberg) I made this point in a recent comment.
China has reportedly already retaliated by levying additional tariffs on about $75B of U.S. exports including a new 5% tariff on U.S. crude exports. China starts to impose additional tariffs on some US goods More information will likely be available early next week.
And, China would not even acknowledge that a high level meeting will occur this month. Last Friday, Trump made the following statement about a September meeting: I guess the meeting in September continues to be on, it hasn’t been canceled.”
Trump claimed last Thursday that the negotiations were occurring "at a different level" which I interpret as meaning at a lower level. Trump says China trade talks resume Thursday 'at a different level'
Trump denied that the tariffs were having any impact on the U.S. economy.
Instead, Donald asserted that a "lot of badly run companies are trying to blame the tariffs".
In the Alternate Reality of TrumpWorld where true is false and false is true, the problem is that interest rates are not low enough even though they are at Great Depression levels. Trump: “We don’t have a Tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem. They don’t have a clue!"
As Trump Escalates Trade War, U.S. and China Move Further Apart With No End in Sight - The New York Times
'It's an unjustified tax': Craft beer brewers hit by Trump China tariffs
China's consumption more crucial to its economy than trade exports
How Trump's China tariffs will impact prices for consumers
Trade war: U.S. tariffs on China target clothing, TVs, other goods: USA Today
The second government estimate for 2nd quarter real GDP growth was revised to 2% from the previous 2.1%. Gross Domestic Product, Second Quarter 2019 (Second Estimate); Corporate Profits, Second Quarter 2019 (Preliminary Estimate) | U.S. Bureau of Economic Analysis (BEA) The current 2nd quarter estimate for personal consumption expenditures is +4.7%, up from 1.1% in the prior quarter.
Quotes from Report:
The U.S. has started to collect a 15% tariff on more than $125B of China's exports on 9/1/19. China, U.S. kick off new round of tariffs in trade war - Reuters Trump stated last Friday that those tariffs will go into effect. There will be no grace period of goods in transit.
The GOP's tariff tax will be paid by U.S. consumers and businesses. Trump has repeatedly claimed that China pays the U.S. tariffs which is a demonstrably false claim intended to mislead the public.
A 15% tariff will be collected on about $160B in exports, including cellphones, laptops and flat panel TV, starting on 12/15/19. Trump's Fall 2019 China Tariff Plan: Five Things You Need to Know | PIIE
The foregoing tariffs are separate from the 25% tariffs already in place on about $250B other products that will be increased to 30% soon. Retailers howl as U.S. trade agency locks in 15% tariffs on Sept. 1 - Reuters; The trade war has already cost electronics companies $10 billion
The market overreacted IMO last Thursday to this news story: China says it's willing to resolve trade war with a 'calm attitude'
China basically invited the "Extremely Stable Genius" to calm down which is more of a criticism of Donald's hyperbolic and highly acerbic negotiating style than an indication that negotiations are now bearing fruit.
With China, Donald is not dealing with a small business supplier of products or services where litigation and threats of litigation could force them to accept less than what Donald owed them or with individuals who told the truth about Donald and were then browbeat with frivolous libel or slander litigation designed to intimate them and silence others who have damaging information on him. Donald Trump Has a History of Not Paying His Bills. That Offers Some Insights Into His Personality.; Donald J. Trump Is A Libel Bully But Also A Libel Loser; American Bar Association blasts Donald Trump as ‘libel bully’ and ‘loser’ who never won a free-speech suit - New York Daily News
China did not say, as widely reported last Thursday, that it will refrain from retaliating if the U.S. imposes new tariffs on 9/1. (see, e.g. China Indicates It Won’t Retaliate Against Newest U.S. Tariffs - Bloomberg) I made this point in a recent comment.
China has reportedly already retaliated by levying additional tariffs on about $75B of U.S. exports including a new 5% tariff on U.S. crude exports. China starts to impose additional tariffs on some US goods More information will likely be available early next week.
And, China would not even acknowledge that a high level meeting will occur this month. Last Friday, Trump made the following statement about a September meeting: I guess the meeting in September continues to be on, it hasn’t been canceled.”
Trump claimed last Thursday that the negotiations were occurring "at a different level" which I interpret as meaning at a lower level. Trump says China trade talks resume Thursday 'at a different level'
Trump denied that the tariffs were having any impact on the U.S. economy.
Instead, Donald asserted that a "lot of badly run companies are trying to blame the tariffs".
In the Alternate Reality of TrumpWorld where true is false and false is true, the problem is that interest rates are not low enough even though they are at Great Depression levels. Trump: “We don’t have a Tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem. They don’t have a clue!"
As Trump Escalates Trade War, U.S. and China Move Further Apart With No End in Sight - The New York Times
'It's an unjustified tax': Craft beer brewers hit by Trump China tariffs
China's consumption more crucial to its economy than trade exports
How Trump's China tariffs will impact prices for consumers
Trade war: U.S. tariffs on China target clothing, TVs, other goods: USA Today
The second government estimate for 2nd quarter real GDP growth was revised to 2% from the previous 2.1%. Gross Domestic Product, Second Quarter 2019 (Second Estimate); Corporate Profits, Second Quarter 2019 (Preliminary Estimate) | U.S. Bureau of Economic Analysis (BEA) The current 2nd quarter estimate for personal consumption expenditures is +4.7%, up from 1.1% in the prior quarter.
