Economy:
Calculated Risk: Lawler: US Population Growth Slowed Again in 2019 (slowest in percentage growth since 1918 and slowest numerically since 1942). Slower population growth will negatively impact GDP growth.
The U.S. economy is now deeply dependent on deficit government spending.
Reducing the annual budget deficit from an anticipated $1 trillion to $500B in 2020 would result in either negative GDP growth or barely positive growth. No deficit spending would result in a severe recession.
There will not be the political will to materially reduce deficit spending. Instead, there is political consensus to put on a blindfold and push the pedal to the metal.
Car sales hit the skids in 2019 - MarketWatch
China cuts banks' reserve ratios again, frees up $115 billion to spur economy - Reuters Lower bank reserves decreases the cushion for bad loans and makes the banks more susceptible to failure during an economic downturn.
Recent surveys show sharp decline in retirement wealth for typical household - MarketWatch
Seattle passed a $15 minimum wage law in 2014. Here's how it's turned out so far
The U.S. economy is now deeply dependent on deficit government spending.
Reducing the annual budget deficit from an anticipated $1 trillion to $500B in 2020 would result in either negative GDP growth or barely positive growth. No deficit spending would result in a severe recession.
There will not be the political will to materially reduce deficit spending. Instead, there is political consensus to put on a blindfold and push the pedal to the metal.
Car sales hit the skids in 2019 - MarketWatch
China cuts banks' reserve ratios again, frees up $115 billion to spur economy - Reuters Lower bank reserves decreases the cushion for bad loans and makes the banks more susceptible to failure during an economic downturn.
Recent surveys show sharp decline in retirement wealth for typical household - MarketWatch
Seattle passed a $15 minimum wage law in 2014. Here's how it's turned out so far
+++
Markets and Market Commentary:
Top Iranian Major General Qassim Suleimani Is Killed on Trump’s Orders, Officials Say I do not expect a major military escalation unless Iran miscalculates in its response. It would be reasonable to expect a response but possibly in the more distant future that can not easily be traced back to Iran.
The market's reaction was subdued and was consistent with nothing major happening in response.
There is no question that General Suleimani was an enemy combatant.
Trump claimed that Suleimani needed to be killed a long time ago.
Both the Bush and Obama administrations passed on taking that action, viewing the potential dangers as outweighing the potential benefits flowing from his death.
On the benefit side, killing this guy will not stop Iran from attacking its enemies including the U.S. through proxies. Iran’s new Quds Force commander brings continuity to the post held by his slain predecessor - The Washington Post Trump claimed that his maximum pressure campaign was working with Iran, which is clearly not the case.
Top Iranian Major General Qassim Suleimani Is Killed on Trump’s Orders, Officials Say I do not expect a major military escalation unless Iran miscalculates in its response. It would be reasonable to expect a response but possibly in the more distant future that can not easily be traced back to Iran.
The market's reaction was subdued and was consistent with nothing major happening in response.
There is no question that General Suleimani was an enemy combatant.
Trump claimed that Suleimani needed to be killed a long time ago.
Both the Bush and Obama administrations passed on taking that action, viewing the potential dangers as outweighing the potential benefits flowing from his death.
On the benefit side, killing this guy will not stop Iran from attacking its enemies including the U.S. through proxies. Iran’s new Quds Force commander brings continuity to the post held by his slain predecessor - The Washington Post Trump claimed that his maximum pressure campaign was working with Iran, which is clearly not the case.
10-year Treasury yields end higher, notch lowest year-end close in seven years - MarketWatch The ten year treasury close out 2012 at a 1.78% yield. 2012 Daily Treasury Yield Curve Rates
Exclusive: Drugmakers from Pfizer to GSK to hike U.S. prices on over 200 drugs - Reuters; Drug prices going up again in 2020 - CNN
Navarro sees Dow 32,000 in 2020 and US economic growth closer to 3%
Exclusive: Drugmakers from Pfizer to GSK to hike U.S. prices on over 200 drugs - Reuters; Drug prices going up again in 2020 - CNN
Navarro sees Dow 32,000 in 2020 and US economic growth closer to 3%
+++++
Trump:
Analysis: New coverup questions in Trump’s Ukraine scandal
Exclusive: Unredacted Ukraine Documents Reveal Extent of Pentagon’s Legal Concerns - Just Security
Exclusive: Unredacted Ukraine Documents Reveal Extent of Pentagon’s Legal Concerns - Just Security
I am expecting a considerable amount of Fake News being generated by Donald, his republican colleagues, apparatchiks and fellow travelers during this election year. This is just one of the first ones so far in 2020. Selectively edited Biden video creates false appearance of racist remark - MarketWatch
Trump upended three decades of U.S. strategy with North Korea, but the gamble has failed to pay off - The Washington Post
White House Withholds 20 Emails Between Two Trump Aides on Ukraine Aid
Was it legal for Donald Trump to order the killing of a top Iranian general?
