BDC Gladstone Investment Releases Results

Just a FYI–BDC Gladstone Investment (NASDAQ:GAIN) has released their earnings for the quarter ending June 30th and they are pretty decent.

We mention this because of the monthly paying term preferreds the company has outstanding and which we and others own.

The outstanding issues can be seen here.

The press release can be seen here.

Spoiled Brats Take Stocks Lower

Just like a child who is not allowed to play video games 24 hours a day and throws a tantrum, stock traders have taken stocks down by 250-400 Dow points. The 1/4% rate cut was made as expected so all should be happy. They even got an end to quantitative tightening-kind of a double bonus.

But…..

Spoiled brats didn’t like it when Powell said this is not the first in a long series of rate cuts. Give them what they want, but don’t promise more of the same goodies down the road and they throw a tantrum.

Anyway we all know that by tomorrow traders will find a reason to “party on”.

The 10 year treasury is trading down at 2.02% and with the employment report coming Friday we will see if this yield falls below 2%–I believe it is destined to move back below 2% soon.

Anxiously Awaiting the FED

Only 10 minutes until the announcement of a 1/4% Fed funds rate cut (at least I am pretty sure).

Everyone knows this will happen–no cut would send stocks tumbling, while a 1/2% cut would send stocks to the moon. Fed Chair Powell already is going to have to do a mea culpa for raising rates in December, so the last thing he wants to do is send stocks sharply higher or lower.

The the press conference–the global economy will be blamed for the “change of heart” by Powell–there is no other reason.

We wait.

Site Down—Again–Update

Update

Thanks all for the kind words on the site–I think we have been down maybe 4 hours in the 1st 18 month of the site being active.

Apparently the “hosting” server has been giving the host problems and they thought they had it fixed yesterday (Tuesday), but as those that tried to use the site this morning between 6 and 7:30 am know it was down–so I guess they didn’t get it fixed.

I will post further updates if Chad get further news from the host.

Yesterday morning our website was either down or very, very slow for maybe 30 minutes. Before I could get to Chad the site was fine so I just let it go.

This morning around 6 am (CDT) it looks like the site was down again–this time maybe 90 minutes or so–growl!!

Maybe there was maintenance or something–don’t know. I have sent off a message to Chad to get an explanation. Minimally if there is maintenance to perform we should get a notice in advance.

Further on Highland Income Fund

We did some really quick and dirty due diligence on the Highland Income Fund (NYSE:HFRO) and unfortunately most of the CEFs holdings are Level 2 assets. This means some there is some observable data from which to value the assets (versus Level 1 which is for instance common stock).

We love the funds with level 1 assets (mostly Gabelli related funds)–but we can live with Level 2 given that they will need to maintain a high asset coverage ratio. As of 12/31/2018 their asset coverage ratio was 306%. With this type of investment we watch the coverage ratio more than the fund performance–this is the important part of making our capital secure.

The fund has net asset of just over $1 billion (as of 12/31/2018) and has been in existence since 2000.

We are less excited about this issue than we were 10 minutes ago when irrational exuberance got the best of us.

At a reasonable price on the OTC Grey market we will likely still purchase a small position in this new issue.

CEF Highland Income Fund Sells a New Preferred

The Highland Income Fund (NYSE:HFRO) has sold a new issue of perpetual preferred stock.

A big thanks to Roger for using his eagle eye to catch this announcement.

We are not familiar with this fund, but we are very happy to see this new issue and it is likely, subject to due diligence we will purchase some “sock drawer” shares.

The shares will trade soon on the OTC Grey market as noted in the chart.

Shares are rated A1 by Moody’s–strong investment grade.

The final prospectus can be read here.

Here We Go with the FOMC

Might as well simply figure that the business news will be dominated by speculation over what the Federal Open Market Committee will announce tomorrow midday.

We don’t need to speculate as the Fed Chair has backed himself into the corner with his congressional testimony and will have to deliver a 1/4% cut to interest rates. To do otherwise would tank the stock market, God forbid, and who wants to be the one to stop that party.

As we have mentioned, and we admit “talking our book”, with an economy that is growing around 2% and employment which is very strong there is no reason to lower rates. Sure the global economy is kind of weak–but no one can save Europe, demographically they are becoming Japan and to push on a string is a waste of our effort.