Quotes from Report:
"The increase in real GDP in the second quarter reflected positive contributions from PCE, federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment, exports, residential fixed investment, and nonresidential fixed investment. Imports increased."
"The deceleration in real GDP in the second quarter primarily reflected downturns in inventory investment, exports, and nonresidential fixed investment. These downturns were partly offset by accelerations in PCE and federal government spending."
"The price index for gross domestic purchases increased 2.2 percent in the second quarter, compared with an increase of 0.8 percent in the first quarter (table 4). The PCE price index increased 2.3 percent, compared with an increase of 0.4 percent. Excluding food and energy prices, the PCE price index increased 1.7 percent, compared with an increase of 1.1 percent." (emphasis supplied)
Second-quarter GDP trimmed to 2% from 2.1%; companies cut spending, boost profits - MarketWatch
Second-quarter GDP trimmed to 2% from 2.1%; companies cut spending, boost profits - MarketWatch
These charts warn that there is something wrong with the American consumer - MarketWatch
Pending home sales fall 2.5% in July - MarketWatch So declining mortgage rates is not acting as a lure for hesitant buyers.
Pending home sales fall 2.5% in July - MarketWatch So declining mortgage rates is not acting as a lure for hesitant buyers.
The rich aren't spending, signaling a possible recession ahead
Ron Insana: It ain't different this time for the inverted yield curve
Ron Insana: It ain't different this time for the inverted yield curve
+++++++
Markets and Market Commentary:
This dividend-stock strategy is for investors who want an attractive monthly income stream - MarketWatch I have created an income stream using bonds and CDs but I am moving more toward using dividend paying stocks as contributors. Of the stocks mentioned in that article, I currently own small amounts of AT&T. Dominion Resources, Duke Energy, Enbridge, and Exxon Mobil. All of those stocks are being bought pursuant to the small ball strategy where each purchase has to be at the lowest price in the chain.
These energy firms are trading at their financial-crisis lows - MarketWatch Before this article was published, I started a small ball purchase program Schlumberger Ltd. (SLB), one of the stocks mentioned in this article. I have not yet discussed the three SLB purchases. SLB is in a major bear market with no end in sight yet.
These energy firms are trading at their financial-crisis lows - MarketWatch Before this article was published, I started a small ball purchase program Schlumberger Ltd. (SLB), one of the stocks mentioned in this article. I have not yet discussed the three SLB purchases. SLB is in a major bear market with no end in sight yet.
Bank of America downgraded amid yield curve inversion, likely Fed cuts The yield inversion is a major headwind for banks.
Stocks won't bottom until they fall another 5%: Wells Fargo
History says the stock market’s volatile August paves the way for more losses in September - MarketWatch
Stocks won't bottom until they fall another 5%: Wells Fargo
History says the stock market’s volatile August paves the way for more losses in September - MarketWatch
++++++++
Trump:
Trump's False Auto Industry Tweets - FactCheck.org
Donald Trump misleads on Russia, Crimea, Obama and the G-8 | PolitiFact
Trump pushes to allow new logging in Alaska’s Tongass National Forest - The Washington Post ("The move would affect more than half of the world’s largest intact temperate rainforest, opening it up to potential logging, energy and mining projects.")
Donald is a self-proclaimed "environmentalist". That is the kind of Trump comment that makes one want to laugh at the Duck and cry at the same time since millions view him as honest person "who tells it like it is" (and they vote).
Trump says he's 'an environmentalist' after skipping G-7 climate meeting | TheHill;
Fact Check: Trump's environmental rhetoric versus his record - POLITICO
Some media outlets parrot Trump’s preposterous claim that he’s an environmentalist | Media Matters for America;
83 Environmental Rules Being Rolled Back Under Trump - The New York Times
New Interior Department senior adviser Christian Palich is a climate denier and former coal group president | Media Matters for America
Trump Administration Hardens Its Attack on Climate Science - The New York Times
After Trump claims first lady has ‘gotten to know’ Kim Jong Un, White House clarifies they’ve never met - The Washington Post
Demagogue Don continued to lash out at media organization that contradict his reality creations and lies with facts.
Donald's conduct, summarized in a WP article published last Wednesday, would constitute impeachable offenses if true. President Trump wants a border wall. He wants it black. And he wants it by Election Day. - The Washington Post Trump is so eager to complete his border law by election day that he instructed aides to "aggressively seize private land and disregard environmental rules, according to current and former officials involved with the project."
When aides suggested that some of Authoritarian Don's were unlawful or unworkable, Donald "waved off worries about contracting procedures and the use of eminent domain, saying 'take the land.'" If anyone was charged with violating the law, the Duck promised that he would pardon them. If Donald did direct subordinates to violate the law, that would be a clear violation of his oath of office.
Donald called the report Fake News that was made up by the WP. Democrats alarmed by Trump’s promise of pardons to build border wall
Donald's spokesperson claimed that Donald was joking when he requested officials to break the law. Trump only 'joking' about pardons if laws broken in pursuit of border wall: WH official - ABC News That is Donalds go to defense when caught in a clearly impeachable offense (the pardon offer for violating the law, if made, probably violated the federal bribery statute, 18 U.S. Code § 201 and other laws besides being a clear violation of his oath of office. On its face, the offer would violate the bribery statute, but Donald's defense, which goes to "corrupt" intent, would be a jury question)Donald called the report Fake News that was made up by the WP. Democrats alarmed by Trump’s promise of pardons to build border wall
Trump's False Auto Industry Tweets - FactCheck.org
Donald Trump misleads on Russia, Crimea, Obama and the G-8 | PolitiFact
Trump pushes to allow new logging in Alaska’s Tongass National Forest - The Washington Post ("The move would affect more than half of the world’s largest intact temperate rainforest, opening it up to potential logging, energy and mining projects.")
