To review this week’s market action is to basically yawn for a change. Earnings season began but was tempered to a degree by economic news that questioned the robustness of the US consumer. While the economy is still growing, the rate is slowing. My view remains that without a ‘real’ deal – skinny or otherwise – on the table between the US and China, both countries will continue to hobble along.
Meanwhile I did make one purchase this week that was a little unanticipated, but not totally unexpected. I topped up my Legacy Texas (LTXB) holdings in preparation for the completion of the merger into Prosperity Bank (PB) which has received regulatory approval. Currently I hold both sides of this merger, LTXB in a taxable account and PB in my IRA. Essentially I wanted to avoid assignment of an odd fractional share that I could do nothing with as the ratio is 0.875:1 (plus $6.28 cash). Assuming shareholder approval October 29th, the expectation is for the deal to close November 1st. My current thinking is the new PB shares (and cash component) will be assigned to the taxable account. Subsequently, I intend to sell the old PB in my IRA replacing it with TD (to take advantage of the tax treaty). After the dust settles, I will sell the TD in my taxable account. End result being more shares (slightly) of both PB and TD, no shares of LTXB and some excess cash.
I did hit the halfway point on my endeavor to replicate the grandkid’s trust (now liquidated, save one stock). After I complete the transactions I’ll post regarding the rhyme and reason, but for now let’s say it’s to preserve all options regarding financial assistance as she begins the college application process.
The strategy I’ve employed is to gauge the futures market for weakness prior to entering an order for market open as I decided to use M1 finance for the bulk of this replication. For the most part, this has been a viable approach except of late there have been some wild swings going into the open. I’m unsure as to the why, but perhaps someone has identified the secret sauce regarding presidential tweets?
The effort remains ongoing regarding the directory update – primarily removing dormant entries. It turns out I wind up spending more time than usual as my attention gets diverted by an interesting presentation or difference of opinion or a concept worthy of further review. Examples of some of these include:
- Dividends Diversify – in his review of the book Dividends Still Don’t Lie, the comment, “I did some searching on the internet for free services. But didn’t come up with anything that looked useful … Dividends Still Don’t Lie goes through how the calculations are done. So it is certainly possible for a do it yourself investor to develop the calculations on their own.” garnered my attention. Now the strategy discussed may be an anathema to a Buy and Hold type (my concern would be tax implications), the “tool” became the curiosity. The best I could come up with was the Charles Schwab screener that could only analyze three of the book’s eleven metrics yielding fifteen possibilities for further manual research.
- Finance Journey – the comments, “As a dividend investor, my full focus is on income than capital gain. Thus, capital gains or losses in my investments do not make any sense to me at least for now.” and “I do not convert dividends received from U.S stocks to Canadian dollar, and I use a 1 to 1 currency rate approach to keep the math simple and avoid fluctuations in my dividend income reports due to changes in the exchange rate.” were the culprits. I trust the “full focus” does not exclude possible warning signals. For instance, many dividend cuts (income) are preceded by a falling stock price (capital gain (loss)). Likewise, the use of a 1:1 exchange ratio for simplicity sake risks masking the true portfolio performance. Personally, I (like ETFs) translate income from my thirteen foreign holdings to home currency prior to publishing results. Besides, if the full focus is income why distort currency exchange (which is a direct income factor)?
- Finance Pondering is a relatively new blog from the UK that is in the process of ramping up in a thoughtful manner. The insightful questions raised in this rollout carry the promise of one day being one of the standouts. Yet there is already one nagging question that I hope will be answered in the future – “Why Trainline?”. To enlighten my audience, Trainline is a ticket booking company that charges a premium in exchange for convenience in what is basically a mobile app. My issues are, 1) it was a 2019 IPO (albeit one of the better ones), 2) KKR was involved (can you say monetize and exit strategy), 3) I question the nature of Brits to embrace premium services given the uncertainty of Brexit and recent demise of Thomas Cook.
This weeks’ final thought is a potential black swan. My concern is the expanding pockets of unrest appearing from Hong Kong to Chile to Spain. Ignoring Turkey/Syria for now, just something I’m keeping my eyes on …