We are somewhat resigned to the cycle of issuers redeeming issues and sticking us with a lower coupon–but that is ok–companies need to do what they need to do and we need to find a way to earn a little reasonable return. That is what this game is all about.

Errors and Omissions

On this page reader/participants can post comments pointing out ERRORS AND OMISSIONS on our various lists.

I think we are dealing with near 1000 pages on site at this moment (1/5/2019) and we always say we have maybe 98% good data with 2% being incorrect or simply missing.

For instance this week Affinity4Investing let us know we were missing one of the Allstate Corp preferred issues–fortunately we stumbled on his comment so we were able to get the issue added, BUT there is so much commenting activity we can only skim through them.  Thus if they are posted here were can, at a glance, find out issues.

We will respond to comments on this page, but we will clear it off every week or two.

RSS Overview

Just a quick note on the use of the RSS (real simple syndication) feed on this site–and on any site.

In the column on the right hand side is a choice of “RSS Feed”.

If you have a feed reader installed and you click on this choice it will allow the addition of a “feed” from this website. This means anytime something new is posted to the home page a notice will come to your feed reader.

We can only speak to the Chrome browser which is the one we use. We use a feed reader on our desktops, laptops and Chromebooks. It is great–very efficient for catching stuff you want to catch.

In our case we actually follow 100’s of feeds. For instance you can follow any company SEC filings or you can follow any company on Seeking Alpha–or any particular author. Many companies have feeds from their websites as well with press releases etc.

So simply here is how you do the Chrome RSS. Go here. Then “add to Chrome”. Then open the file to install–done. Then as you want to add a feed to your feed reader just click the RSS icon on the site you want to follow and it will add the feed. Your list will update every 10 minutes or whatever you set it to.

You should see this symbol in your tool bar of Chrome–top right corner when you have the feed reader installed.

Monday Morning Kickoff

The S&P500 traded in a range of 2976 to 3027, opening the week at 2981 and closing the week at 3025–“party on Garth”.

The 10 year treasury traded in a range of 2.01% to 2.08%, closing the week at the high yield of 2.08%.

The Fed Balance Sheet fell by $5 billion last week — the balance sheet stands at $3.8 trillion right now.

The average $25 preferred stock and baby bond is trading at $25.11 right now which is up 6 cents on the week–it just keeps marching higher. We have just 149 issues now trading at $25 or below–compared to 161 last week. Obviously this all goes to show that bargain hunting continues to get more difficult.

We had 1 new income issue announced last week as BDC Newtek Business Services (NASDAQ:NEWT) announced a new 5.75% $25 baby bond – they will call the NEWTZ 7.50% issue, which is a small issue. Holders of the NEWTZ issue got spanked–which they sorely needed to teach them a “call risk” lesson.

Holders got to experience an instant $1.50 loss with the announced redemption.

The new issue is to trade under ticker NEWTL, which was also a ticker used previously. It is possible this ticker could change prior to the start of trading. Details can be seen here.

Markets Quietly Awaiting the Fed

All the markets are awaiting the decision on interest rates from the FOMC next Wednesday. We believe the Fed Chair has backed himself into the corner (with his testimony to congress) and that while lower rates are unnecessary (in my opinion) they will lower the Fed Funds rate by 1/4%.

Purely on a domestic basis the economic numbers continue to look fairly strong. Obviously on a more global basis economies are weakening and Europe remains a never ending basket case – I don’t see that changing for the better anytime soon

Of course when I write on the lowering of the Fed Funds rate I am “talking my book”. It is more palatable to have our money market earning over 2% and not being pushed into more risky assets. In these times of redemptions of preferreds and baby bonds we always seem to end up with excessive cash and we don’t mind waiting for reasonable opportunities while earning 2%–when we are earning 0 on money market there is more urgency to get cash deployed.

Look for all of the markets to remain quiet until next Wednesday afternoon as no one will want to make commitments prior to the interest rate announcement.

Newtek Business Services Prices Baby Bonds

As predicted by some the new Newtek (NASDAQ:NEWT) baby bonds have priced at 5.75%.

Here are the details of the issue known at this point.