Donald is a self-proclaimed "environmentalist". That is the kind of Trump comment that makes one want to laugh at the Duck and cry at the same time since millions view him as honest person "who tells it like it is" (and they vote).
Trump says he's 'an environmentalist' after skipping G-7 climate meeting | TheHill;
Fact Check: Trump's environmental rhetoric versus his record - POLITICO
Some media outlets parrot Trump’s preposterous claim that he’s an environmentalist | Media Matters for America;
83 Environmental Rules Being Rolled Back Under Trump - The New York Times
New Interior Department senior adviser Christian Palich is a climate denier and former coal group president | Media Matters for America
Trump Administration Hardens Its Attack on Climate Science - The New York Times
After Trump claims first lady has ‘gotten to know’ Kim Jong Un, White House clarifies they’ve never met - The Washington Post
Demagogue Don continued to lash out at media organization that contradict his reality creations and lies with facts.
Trump takes time out of G7 meeting to lash out at media
Demagogue Don is of course one of the most prolific liars in recorded human history and consequently does whatever he can to turn voters away from accurate information that contradicts his constant and overflowing stream of false statements and representations.
Demagogue Don is of course one of the most prolific liars in recorded human history and consequently does whatever he can to turn voters away from accurate information that contradicts his constant and overflowing stream of false statements and representations.
VA staffers blasted 'ridiculous' meetings and questions with Trump allies in internal emails
Axios: Trump floated the idea of using nuclear bombs to stop hurricanes headed for US; Scoop: Trump suggested nuking hurricanes to stop them from hitting U.S.-Axios Donald denied that he ever suggested using nuclear weapons to stop hurricanes from reaching the U.S. Trump denies asking about nuking hurricanes - The Washington Post (noting the idea had been considered in the past)
Exclusive: Falwell steered Liberty University land deal benefiting his personal trainer-Reuters Falwell, a self proclaimed Christian and "conservative", is a major Trump supporter.
Donald Trump’s border wall: how much has been built?-PolitiFact Before Lying Don became President, there were 654 miles of primary barriers along the nearly 2000 mile border. That has not changed under Trump notwithstanding his statements to the contrary. What has been done is the replacement of dilapidated barriers with new fencing. Mexico has not paid a penny to build the wall.
Axios: Trump floated the idea of using nuclear bombs to stop hurricanes headed for US; Scoop: Trump suggested nuking hurricanes to stop them from hitting U.S.-Axios Donald denied that he ever suggested using nuclear weapons to stop hurricanes from reaching the U.S. Trump denies asking about nuking hurricanes - The Washington Post (noting the idea had been considered in the past)
Exclusive: Falwell steered Liberty University land deal benefiting his personal trainer-Reuters Falwell, a self proclaimed Christian and "conservative", is a major Trump supporter.
Donald Trump’s border wall: how much has been built?-PolitiFact Before Lying Don became President, there were 654 miles of primary barriers along the nearly 2000 mile border. That has not changed under Trump notwithstanding his statements to the contrary. What has been done is the replacement of dilapidated barriers with new fencing. Mexico has not paid a penny to build the wall.
+++++++
1. Eliminations:
A. Sold 112+ Shares of PRHSX at $74.16:
Quote: T. Rowe Price Health Sciences Fund
Profit Snapshot: +$1,166.12
I have now reduced by T. Rowe Price mutual fund holdings to 3 core funds:
T. Rowe Price Capital Appreciation (PRWCX)
T. Rowe Price Dividend Growth Fund (PRDGX)
T. Rowe Price Small-Cap Fund (OTCFX)
The largest position is in the balanced fund Capital Appreciation. The unrealized gains in those three funds is currently over $30K.
I have been taking the dividends in cash for over 2 years now and will continue to do until there is at least a 40% correction from current levels or around SPX 1800.
If the stock market continues to move higher, piercing SPX 3200 within 12 months, I will next consider eliminating the Dividend Growth Fund which has my largest unrealized profit among those three funds. I reach a point, given my capital preservation objectives, where I would prefer to lock in a profit and then invest the proceeds into credit risk free assets. So far this year, I have harvested a $10,899.66 profit by eliminating T.Rowe Price stock mutual funds.
B. Sold Remaining 61+ THQ Shares at $17.5:
Quote: Tekla Healthcare Opportunities Fund (THQ)
Sponsor's Website: Fund Basics | Tekla Capital
THQ-CEF Connect Page
Closing Price Last Friday: THQ $17.22 +$0.06 +0.35%
SEC Filings
Dividend: Monthly at $.1125 (supported by ROC)
Distributions | Tekla Capital Management LLC
Profit Snapshot: +$60.49 (excludes prior 2019 transactions)
Last Discussed: Item # 2.A. Sold 53 THQ at $17.98(7/31/19 Post)
Last Buy Discussion: Item # 1 Bought 50 THQ at $16.5 (6/12/19 Post)
Other Sell Discussions: Item # 5 Sold 100 THQ at $17.59-Used Commission Free Trade(7/7/19 Post)(profit snapshot = $79.98)(contains 2017 profit snapshots = $555.56); Item # 2.C. Sold 232+ THQ at 17.59 (7/3/17 Post): Item # 2.D. Sold 118+ THQ at $18.7 in a Roth IRA Account (7/3/17 Post); Item # 3. Sold 160+ THQ at $17.41 (6/5/17 Post)
Last Elimination: Item # 6 Eliminated THQ at $17.65 (12/29/18 Post)(profit snapshot = $47.03)
2017 to Date THQ Realized Profit = $743.06
Expense Ratio: Too high at 1.49% which excludes interest expenses
The goal with THQ is harvest the dividend and to sell the shares profitably from time to time.
