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UPWARD BIAS IN MARKETS. WATCH MIC.

July 9, 2018.  Last week was very good for our income producing positions in the Core Portfolio in that we saw price increases.  But it was not very good for buying new positions that we wanted.  Prices spiked on those that we were looking at, so all in all, we had a quiet four days in terms of buying anything.

We have been looking at numerous positions for POSSIBLE BUYS, but the prices are just too high.

The overall market continues to look positive despite all of the bad news like the tariff situation…yield curve….and more…..and the market is up once again this morning.

From what we can tell, the Donald has gotten himself in somewhat of a mess, but his record so far indicates he knows what he is doing.  We shall see.

The liberal radical press continues to tell lies and is totally out of control:  we have never seen anything like it.  And we have been around a long time!!! 

Bottom line:  we are just sitting here, collecting the dividends, and waiting for the next inevitable down swing allowing us the opportunity to buy at lower prices.

Note:  MIC has been a disaster dropping 50%.  This is a ‘turnaround’ situation and we decided to keep MIC in the portfolio fully expecting it to recover.  In late May, buyers started to come in and now would be a good time to buy.  Pays over 9%. 

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We wanted to buy GSBD but positive press coverage caused higher prices.  We will continue to watch.  (We owned GSBD in the past but sold it.) 

I consider GSBD to be a higher quality BDC for many reasons including:
Likely higher NII per share in the coming quarters that could drive a near-term quarterly dividend increase to $0.50 to $0.55 (as shown in the previous table) and/or special dividends.
Best-of-breed fee agreement including 1.00% base management fee and income incentive fees that take into account capital losses.
Access to a broader credit platform, Goldman Sachs Asset Management (GSAM), with a depth of credit channels and robust organization to support higher quality originations.
10b5-1 purchase plan that automatically purchases shares under NAV of up to $25 million that uses GS capital to purchase up to 19.9%. Additionally, there is a $35 million share repurchase program, at prices below NAV, once the 10b5-1 plan is exhausted.
Use of front-end leverage by partnering with banks for first-out/last-out transactions to structure a higher yield while staying invested in first lien and maintaining credit control including 90% of the portfolio with protective covenants.
Excellent historical dividend coverage (average of 114% over the last four quarters) growing spillover/undistributed income to $32.7 million or around $0.81 per share.

On June 18, 2018, GSBD announced that Fitch Ratings (“Fitch”) has assigned the company an investment grade rating of BBB-; the rating outlook is stable.
“We are pleased to receive an investment grade rating from Fitch, which we believe reflects both the quality of GSBD’s investment portfolio and the strength of Goldman Sachs Asset Management’s (“GSAM’s”) platform. We are particularly gratified by Fitch’s acknowledgment of GSAM’s differentiated risk management and proprietary loan sourcing capabilities in its assessment.” said Brendan McGovern, CEO of the Company.

https://seekingalpha.com/article/4185603-8_6-percent-yield-dividend-growth-potential-reduced-fees-increased-leverage

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Twitter news:

The social media giant has more than doubled its rate of suspensions since October, when the company suggested that Russia used fake accounts to manipulate the 2016 U.S. presidential election.
While the 70 million accounts suspended in May and June represent an amount equal to roughly 20% of Twitter’s 336 million active monthly users – the company says that the purge mostly applies to inactive users, or bot accounts, instead of the revenue-generating accounts of real people.

That said, Facebook VP of advertising, Rob Goldman, said in February after the indictment of 13 Russian nationals running a “bot farm” that the majority of advertising purchased by Russians on Facebook occurred after the election – and was in fact designed to sow discord and divide Americans.

https://www.zerohedge.com/news/2018-07-06/twitter-purges-70-million-accounts-two-months-equal-20-monthly-active-users

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We signed up for emails from http://www.statista.com.  Here is an example of the various categories that they cover.

Infographic: Netflix Is Americans' Platform of Choice for TV Content | Statista

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