Trump upended three decades of U.S. strategy with North Korea, but the gamble has failed to pay off - The Washington Post
White House Withholds 20 Emails Between Two Trump Aides on Ukraine Aid
Was it legal for Donald Trump to order the killing of a top Iranian general?
++++
All trades are commission free unless otherwise noted.
1. Added 65 FENY at $16.11:
Quote: Fidelity MSCI Energy Index ETF
Last Discussed: Item # 1.B. Added 10 FENY at $16.03 (12/28/19 Post)
Sponsor's Website: FENY | ETF Snapshot - Fidelity
Expense Ratio: .084%
This was in response to recent Middle East developments. This purchase just brings me up to 100+ shares.
Cushing, OK WTI Spot Price FOB (Dollars per Barrel)
Last Elimination Discussions: Item # 4.A. Eliminated FENY-Sold 60 shares at $18.83 (10/26/17 Post)(profit snapshot=$127.78); Item #1.A. Bought 50 FENY at $17.85 (7/19/17 Post); Item # 5 Sold 50 FENY at $27.81 (8/6/14)(profit snapshot $115.96)-Item # 2 Bought 50 FENY at $25.49 (3/10/14 Post)
2. Bought 100 XEG:CA at C$9.37 (C$1 Commission):
Quote: iShares S&P/TSX Capped Energy Index ETF Overview
This buy was also in response to a possible conflagration that disrupts crude shipments from the Middle East.
Sponsor's Website: iShares S&P/TSX Capped Energy Index ETF | XEG
Expense Ratio: .61% (high)
Holdings: 23
Top 10 Holdings as of 1/2/2020:
Dividends: Quarterly at a variable rate
Goal: Viewed as a hedge against a major conflagration in the Middle East that drives crude oil to $100+ per barrel. If that does not happen, then a 6% to 10% realized total return within 12 months would be viewed as a victory.
1. Added 65 FENY at $16.11:
Quote: Fidelity MSCI Energy Index ETF
Last Discussed: Item # 1.B. Added 10 FENY at $16.03 (12/28/19 Post)
Sponsor's Website: FENY | ETF Snapshot - Fidelity
Expense Ratio: .084%
This was in response to recent Middle East developments. This purchase just brings me up to 100+ shares.
Cushing, OK WTI Spot Price FOB (Dollars per Barrel)
Last Elimination Discussions: Item # 4.A. Eliminated FENY-Sold 60 shares at $18.83 (10/26/17 Post)(profit snapshot=$127.78); Item #1.A. Bought 50 FENY at $17.85 (7/19/17 Post); Item # 5 Sold 50 FENY at $27.81 (8/6/14)(profit snapshot $115.96)-Item # 2 Bought 50 FENY at $25.49 (3/10/14 Post)
2. Bought 100 XEG:CA at C$9.37 (C$1 Commission):
Quote: iShares S&P/TSX Capped Energy Index ETF Overview
This buy was also in response to a possible conflagration that disrupts crude shipments from the Middle East.
Sponsor's Website: iShares S&P/TSX Capped Energy Index ETF | XEG
Expense Ratio: .61% (high)
Holdings: 23
Top 10 Holdings as of 1/2/2020:
Dividends: Quarterly at a variable rate
Goal: Viewed as a hedge against a major conflagration in the Middle East that drives crude oil to $100+ per barrel. If that does not happen, then a 6% to 10% realized total return within 12 months would be viewed as a victory.
3. Bought 50 IVZ at $17.91 (Fidelity Account) and 10 at $17.81 (Schwab Account):
Quote: INVESCO Ltd.
Website: Invesco | Home
This is my first purchase of the common shares.
IVZ is a large investment manager with approximately $1.2T of assets under management ("AUM") as of 9/30/19. Invesco offers a wide variety of mutual funds, money market fund, CEFs, unit trusts and ETFs.