I am concerned that healthcare stocks may falter during the election season, particularly if it looks like the Democrats will regain control over the White House and both houses of Congress.
While I do not have a target re-entry price, my last purchase was at $16.5 (6/3/19) when the discount to net asset value was greater than 10%. I will start to take another look when the price falls below that level, provided the discount is then at greater than 10%.
2. Small Ball-BDCs:
The goal is always to generate a total return in excess of the dividend yield which requires taking profits and averaging down in order to improve my chances of achieving that goal.
A. Pared Highest Cost 14 TPVG Shares at $15.61-Used Commission Free Trade:
Profit Snapshot: +$46.33
Quote: TPVG | TriplePoint Venture Growth BDC Corp. Overview
TPVG SEC Filings; 2018 Annual Report
Website: TriplePoint Venture Growth
While I view TPVG as one of the better BDCs, I am not accustomed to holding onto any BDC selling at a significant premium to its last reported net asset value per share. TPVG's last reported net asset value per share was $14.19 as of 6/30/19. TPVG 10-Q at page 3
Unlike most other BDCs discussed in this blog, I have had only positive things to say about TPVG. That may change of course.
In the second quarter, a number of BDCs reported downdrafts in their respective net asset values per share due to new nonaccruals and loan writedowns. I discuss one of those in Item # 2.B. below. TPVG, on the other hand, reported a nice gain in its net asset value per share.
I have now sold down my TPVG position to just 20+ shares and have turned off the dividend reinvestment given the premium price to net asset value per share.
TPVG Before Pare: Average Cost Per Share = $11.76
TPVG After Pare: Average Cost per Share = $11.14
Dividend: Quarterly at $.36 per share ($1.44 annually)
Dividend Yield at $11.14= 12.93% (excludes special dividends)
Last Ex Dividend Date: 8/29/19
Realized TPVG Gains to Date: +$699.27 ($652.94 in prior trades)
Sell Discussions: Item # 2.A. Sold 74+ TPVG at $14.87 (7/20/19 Post)(profit snapshot= $246.43); Item # 4.C. Eliminated TPVG in Roth IRA Account (4/17/19 Post)(profit snapshot= $88.87); Item # 3.B.(4/14/19 Post)(profit snapshot = $71.76); Item 3.A. Sold 40 TPVG at $13.44-Schwab Account and Item #3B Sold 50 TPVG at $13.39 Vanguard Roth IRA (3/13/19 Post)(profit snapshots included); Item 2.B. Sold 50 TPVG at $13.39 (3/4/2017 Post)(profit snapshot = $153.08); Item # 3 Sold 50 TPVG at $12.33 (1/16/17 Post)(profit snapshot = $83.48)
Buy Discussions: Item # 4.A. Bought 50 TPVG at $12.11-In A Roth IRA Account (12/5/18 Post); Item # 3 D. Bought 10 TPVG at $11.2-Used Commission Free Trade (1/9/19 Post); Item # 4.A. Bought 50 TPVG at $12.11-In A Roth IRA Account (12/5/18 Post); Item # 3.A. Added 50 TPVG at $13.28 and 10 at $13.02-Used Schwab Commission Free Trades (8/15/18 Post); Item # 2.B. Added 10 TPVG at $11.6-Used Commission Free Trade (3/19/18 Post); Items 1.B. and 1.C. Bought 50 TPVG at $12.32 and 10 at $12.01-Used Commission Free Trades (2/26/18 Post); Comment Blog # 3-South Gent: Bought 50 TPVG at $10.61 | Seeking Alpha
As previously note, I define victory for a BDC position as a total return in excess of the dividend yield. TPVG has significantly surpassed that objective.
B. Bought 10 TCPC at $13.17-Used Commission Free trade:
Quote: BlackRock TCP Capital Corp.
Closing Price Last Friday: TCPC $13.45 unchanged
TCPC is now a borderline deservedly hated BDC IMO.
SEC Filings
Management: External and richly compensated
Only Prior Trade: Stocks, Bonds & Politics:Item # 1.C. Bought 20 TCPC at $13.95-Used Commission Free Trade (4/2/18 Post)
Net Asset Value Per Share History (for a BDC the trend was stable from the 2012 IPO date through 12/31/17 but has been sliding meaningfully since then as highlighted in red below):
6/30/19: $13.64 10-Q for the Q/E 6/30/19 at page 2
12/31/18: $14.13
12/31/17: $14.8
12/31/16: $14.91
12/31/15: $14.78 Earnings Release
12/31/14: $15.43
12/31/13: $15.18 Earnings Release
12/31/12 $14.71 Earnings Release
IPO on 4/3/12 at $14.75 Prospectus (proceeds after external manager's 1/2 reimbursement of the underwriters' discount and the BDC's cost related to the offering was at about $14.16 per share)
5 Year Financial Date:
Average Cost Per Share = $13.69
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule (next purchase 20 shares at below $12.75)
Dividend: Quarterly at $.36 per share ($1.44 annually)
Next Ex Dividend Date: 9/13/19
Dividend Yield at $13.69 TC per share = 10.52%
Dividend Reinvestment: Will start with the next quarterly dividend as a means to average down.