NOTE–issue is unrated by major rating agencies, but rated A-/BBB+ by Egan Jones.

Over the years I have gotten to like Newtek issues, but I am on the fence on this one. 5.75% may be too low for me to make a buy–but given the current marketplace who knows for sure.

I am looking for this one to trade sometime next week on the NASDAQ under ticker NEWTL. Of course there will be no OTC Grey market exchange trading prior to the NASDAQ listing, but for those looking for an early purchase checking with your brokerage bond desk next week may be fruitful.

The pricing term sheet can be read here.

Newtek Business Services to Sell New Baby Bond

BDC Newtek Business Services (NASDAQ:NEWT) has announced a new baby bond with a maturity date in 2024.

The company states that the “use of proceeds” is to call the 2022 7.50% baby bonds (NEWTZ). These baby bonds were trading as high as $28.00 in recent days. Investors were totally asleep at the wheel on this one–although we know a number of readers were on this one and sold at high prices and got out. We had seen a few exchanges of comments on this one.

The chart on the NEWTZ issue is here and you will be able to see a $1/share drop when folks wake up.

The preliminary prospectus for the new issues can be read here.

Here Comes Another $1000 Preferred Reset Rate Issue

We mention that we don’t normally follow $1000 issues, but the proliferation of these issues catches our attention.

M&T Bank (NYSE:MTB) has announced another new one today–$1000, non-cumulative, semi-annual dividend payment and a reset rate starting in 2024 which drives off the 5 year treasury.

M&T apparently has a 6.375% cumulative $1000 issue outstanding that they mention they may call with the proceeds.

The preliminary prospectus can be read here.

Of course BB&T priced one yesterday at 4.80%–can’t wait to see the crap coupon on the M&T issue.

Ready Capital $25 Baby Bond “Queued Up”.

We see the new baby bond from REIT Ready Capital is set up in the eTrade database this morning. We do not see it yet at Fido. Likely it will trade within a day or so (or maybe even today).

This 6.20% issue will trade under ticker RCB.

Details on the issue are here.

1 correction from Justin is that the CUSIP on this issue has been changed to 75574U408.

BB&T Prices New $1000 Perpetual Preferred

BB&T Corp (NYSE:BBT) has priced a new $1000/share fixed rate reset non cumulative preferred with an initial coupon of 4.80%.

Quite honestly this is a total crap issue–perpetual, non-cumulative with a rating of BBB- from S&P and Baa1 (potentially to be downgraded) from Moodys and BBB- from Fitch. Just barely investment grade.

The coupon is fixed until 9/1/2024 and then resets at the 5 year treasury plus a spread of 3.003%. After this it will be reset every 5th anniversary. The issue becomes optionally redeemable on 9/1/2024 at the companies option.

To top it all off the issue will pay dividends only twice a year.

We don’t deal with $1000 issues on this site, but I thought it would be nice to show what is coming down the road.

The pricing term sheet can be read here.

Monday Morning Kickoff

The S&P500 moved in a range of 2973 to 3015 last week before closing Friday at 2977–off by over 1%.

The 10 year treasury moved in a range of 2.035% to 2.14%, but has been the case continually for the last number of months any bump higher in interest rates is followed by a drift back lower and it closed the week at the lows.

The Fed Balance Sheet fell by $7 billion last week after rising a couple billion the week before. There hasn’t been too much talk of the continued runoff in the balance sheet, but the chart below clearly shows that there has been no change in pace and direction of the runoff in 2019.

The average $25 preferred and baby bond moved higher in price by 1 penny last week. We now have 161 issues that are trading at $25 or below compared to 170 issues last week. Still heading in the direction that makes investing more and more difficult.

Last week we had just 1 new income issue announced and that is the new 6.20% baby bond from REIT Ready Capital Corp. The issue will trade under ticker RCB when it begins to trade either this week or next. The details on this one can be found here.

Spreadsheet Listing Changes

I have made to 2 changes to the spreadsheet listings lately.

1st I totally eliminated the “master listing of near new highs and new lows” spreadsheet. This included all preferreds and baby bonds. As seems to happen on a regular basis the quote provider for the 52 week highs and lows became totally erratic on the baby bonds—if 20% of the data is missing there simply is no reason to try to provide the data.