The company acquired Oppenheimer Funds, an affiliate of MassMutual in May 2019. Invesco announces Combination with OppenheimerFunds, $1.2 Billion Common Stock Buyback Program and Reports Results for the Three Months Ended September 30, 2018 ("Under the terms of the agreement, Invesco will acquire OppenheimerFunds with consideration to MassMutual and OppenheimerFunds employees consisting of 81.9 million shares of Invesco common equity and $4 billion in perpetual, non-cumulative preferred shares with a 21-year non-call period and a fixed rate of 5.9%. The 81.9 million shares include approximately 6.6 million shares to be issued as a part of the post-closing conversion of unvested restricted stock awards, currently held by OppenheimerFunds employees, into Invesco restricted stock awards.")
Invesco Monthly AUM Press releases
IVZ Analyst Estimates | MarketWatch (as of 12/26/19)
2019: $2.59
2020: $2.66
P/E at $ using $2.66 estimate=
The E.P.S. estimates are ex items (non-GAPP)
10 Year Chart: Bear Market Trend Since 2015, possible double bottom
The underlying problem revealed by this chart is that low cost passive investment vehicles are garnering an increasing share of investor dollars at the expense of active managers. A related issue is the competitive pressure to reduce fees. There is no reason to expect that these trends will reverse.
For the past decade, assets under management have been positively impacted by the bull markets in stocks and bonds. That tailwind of course may reverse.
Website: Invesco | Home
This is my first purchase of the common shares.
IVZ is a large investment manager with approximately $1.2T of assets under management ("AUM") as of 9/30/19. Invesco offers a wide variety of mutual funds, money market fund, CEFs, unit trusts and ETFs.
The company acquired Oppenheimer Funds, an affiliate of MassMutual in May 2019. Invesco announces Combination with OppenheimerFunds, $1.2 Billion Common Stock Buyback Program and Reports Results for the Three Months Ended September 30, 2018 ("Under the terms of the agreement, Invesco will acquire OppenheimerFunds with consideration to MassMutual and OppenheimerFunds employees consisting of 81.9 million shares of Invesco common equity and $4 billion in perpetual, non-cumulative preferred shares with a 21-year non-call period and a fixed rate of 5.9%. The 81.9 million shares include approximately 6.6 million shares to be issued as a part of the post-closing conversion of unvested restricted stock awards, currently held by OppenheimerFunds employees, into Invesco restricted stock awards.")
Invesco Monthly AUM Press releases
IVZ Analyst Estimates | MarketWatch (as of 12/26/19)
2019: $2.59
2020: $2.66
P/E at $ using $2.66 estimate=
The E.P.S. estimates are ex items (non-GAPP)
10 Year Chart: Bear Market Trend Since 2015, possible double bottom
For the past decade, assets under management have been positively impacted by the bull markets in stocks and bonds. That tailwind of course may reverse.
Dividend: Quarterly at $.31 per share ($1.24 annually)
Invesco-Dividend information
Since 2015, IVZ has increased the dividend annually by raising the quarterly penny rate by 1 cent.
Dividend Yield at $17.91 = 6.92%
Last Ex Dividend Date: 11/8/19
Invesco-Dividend information
Since 2015, IVZ has increased the dividend annually by raising the quarterly penny rate by 1 cent.
Dividend Yield at $17.91 = 6.92%
Last Ex Dividend Date: 11/8/19
Last Earnings Report (Q/E 9/30/19): Invesco Reports Results for the Three Months Ended September 30, 2019
Reconciliation of GAAP and Non-GAAP:
The primary add back to GAAP net income relates to the Oppenheimer Funds acquisition.
10-Q for the Q/E 9/30/19 (debt listed at page 15)
10-Q for the Q/E 9/30/19 (debt listed at page 15)
Quotes from page 15 of 10-Q:
"Our revenues are directly influenced by the level and composition of our AUM. As a significant proportion of our AUM is based outside of the U.S., changes in foreign exchange rates result in a change to the mix of U.S. Dollar denominated AUM with AUM denominated in other currencies.
Invesco has made significant progress toward the integration of the two firms through the combination of middle- and back-office, location strategy and leveraging the scale of the global operating platform. To date, Invesco has achieved $501 million in annualized net expense synergies related to integration of the OppenheimerFunds business, which is in excess of our $475 million target and ahead of schedule. Transaction, integration, and restructuring costs related to the acquisition are expected to increase from the original projection as a result of expenses related to fund mergers that were not contemplated at close, as well as incremental severance costs related to achieving increased net expense synergies. The company also will continue to incur incremental non-cash transaction, integration, and restructuring charges related to accelerated vesting of share-based awards for terminated employees and acceleration of depreciation for software and leasehold improvement assets as well as $120 million related to compensation payments to certain OppenheimerFunds employees, which were granted and funded by MassMutual under the terms of the acquisition.