Last Earnings Report: The market reacted unfavorably to this earnings release for the reasons discussed below. That reaction was deserved IMO.
The most serious problem involved major markdowns to to Fidelis Acquisition L.L.C.
A $26.765+M original principal amount Term C PIK loan to Fidelis was marked down to a zero valuation. This loan never actually paid TCPC any interest. Instead, interest payments were paid with additions to the original principal amount.
A Term B $25.904+M 8% PIK loan to Fidelis was assigned a $18.965+M valuation.
As of 3/31/19, TCPC marked the Term C PIK loan at $21.608M. The markdown in just 3 months to zero makes the earlier mark look unwarranted and suspicious. The Term B PIK loan was valued at $22.5498+M.
Those two loans went from a $44.157+M valuation as of 3/31/19 to $18.964+B as of 6/30/19.
I do not like PIK loans. since pretend interest payments are made.
If the borrower survives to pay off the principal amount at maturity, then the pretend interest turns into real cash interest.
The large size of this PIK loan, its junior status in the capital structure, and the fast write-down in valuation support an opinion that the external managers are incompetent. They are nonetheless paid boatloads of money to produce this kind of result.
Stock Offerings:
TCP Capital Corp. Announces Pricing Of Public Offering Of Common Shares (4/20/17)("priced the public offering of 5,000,000 shares of its common stock at $16.84 per share for total gross proceeds of approximately $84.2 million. The Company has granted the underwriters an option for 30 days to purchase up to an additional 750,000 shares of common stock.")
$1K Par Value Bonds: Bond Detail (rated Baa3/BBB-)
Prospectus
TCP Capital Corp. Prices $50 Million Of 4.125% Notes Due 2022 (11/1/17); Prospectus
TCP Capital Corp. Prices $125 Million Of 4.125% Notes Due 2022 (8/4/2017)
This BDC recently sold $150M of 3.9% SU notes maturing on 8/23/24: Pricing Supplement
3. Short Term Bond/CD Ladder Basket Strategy:
A. Sold 1 Royal Bank of Canada 2.35% SU Maturing on 10/30/20:
Profit Snapshot: +$17.12
FINRA Page: Bond Detail (prospectus linked)
Issuer: Royal Bank of Canada (US: RY); Royal Bank of Canada (Canada: Toronto)
Sold at 100.394
YTM at 100.394 = 2.014%
Proceeds at 100.294 (after $1 commission)
B. Sold 2 Duke Energy 3.05% SU Maturing on 8/15/22-In a Roth IRA Account:
Profit Snapshot: +$51.12
Item # 3.B. Bought 2 DUK 2022 SU at a Total Cost of 99.465 (3/15/18 Post)
FINRA Page: Bond Detail (prospectus linked)
Issuer: Duke Energy Corp. (DUK)
DUK Analyst Estimates
Sold at 102.221
YTM at 102.221 = 2.21%
Accrued interest paid by the buyer was less than $1 since this bond just made its semi-annual interest payment:
I am redeploying proceeds from DUK bonds into its common stock which has a higher yield.
C. Bought 5 Treasury 56 Bills Maturing on 10/22/19 at Auction:
IR = 2.024%
Auction Results:
A. Sold 112+ Shares of PRHSX at $74.16:
Quote: T. Rowe Price Health Sciences Fund
Profit Snapshot: +$1,166.12
I have now reduced by T. Rowe Price mutual fund holdings to 3 core funds:
T. Rowe Price Capital Appreciation (PRWCX)
T. Rowe Price Dividend Growth Fund (PRDGX)
T. Rowe Price Small-Cap Fund (OTCFX)
The largest position is in the balanced fund Capital Appreciation. The unrealized gains in those three funds is currently over $30K.
I have been taking the dividends in cash for over 2 years now and will continue to do until there is at least a 40% correction from current levels or around SPX 1800.
If the stock market continues to move higher, piercing SPX 3200 within 12 months, I will next consider eliminating the Dividend Growth Fund which has my largest unrealized profit among those three funds. I reach a point, given my capital preservation objectives, where I would prefer to lock in a profit and then invest the proceeds into credit risk free assets. So far this year, I have harvested a $10,899.66 profit by eliminating T.Rowe Price stock mutual funds.
B. Sold Remaining 61+ THQ Shares at $17.5:
Quote: Tekla Healthcare Opportunities Fund (THQ)
Sponsor's Website: Fund Basics | Tekla Capital
THQ-CEF Connect Page
Closing Price Last Friday: THQ $17.22 +$0.06 +0.35%
SEC Filings
Dividend: Monthly at $.1125 (supported by ROC)
Distributions | Tekla Capital Management LLC
Profit Snapshot: +$60.49 (excludes prior 2019 transactions)
Last Discussed: Item # 2.A. Sold 53 THQ at $17.98(7/31/19 Post)
Last Buy Discussion: Item # 1 Bought 50 THQ at $16.5 (6/12/19 Post)
Other Sell Discussions: Item # 5 Sold 100 THQ at $17.59-Used Commission Free Trade(7/7/19 Post)(profit snapshot = $79.98)(contains 2017 profit snapshots = $555.56); Item # 2.C. Sold 232+ THQ at 17.59 (7/3/17 Post): Item # 2.D. Sold 118+ THQ at $18.7 in a Roth IRA Account (7/3/17 Post); Item # 3. Sold 160+ THQ at $17.41 (6/5/17 Post)
Last Elimination: Item # 6 Eliminated THQ at $17.65 (12/29/18 Post)(profit snapshot = $47.03)
2017 to Date THQ Realized Profit = $743.06
Expense Ratio: Too high at 1.49% which excludes interest expenses
The goal with THQ is harvest the dividend and to sell the shares profitably from time to time.