2ndly while looking at all the 52 week highs a couple days ago on one of our non published sheets we decided to merge the “Near 52 Week Low” into the “Near 52 Week High” sheet and publish as 1 sheet—you can toggle between new high and new lows.

This newly expanded sheet can be seen here and is it linked on the “preferred stock” page.

Ready Capital Corporation Prices Baby Bonds

mREIT Ready Capital Corporation (NYSE:RC) has priced a new baby bond issue with a fixed rate coupon of 6.20%.

While the coupon could be a bit more generous, at least the 2026 maturity date makes it a bit attractive.

The details of the issue are below–

This issue should trade sometime in the next week or two, although the timing will not be known in advance.

There is no OTC Grey market trading, but the bond desk of your brokerage firm may be able to secure for you prior to NYSE trading.

The pricing term sheet can be seen here.

WOW!! No Wonder We Can’t Find Bargains

We have a spreadsheet which we use–but it is not posted on the “preferred stock” page that is “$25 Preferreds At or Near New Highs” which is a listing of all preferred stocks and it compares current price to the 25 week high for the shares.

This spreadsheet is now showing 154 of 462 issues followed within 1% of a new high.

When I reset the formula to show all issues within 2% of a new high 250 issues show up. More than 1/2 the $25 preferred issues are within 2% (50 cents) of a new high–no wonder we search in vain for “bargains”.

Of course we see that in our own holdings–in particular in the investment grade CEF preferreds. Our AllianzGI Convertible and Income 5.62% Preferred (NCV-A) is now trading at $25.81. Some of this quality issue (rated AAA by Fitch) we purchased last December in the $23.50 area and more of it we purchased in March/April for around $24.50. Never dreamed we would have such capital gains in these issues.

I hate to wish for an “event” of some sort, but honestly we either need an event to set prices lower or we need to recalibrate our expectations. Patience I keep saying–patience.

We will try to post this “new high” spreadsheet in the next day or 2.

REIT Ready Capital to Offer Senior Notes

mREIT Ready Capital (NYSE:RC), which was formerly Sutherland Asset Management, has announced an offering of $25 senior notes.

The notes interest payment is an unqualified interest payment taxed at ordinary tax rates. The issue will be unrated.

The notes will have a maturity date in 2026, with an optional redemption date starting in 2022. The issue will offer 101% of principal, plus accrued and unpaid interest if redeemed early starting in 2022 until mid year 2025 (exact dates not announced) which will then go to 100% for part of 2025 until maturity.

The notes will trade on the NYSE under ticker RCB. There will be no OTC Grey market trading on these, although it is possible some brokers bond desk may trade these prior to NYSE listing.

The preliminary prospectus can be read here.

The company has 2 baby bonds outstanding already which can be seen here.

Strong Economic Reports Move Interest Rates Higher

The combination of a strong jobs report 2 Fridays ago and very strong retail sales being reported today have worked to move interest rates higher–for now. The 10 year treasury yield moved as high as 2.14% before settling back to around 2.11% right now. Remember it traded as low as 1.95% on 7/3/2019.

It seems to me that the most recent “data” would argue for the FED holding the Fed Funds rate steady–but from recent testimony to congress we think that once again the FED has backed themselves into a corner and will have to lower rates 1/4%.

“Talking our book” we would be quite happy to see no rate hike. Our money market right now is yielding 2.24% (Gabelli US Treasury money market-GABXX) and we are happy with that yield–to go back to the sub-2% area will certainly make our life a bit more difficult as we chase higher returns.

Of course when we look at the global economies–Europe in a slow motion slide and China slowing bringing many negative rates we know darned well the Fed will move rates lower.

Ag Coop CHS Releases Earnings

Giant ag cooperative CHS has released earnings for the quarter ending 5/31/2019.

Honestly the earnings were not very good–although they haven’t been stellar for quite a few quarters. The coop earned a net of $54 million on sales of $8.5 billion.

We only care about these earnings as the cooperative has 5 outstanding issues of preferred stock–all of which are unrated and which carry fairly high coupons. In spite of the marginal earnings, preferred shares are not reacting negatively–nor would we be overly concerned. Over time when the ag economy improves the general financials will improve.

The earnings release can be read here.