During the third quarter, the company purchased $314.8 million of its common shares. This amount reflects $300.0 million through a forward contract ($16.0 million shares) and $14.8 million (0.8 million shares) relating to purchases of shares from employees to satisfy tax withholding requirements at the time of share vesting." (emphasis added)
Brokerage Reports:
Argus (10/24/19): Buy with a $26 PT
Morningstar (10/23/19): 4 stars with a FV of $21
Credit Suisse (10/23/19): Neutral with a $18 PT
S & P (10/29/17): 4 Stars with a 12 month PT of $19
Subsequent to my purchases, RBC downgraded from outperform to market perform and reduced its PT to $19 from $22. WFC downgraded from equal weight to underperform, with a $17 PT. I do not have access to those reports.
Goal: 8+% annual average total return, mostly from the dividend. I have low expectations for stock appreciation.
Maximum Position This Account: 100 shares + shares purchased with dividends. I will average down at some point with a 50 share purchase.
I also started a small ball "buying program" in my Schwab account with a 10 share purchase at $17.81.
The maximum position in that account will be 50 shares, bought in 10 share lots using the small ball purchase restriction.
Argus (10/24/19): Buy with a $26 PT
Morningstar (10/23/19): 4 stars with a FV of $21
Credit Suisse (10/23/19): Neutral with a $18 PT
S & P (10/29/17): 4 Stars with a 12 month PT of $19
Subsequent to my purchases, RBC downgraded from outperform to market perform and reduced its PT to $19 from $22. WFC downgraded from equal weight to underperform, with a $17 PT. I do not have access to those reports.
Goal: 8+% annual average total return, mostly from the dividend. I have low expectations for stock appreciation.
Maximum Position This Account: 100 shares + shares purchased with dividends. I will average down at some point with a 50 share purchase.
I also started a small ball "buying program" in my Schwab account with a 10 share purchase at $17.81.
4. Pares and Eliminations:
A. Eliminated NRBAY-Sold 50 at $8.11:
Item # 1.C. Bought 30 at $6.11 (9/7/19 Post)
Category: Lottery Ticket Basket
Nordea's stock has proved to be a difficult trade due to several headwinds. I decided to back off given those issues which includes the self inflicted Russian money laundering problems that has negatively impacted several European banks particularly those with branches in Estonia.
The other major headwind for European bank in general is the extremely abnormal monetary policies of the ECB.
Prior Trades:
Item # 4 Sold Nordea Bank (NRBAY) at $12.39 (2/1/18 Post)(profit snapshot $74.97)(noting that the last earnings report was awful IMO)-Bought Back 100 NRBAY at $11.54 (12/11/17 Post); Item # 2.A. Sold 100 NRBAY on Ex Dividend Date (4/1/17 Post)(profit snapshot $72.17).
I was harvesting then the annual dividend payment and then selling the shares for a profit. That has become too time consuming given the difficulty in exiting the position at a profit.
Dividends: Annually
Dividend | nordea.com
Last Ex Dividend: 3/22/19
Category: Lottery Ticket Basket
Nordea's stock has proved to be a difficult trade due to several headwinds. I decided to back off given those issues which includes the self inflicted Russian money laundering problems that has negatively impacted several European banks particularly those with branches in Estonia.
The other major headwind for European bank in general is the extremely abnormal monetary policies of the ECB.
Prior Trades:
Item # 4 Sold Nordea Bank (NRBAY) at $12.39 (2/1/18 Post)(profit snapshot $74.97)(noting that the last earnings report was awful IMO)-Bought Back 100 NRBAY at $11.54 (12/11/17 Post); Item # 2.A. Sold 100 NRBAY on Ex Dividend Date (4/1/17 Post)(profit snapshot $72.17).
I was harvesting then the annual dividend payment and then selling the shares for a profit. That has become too time consuming given the difficulty in exiting the position at a profit.