I am concerned that healthcare stocks may falter during the election season, particularly if it looks like the Democrats will regain control over the White House and both houses of Congress.
While I do not have a target re-entry price, my last purchase was at $16.5 (6/3/19) when the discount to net asset value was greater than 10%. I will start to take another look when the price falls below that level, provided the discount is then at greater than 10%.
2. Small Ball-BDCs:
The goal is always to generate a total return in excess of the dividend yield which requires taking profits and averaging down in order to improve my chances of achieving that goal.
A. Pared Highest Cost 14 TPVG Shares at $15.61-Used Commission Free Trade:
Profit Snapshot: +$46.33
Quote: TPVG | TriplePoint Venture Growth BDC Corp. Overview
TPVG SEC Filings; 2018 Annual Report
Website: TriplePoint Venture Growth
While I view TPVG as one of the better BDCs, I am not accustomed to holding onto any BDC selling at a significant premium to its last reported net asset value per share. TPVG's last reported net asset value per share was $14.19 as of 6/30/19. TPVG 10-Q at page 3
Unlike most other BDCs discussed in this blog, I have had only positive things to say about TPVG. That may change of course.
In the second quarter, a number of BDCs reported downdrafts in their respective net asset values per share due to new nonaccruals and loan writedowns. I discuss one of those in Item # 2.B. below. TPVG, on the other hand, reported a nice gain in its net asset value per share.
I have now sold down my TPVG position to just 20+ shares and have turned off the dividend reinvestment given the premium price to net asset value per share.
TPVG Before Pare: Average Cost Per Share = $11.76
TPVG After Pare: Average Cost per Share = $11.14
Dividend: Quarterly at $.36 per share ($1.44 annually)
Dividend Yield at $11.14= 12.93% (excludes special dividends)
Last Ex Dividend Date: 8/29/19
Realized TPVG Gains to Date: +$699.27 ($652.94 in prior trades)
Sell Discussions: Item # 2.A. Sold 74+ TPVG at $14.87 (7/20/19 Post)(profit snapshot= $246.43); Item # 4.C. Eliminated TPVG in Roth IRA Account (4/17/19 Post)(profit snapshot= $88.87); Item # 3.B.(4/14/19 Post)(profit snapshot = $71.76); Item 3.A. Sold 40 TPVG at $13.44-Schwab Account and Item #3B Sold 50 TPVG at $13.39 Vanguard Roth IRA (3/13/19 Post)(profit snapshots included); Item 2.B. Sold 50 TPVG at $13.39 (3/4/2017 Post)(profit snapshot = $153.08); Item # 3 Sold 50 TPVG at $12.33 (1/16/17 Post)(profit snapshot = $83.48)
Buy Discussions: Item # 4.A. Bought 50 TPVG at $12.11-In A Roth IRA Account (12/5/18 Post); Item # 3 D. Bought 10 TPVG at $11.2-Used Commission Free Trade (1/9/19 Post); Item # 4.A. Bought 50 TPVG at $12.11-In A Roth IRA Account (12/5/18 Post); Item # 3.A. Added 50 TPVG at $13.28 and 10 at $13.02-Used Schwab Commission Free Trades (8/15/18 Post); Item # 2.B. Added 10 TPVG at $11.6-Used Commission Free Trade (3/19/18 Post); Items 1.B. and 1.C. Bought 50 TPVG at $12.32 and 10 at $12.01-Used Commission Free Trades (2/26/18 Post); Comment Blog # 3-South Gent: Bought 50 TPVG at $10.61 | Seeking Alpha
As previously note, I define victory for a BDC position as a total return in excess of the dividend yield. TPVG has significantly surpassed that objective.
B. Bought 10 TCPC at $13.17-Used Commission Free trade:
Quote: BlackRock TCP Capital Corp.
Closing Price Last Friday: TCPC $13.45 unchanged
TCPC is now a borderline deservedly hated BDC IMO.
SEC Filings
Management: External and richly compensated
Only Prior Trade: Stocks, Bonds & Politics:Item # 1.C. Bought 20 TCPC at $13.95-Used Commission Free Trade (4/2/18 Post)
Net Asset Value Per Share History (for a BDC the trend was stable from the 2012 IPO date through 12/31/17 but has been sliding meaningfully since then as highlighted in red below):
6/30/19: $13.64 10-Q for the Q/E 6/30/19 at page 2
12/31/18: $14.13
12/31/17: $14.8
12/31/16: $14.91
12/31/15: $14.78 Earnings Release
12/31/14: $15.43
12/31/13: $15.18 Earnings Release
12/31/12 $14.71 Earnings Release
IPO on 4/3/12 at $14.75 Prospectus (proceeds after external manager's 1/2 reimbursement of the underwriters' discount and the BDC's cost related to the offering was at about $14.16 per share)
5 Year Financial Date:
Current Position: 30 Shares
Average Cost Per Share = $13.69
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule (next purchase 20 shares at below $12.75)
Dividend: Quarterly at $.36 per share ($1.44 annually)
Next Ex Dividend Date: 9/13/19
Dividend Yield at $13.69 TC per share = 10.52%
Dividend Reinvestment: Will start with the next quarterly dividend as a means to average down.
