October 2019 Update

On the 1.9% Q3 GDP growth rate, “The Greatest Economy in American History!” as contrasted with the 1.9% Q1 2012 growth rate under the prior administration, “Q1 GDP has just been revised down to 1.9%. The economy is in deep trouble.

As tweeted Oct 30, 2019 and May 31, 2012 by the now president, Donald Trump

With renewed optimism for a China trade deal (again), generally good earnings reports (though there were a few snags) and additional rate cuts in this Great Economy – perhaps to spur growth to the promised sustained 4%+ envisioned with the tax cuts (doubtful) – the markets did achieve new records. In spite of all this noise, the S&P rose 2.0% and my portfolio – sans purchases – rose 2.0%. I did deploy funds that were previously generated by the portfolio, accounted for in my reports , but then stashed in an interest bearing account. When incorporating these funds (repeat – no fresh money was used), the portfolio value rose by 8.65%. So, yes, purchases can have an impact on the portfolio. Imagine the potential results if it was “new money” and I had some years to let it run.

PORTFOLIO UPDATES

  • increased my LTXB position going into the PB merger
  • increased my JNJ position on weakness
  • Performed a partial rebalance resulting in slight increases to AROW, BANF, BKSC, BRKL, CVLY, FMBH, LSBK, NWBI, TMP, UMBF and WFC
  • New Position – GIS
  • New Position – WMT
  • New Position – UNP
  • New Position – RDS.B
  • New Position – HSY
  • New Position – TXN
  • New Position – ATO
  • New Position – T

DIVIDENDS

My primary focus resides on dividends with the goal being a rising flow on an annual basis.

  • October delivered an increase of 7.49% Y/Y.
  • Dividend increases averaged 10.27% with 66.52% of the portfolio delivering at least one increase (including 4 cuts). This is off last years’ pace and I believe a new personal record for dividend cuts in a single year since about 1980.
  • 2019 Dividends received were 93.01% of 2018 total dividends putting me on target to exceed last year’s total in mid-November. The YTD run rate is 108.77% of 2018, slightly under my 110.0% goal – but still recoverable. Point of reference, this the first time since starting this blog that I didn’t exceed the prior year dividends before the end of October.

Note: I updated my Goals page to provide a visual of these numbers.  Based on Mr All Things Money’s instruction set with a conversion to percentages.  My code only updates when the monthly Y/Y number is exceeded.  Otherwise, the prior year actual is used.

SPINOFFs

On Oct 4, 2018 MSG filed a confidential Form 10 to spin the sports business which remains in progress.

MERGERS

XRX merger with Fujifilm cancelled (still being litigated). The expected settlement was disallowed by the judge September 13th.

PB acquired LTXB for 0.528 shares and $6.28 cash for each LTXB share which completed November 1st. I plan to pocket the cash and sell the old shares – retaining the new PB shares.

VLY to acquire ORIT for 1.6 sh VLY to 1 ORIT. This merger will result in a slight dividend cut November forward as the rate will be normalized to VLY’s current rate. In my view, the other positives outweigh this negative.

PBCT acquired UBNK for .875 sh PBCT to 1 UBNK – completed November 1st. I plan to hold this one as I wouldn’t be surprised if PBCT gets taken out at some point.

Spirit MTA REIT (SMTA) voted on Sept. 4th to approve the sale of most assets to HPT for cash. A second vote was held to liquidate the REIT. The first payment was received and am awaiting final settlement payout. Fully expecting a profitable outcome for one of my most speculative positions.

SUMMARY

Overall, no complaints. The initial quote can also bear reference to the growth rate of my portfolio this month – which is why I presented the results in two ways. Although accurate, I do not care to be viewed as tilting the scales in favor of one narrative over another. My cash position will hover close to zero while replicating the kids’ portfolio but expect the dividend growth to accelerate into the first half of 2020 with this strategy.

Here’s hoping your month was successful!

Conspiracy Theory: The Fed

Every now and again a friend of mine asks my view of the world as it relates to conspiracy theories.  For the uninitiated, these are plausible concepts with minimal basis in truth that take on a life of their own through repetition by a willing spokesperson.  A recent example is Info Wars as reported by Rolling Stone.  This platform has been – and continues to be – used by the now indicted and arrested former Trump confidante, Roger Stone.

The theory in question – which has existed for nearly 200 years in some form or fashion – centers on the role played by the Rothschild family in the formation of the Federal Reserve.  While the family’s wealth was at one time vast, nationalizations (France), confiscations (Germany/Austria), charitable donations and dilution between various heirs have reduced the fortune.  One leading view was that the wealth was being used to accumulate land holdings as the precursor to a ‘one world order’.  This one was obviously deflated last week with the sale of their final Austrian property.

As in any good Mythbuster episode, there’s always a secondary revelation and in this case it pertains to Federal Reserve ownership.  The Fed is both a public and private enterprise, the Board of Governors is a government agency while the twelve banks are stock companies.  Their shares are restricted with ownership limited to Fed member banks which currently number about 767 banks.  FRB shares pay a dividend of roughly 6% per annum which for one of my smaller banks Brookline Bancorp (BRKL) would’ve been about $1m last year.  The Fed also pays interest on both required and excess reserves on deposit currently about 2.4%.

Fed membership is not compulsory and many smaller institutions choose not to join, taking advantage of correspondent relationships.  With the advent of the 1976 banking law permitting interstate banking, correspondent banking began to decline and Banker’s Banks arose on fears of competition from their bigger brethren.  Banker’s Banks are structured similarly to the Fed (owned by member banks) but are subject to regulatory oversight.  An interesting tidbit … Congressional hearings in 1923 on lack of participation in the Federal Reserve highlighted a trust issue between large and small, rural and urban – a divide that obviously continues to this day!

So, no the Rothschild family don’t own the Federal Reserve or banking system.  If you own stock in a National bank or State chartered member bank – you own the Fed.