Dividend | nordea.com
Last Ex Dividend: 3/22/19
B. Pared ORKLY-Sold 100 Shares at $10.1 (highest cost lot):
NOK Priced Ordinary Shares: ORK.OL
USD Priced ADR Pink Sheet Exchange: ORKLY
Investor Relations - Orkla.com
About Orkla - Orkla.com
Orkla Foods - Orkla.com
Orkla Confectionery & Snacks - Orkla.com
Orkla Care - Orkla.com
Orkla Food Ingredients - Orkla.com
Profit Snapshot: +$4.97
Item # 5 Bought Back 100 ORKLY at $10.05 (9/21/17 Post)
Average Cost Per Share Before Pare = $9.41
Average Cost Per Share After Pare = $8.35
 |
| Snapshot at the Close on 12/26/19 |
Agreement regarding sale of Orkla’s interest in Sapa to Hydro completed - Orkla.com; Orkla ASA: Orkla to sell its interest in Sapa to Hydro That transaction resulted in a special dividend on my 100 share lot paid in 2017:
The price was negatively impacted about two years ago after this development: Mars Norge terminates "Wrigley contract"; Orkla's (ORKLY) CEO Peter Ruzicka on Q1 2018 Results - Earnings Call Transcript | Seeking Alpha (see page 1: "Orkla had approximately NOK250 million in sales from the regular distribution agreement.").
Another problem occurring at about the same time was Norway increasing its sugar tax by 83%. Norwegian sugar tax sends sweet-lovers over border to Sweden-The Guardian So some negative developments caused the 100 share lot to lose value which was finally recovered after the recent positive earnings reports.
Prior Round-Trips:
Sold 100 ORKLY-Update On Portfolio Positioning And Management - South Gent | Seeking Alpha August 2015 (+$51.08)- Bought Back 100 Orkla (ORKLY) At $7.285 - South Gent | Seeking Alpha December 2014
Item # 4 Sold 100 ORKLY at $9 (9/6/14 Post)(profit snapshot $122.48)-Item # 2. Bought 100 ORKLY at $7.61 (1/13/14 Post)
Total ORKLY Trading Profits: $243.98
2018 Regular Dividend on 100 Shares:
Note that there was an adjustment on the foreign tax. The foreign tax of $8.13 or 25% of the dividend amount was deleted. The 25% rate is probably what Norway charges when the broker fails to claim the 15% tax treaty rate which Fidelity apparently did for this payment and the previous one referenced in the previous snapshot as well as all prior dividends that I have received from Orkla prior to 2019. .
2019 Regular Dividend on 160 Shares:
For this last dividend, Fidelity apparently failed to claim my tax treaty rights at the source.
While I have only viewed U.S. tax treaties with a few foreign countries, the general limitation is a maximum 15% withholding tax on dividends paid to U.S. citizens. The broker needs to assert tax treaty rights at the source. Otherwise, the foreign country will tax the dividend at its highest rate applied to any country which does not have a tax treaty imposing limits. The highest rate will generally be between 25% to 35%.
 |
| Norway Withheld 15%/ADR Custodian Fee $2.5 |
Another problem occurring at about the same time was Norway increasing its sugar tax by 83%. Norwegian sugar tax sends sweet-lovers over border to Sweden-The Guardian So some negative developments caused the 100 share lot to lose value which was finally recovered after the recent positive earnings reports.
Prior Round-Trips:
Sold 100 ORKLY-Update On Portfolio Positioning And Management - South Gent | Seeking Alpha August 2015 (+$51.08)- Bought Back 100 Orkla (ORKLY) At $7.285 - South Gent | Seeking Alpha December 2014
Item # 4 Sold 100 ORKLY at $9 (9/6/14 Post)(profit snapshot $122.48)-Item # 2. Bought 100 ORKLY at $7.61 (1/13/14 Post)
Total ORKLY Trading Profits: $243.98
2018 Regular Dividend on 100 Shares:
 |
| 100 Shares: ADR Custodian Fee = $2.5/Norway withheld 15% |
2019 Regular Dividend on 160 Shares:
 |
| 160 Shares/Norway withholds 25%; $3.2 paid to ADR Custodian |
While I have only viewed U.S. tax treaties with a few foreign countries, the general limitation is a maximum 15% withholding tax on dividends paid to U.S. citizens. The broker needs to assert tax treaty rights at the source. Otherwise, the foreign country will tax the dividend at its highest rate applied to any country which does not have a tax treaty imposing limits. The highest rate will generally be between 25% to 35%.
Recent Earnings Report: Orkla 2019 3rd Quarter.Pdf
5. Canadian Reset Equity Preferred Stock Dividends:
The following Canadian preferred stock dividends were paid on 12/31/19:
I will be leaning more on Canadian reset preferred stocks this year for CAD income generation.
5. Canadian Reset Equity Preferred Stock Dividends:
The following Canadian preferred stock dividends were paid on 12/31/19:
Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.