Last Earnings Report: The market reacted unfavorably to this earnings release for the reasons discussed below. That reaction was deserved IMO.
The most serious problem involved major markdowns to to Fidelis Acquisition L.L.C.
A $26.765+M original principal amount Term C PIK loan to Fidelis was marked down to a zero valuation. This loan never actually paid TCPC any interest. Instead, interest payments were paid with additions to the original principal amount.
A Term B $25.904+M 8% PIK loan to Fidelis was assigned a $18.965+M valuation.
 |
| Fidelis Loans as of 6/30/19 with TCPC market values |
Those two loans went from a $44.157+M valuation as of 3/31/19 to $18.964+B as of 6/30/19.
I do not like PIK loans. since pretend interest payments are made.
If the borrower survives to pay off the principal amount at maturity, then the pretend interest turns into real cash interest.
The large size of this PIK loan, its junior status in the capital structure, and the fast write-down in valuation support an opinion that the external managers are incompetent. They are nonetheless paid boatloads of money to produce this kind of result.
Stock Offerings:
TCP Capital Corp. Announces Pricing Of Public Offering Of Common Shares (4/20/17)("priced the public offering of 5,000,000 shares of its common stock at $16.84 per share for total gross proceeds of approximately $84.2 million. The Company has granted the underwriters an option for 30 days to purchase up to an additional 750,000 shares of common stock.")
$1K Par Value Bonds: Bond Detail (rated Baa3/BBB-)
Prospectus
TCP Capital Corp. Prices $50 Million Of 4.125% Notes Due 2022 (11/1/17); Prospectus
TCP Capital Corp. Prices $125 Million Of 4.125% Notes Due 2022 (8/4/2017)
This BDC recently sold $150M of 3.9% SU notes maturing on 8/23/24: Pricing Supplement
A. Sold 1 Royal Bank of Canada 2.35% SU Maturing on 10/30/20:
Profit Snapshot: +$17.12
FINRA Page: Bond Detail (prospectus linked)
Issuer: Royal Bank of Canada (US: RY); Royal Bank of Canada (Canada: Toronto)
Sold at 100.394
YTM at 100.394 = 2.014%
Proceeds at 100.294 (after $1 commission)
B. Sold 2 Duke Energy 3.05% SU Maturing on 8/15/22-In a Roth IRA Account:
Profit Snapshot: +$51.12
Item # 3.B. Bought 2 DUK 2022 SU at a Total Cost of 99.465 (3/15/18 Post)
FINRA Page: Bond Detail (prospectus linked)
Issuer: Duke Energy Corp. (DUK)
DUK Analyst Estimates
Sold at 102.221
YTM at 102.221 = 2.21%
Accrued interest paid by the buyer was less than $1 since this bond just made its semi-annual interest payment:
I am redeploying proceeds from DUK bonds into its common stock which has a higher yield.
C. Bought 5 Treasury 56 Bills Maturing on 10/22/19 at Auction:
IR = 2.024%
Auction Results:
4. Intermediate Term Bond Ladder Basket Strategy:
A. Sold 2 out of 3 Dominion Resources 2.75% SU Maturing on 9/15/22:
Profit Snapshot: +$10.38
Finra Page: Bond Detail
Issuer: Dominion Energy Inc. (D)
Sold at 100.482
YTM at 100.482 = 2.576%
Proceeds at 100.382 (after $ 2 brokerage commission)
5. Small Ball-Electric Utility Stocks:
A. Bought 10 DUK at $89.4-Used Commission Free Trade:
Quote: Duke Energy Corp. (DUK)
Investors - Our Company - Duke Energy
Closing Price Last Friday: DUK $92.74 -$0.02 -0.02%
Duke is favorably mentioned in this Kiplinger article published on 8/30/19: 11 Utility Stocks and Funds to Buy for Safety and Income Centerpoint (CNP), which I discussed in my last post, is also mentioned.
Duke is one of the largest electric power holding companies in the U.S., providing electricity to about 7.7M retail customers in six states.
Operations:
5 Year Chart as of 8/14/19:
Dividend: Quarterly at $.945, raised from $.9275 effective for the 2019 third quarter payment
Dividend Information- Duke Energy
Ex Dividend (day after 10 share purchase): 8/15/19
Dividend Yield at $89.4 TC = 4.23%
Broker Reports:
Morningstar (5/9/19): 3 stars with a FV of $88
Credit Suisse (8/12/19): Neutral with a PT of $95 down from $100
Argus (7/22/19): Hold based on valuation
S & P (8/6/19): 4 stars with a 12 month PT of $95
Over the next 12 months, the price IMO will significantly depend on the movement of intermediate term interest rates. Buyers are now desparate for yield substitutes and a starting yield of 4% with a history of dividend increases looks desirable to those investors. That may change with a pop in interest rates. A decline in the 10 year treasury yield to below 1% could move the price closer to $100. The current price would be too expensive for this stock IMO if I woke up tomorrow and discovered that the 10 year treasury was over 3% and moving toward 3.5%.
Current Position: 10 Shares
Maximum Position: 30 shares
Purchase Restriction: Small Ball Rule
Last Earnings Report (Q/E 6/30/19):
SEC Filed Earnings Press Release
6. Bought 100 DPG at $15.29-Used Commission Free Trade:
Quote: Duff & Phelps Global Utility Income Fund Inc. (DPG)
Closing Price Last Friday: DPG $15.56 +$0.30 +1.97%
Sponsor's Website: Duff & Phelps Global Utility Income Fund Inc.
DPG Duff & Phelps Global Utility-CEF Connect
SEC Filings
Last SEC Filed Shareholder Report: Duff & Phelps Global Utility Income Fund Inc. (Period ending 4/30/19)
Leveraged: Significant at 28.96% as of 4/30/19. The fund uses two forms of leverage. The first is 4,000,000 Floating Rate Mandatory Redeemable Preferred Shares ($25 par value) in 3 series that pays 1.85% to 1.95% spreads to 3 month Libor depending on the series. The second is a secured bank loan which had a $160M balance as of 4/20/19. The interest is a spread over a short term Libor rate, probably one month. For the 6 months ending on 4/29/19, the weighted daily average rate was 3.27%. When the fund files its next shareholder report, I would anticipate that the average weighted daily interest rates on both the bank loan and the preferred stocks to come down.
Dividend: Quarterly at $.35 per share (supported by ROC)
Dividend yield at a TC of $15.29 = 9.16%
Last Ex Dividend Date: 6/14/19
Next Ex Dividend Date: 9/13/19
I am discussing this purchase out of time order since I mentioned this purchase in a comment published last Friday.
I discussed this CEF in a January 2019 post and have nothing much to add to that discussion and my comment cited above: Item # 5 Added 50 DPG at $12.87 in a Roth IRA Account (1/9/19 Post)
A. Bought 10 DUK at $89.4-Used Commission Free Trade:
Quote: Duke Energy Corp. (DUK)
Investors - Our Company - Duke Energy
Closing Price Last Friday: DUK $92.74 -$0.02 -0.02%
Duke is favorably mentioned in this Kiplinger article published on 8/30/19: 11 Utility Stocks and Funds to Buy for Safety and Income Centerpoint (CNP), which I discussed in my last post, is also mentioned.
Duke is one of the largest electric power holding companies in the U.S., providing electricity to about 7.7M retail customers in six states.
Operations:
5 Year Chart as of 8/14/19:
Dividend: Quarterly at $.945, raised from $.9275 effective for the 2019 third quarter payment
Dividend Information- Duke Energy
Ex Dividend (day after 10 share purchase): 8/15/19
Dividend Yield at $89.4 TC = 4.23%
Broker Reports:
Morningstar (5/9/19): 3 stars with a FV of $88
Credit Suisse (8/12/19): Neutral with a PT of $95 down from $100
Argus (7/22/19): Hold based on valuation
S & P (8/6/19): 4 stars with a 12 month PT of $95
Over the next 12 months, the price IMO will significantly depend on the movement of intermediate term interest rates. Buyers are now desparate for yield substitutes and a starting yield of 4% with a history of dividend increases looks desirable to those investors. That may change with a pop in interest rates. A decline in the 10 year treasury yield to below 1% could move the price closer to $100. The current price would be too expensive for this stock IMO if I woke up tomorrow and discovered that the 10 year treasury was over 3% and moving toward 3.5%.
Current Position: 10 Shares
Maximum Position: 30 shares
Purchase Restriction: Small Ball Rule
Last Earnings Report (Q/E 6/30/19):
SEC Filed Earnings Press Release
6. Bought 100 DPG at $15.29-Used Commission Free Trade:
Quote: Duff & Phelps Global Utility Income Fund Inc. (DPG)
Closing Price Last Friday: DPG $15.56 +$0.30 +1.97%
Sponsor's Website: Duff & Phelps Global Utility Income Fund Inc.
DPG Duff & Phelps Global Utility-CEF Connect
SEC Filings
Last SEC Filed Shareholder Report: Duff & Phelps Global Utility Income Fund Inc. (Period ending 4/30/19)
Leveraged: Significant at 28.96% as of 4/30/19. The fund uses two forms of leverage. The first is 4,000,000 Floating Rate Mandatory Redeemable Preferred Shares ($25 par value) in 3 series that pays 1.85% to 1.95% spreads to 3 month Libor depending on the series. The second is a secured bank loan which had a $160M balance as of 4/20/19. The interest is a spread over a short term Libor rate, probably one month. For the 6 months ending on 4/29/19, the weighted daily average rate was 3.27%. When the fund files its next shareholder report, I would anticipate that the average weighted daily interest rates on both the bank loan and the preferred stocks to come down.
Dividend: Quarterly at $.35 per share (supported by ROC)
Dividend yield at a TC of $15.29 = 9.16%
Last Ex Dividend Date: 6/14/19
Next Ex Dividend Date: 9/13/19
I am discussing this purchase out of time order since I mentioned this purchase in a comment published last Friday.
I discussed this CEF in a January 2019 post and have nothing much to add to that discussion and my comment cited above: Item # 5 Added 50 DPG at $12.87 in a Roth IRA Account (1/9/19 Post)
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.
