Seldom do any of us say that we feel good with a 356 DJIA loss, but it sure felt good.
Unfortunately I am afraid the Fed has put themselves in a ‘box’–back to the same old thing where the Fed yaks and the market prices in a rate cut. I guess everyone can have a good weekend, before we are back at the computer Sunday night.
I think we are going to see coordinated global interest rate cuts Sunday night–with the 10 year treasury at 1.12% a 1/4 point cut would still leave Fed Funds above it. I hate the thought of the rate cut (I’m talking my book here)–I don’t think it is helpful, plus us income investors will see our meager 1.50% money markets returns melt away.
If we don’t get coordinated Fed activity Sunday night I am afraid we will see a weak open again on Monday–but absent serious virus news on the weekend we likely are moving toward a base (famous last words).
Well for now I am done until tonight at which point I am going to survey my portfolio damage and get serious about putting together a shopping list.
I do note that my ‘old friend’ WR Berkley 5.625% (WRB-B) is trading at $24.91 and there is a month of accrued interest in it already. I will resist until Monday.
With stocks off around 2 1/2% right now the close today will be interesting—a nice bounce this afternoon would be comforting, but not sure who would be buying going into a weekend with the virus background at play.
Yesterdays close in equity markets was really poor as selling continued right into the last minute–that pretty much wrote the story for today’s opening.
Yesterday was the biggest drop in preferreds and baby bonds this week–and likely moved our personal accounts back to break even for the year (with a 30% cash position)–or maybe even a little red overall. The baby is going out with the bath water so we will see if that continues today.
For today we will review accounts–and again, likely do nothing–while we see lots of securities we would like to own it seems likely that we are going to keep powder dry until we get to Monday–and then re-evaluate.
The CEF preferreds have remained fairly strong–being down just 20 cents from their all time high–no doubt folks their are feeling good about their holdings and the safety of the required 200% asset coverage ratio. I would love to have a bunch more of these–but they are not cheap and it is hard to justify purchases right now to capture a 5% current yield. I will be watching these closely–I wouldn’t mind a tumble in them, but I doubt we will see it happen.
So buckle up–let’s see if we can get some stability after what is likely to be a 600 point DJIA drop.
I watch a few folks on Seeking Alpha–let me repeat–I watch a few folks on Seeking Alpha. I say watch because I will take any good idea I can find, but honestly most folks on SA don’t write to help you and hear me out–they write to create revenue. I have no problem whatsoever with that, but I do have a problem with folks who are ‘experts’ in one area holding themselves out to be expert in everything–most of this based on quotes from Warren Buffett.
I had mentioned a month or so ago, that all the ‘heros’ on SA that mistook dart throwing luck for skill, would soon learn that owning stocks and bonds is not a 1 way street. The thrashings are now occurring. Some authors should feel very humbled right about now.
Everyone has to learn that SA is a business–it is about creating revenue–not about being right so use it for some ideas–don’t take anyone’s word on a ‘buy’. Do your own due diligence–don’t blame anyone else for your personal lack of homework.
Well it looks like another day to review your holdings–I did it multiple times yesterday, but didn’t find anything to sell. I will do it again today–probably twice.
No doubt the economy will be hurt by the corona virus reaction–and the odds that you will find me buying any preferreds from lodging REITs in the next few weeks is pretty small, BUT for those with a bit more taste for risk than I have we may be seeing some good bargains out there.
With the lodging REITs and many of the shippers I don’t think there is a reason to rush into any bargain buying–I would suggest that folks ‘leg into’ new positions (this really goes toward everything right now). If your normal full positions is 500 shares buy 200 shares first and wait a few days or weeks before committing new funds.
I realize that at this point in time in the market drop there are some folks that think the ‘world is going to end’–and they may be laying awake at night with worry. There is a point–and each and every investor is different–where you raise more cash. Investors don’t have to make any excuses to anyone on this website if they feel the need to do a bit more selling. For the same reason that I don’t make buy or sell recommendations, I don’t tell folks they should be holding securities in difficult markets. Everyone needs to do what is best in their mind for themselves–if that means 50% cash–so be it.
Keep your cool, stay sane and protect your ‘stash’ in the best way that you know how.
Stocks took off for a good early gain–but those are now rapidly being given back.
The 10 year treasury popped a couple basis points–but now has settled back to yesterdays close.
I personally have reviewed all of my holdings a few times today–I haven’t bought or sold, although there were gains in the Golar LNG Partners (GMLPP) 8.75% I bought yesterday–which would have bought a steak dinner or two–I’m holding.
Today some of the mall REIT preferreds are taking it in the shorts. Pennsylvania Real Estate Investment (PEI) issues are off 10%–of course this company has plenty of problems.
The CAI preferreds are off 2% (more or less), and many bank preferreds are off 2%.
CORRECTED–this issue is perpetual–no maturity date–earlier I had a maturity date in the chart below.
mREIT MFA Financial (MFA) has priced their new previously announced fixed-to-floating rate preferred stock.
The initial coupon will be 6.50% and will be paid until 3/30/2025 after which time it will pay 3 month Libor plus a spread of 5.345%.
Shares will trade immediately on the OTC Grey market temporarily under ticker MFABO.
This is a large issue with near adequate issuance to call both the 8% baby bond (MFO) and the 7.50% preferred (MFA-B) in full if the over allotment shares are sold. We will have to see what the company decides to do.
I haven’t seen much discussion on the site about the Lodging REITs (and their preferreds), but as I was looking at the ‘big loser’ spreadsheet it was totally littered with lodging preferreds getting hammered lower by 2-9%!!
Of course the hated Ashford Hospitality (AHT) preferreds took the biggest hits–you can see them here. This is a REIT with an extremely heavy debt load–there is not much room for poor business conditions–and between the corona virus and some softness in the industry this company could be facing a make or break situation.
So with the likelihood that we will see some kind of corona virus outbreak in the U.S. and further likelihood that folks will overreact to the news—then what?
From my own experience I can say 1st off don’t willy nilly sell your portfolio–there are folks that sold at the lows in 2009 that have still not reentered the markets–instead opting to bury their cash in the back yard in a mayonnaise jar. Do your upfront work NOW.
2ndly–have some available cash. I have 2 eTrade accounts and they are 90% invested. The FIDO account is around 50% cash—all in all I have 30% cash. If we were to get the giant plunge I would begin to plan to buy CEF preferreds–assuming they took massive tumbles as well. If we truly got the huge plunge it takes months and months for shares to recover – these things don’t happen overnight – if I remember the 2009 plunge it took a year to recoup share prices.
I remember in 2009 there were some solid insurance company investment grade preferreds that traded down in the $7/share area–I only wished I had the courage to buy lots of them instead of a taste–when plunges happen you are scared shitles-, you think the world is going to end and all you can think about is ‘let me out’. Resist the urge.
How do we know the bottom is in? We won’t know–no bells rung at the top–nor at the bottom. If a Gabelli CEF preferred with a 5% coupon is selling at $12.50/share would I be happy with a 10% current yield? Hell yes!! I would buy a part position and wait before committing more to the position.
So–get prepared. No time for panic, just rational behavior – have some cash – now!! We don’t know what the market close will bring today–let alone what happens next week.
I was a bit surprised when stocks opened up higher today–with the soft close last night I thought it might move lower, before a bounce was attempted.
The good part about the stock selloff is that it is fairly ‘orderly’. No panic, just folks moving out of what was already an over valued marketplace. Of course it is unpredictable what will happen when a cluster of corona virus folks are found throughout the U.S.–hopefully rational behavior will rule.
Like interest rates we need slow moves lower in interest rates and stock prices–speed kills. While the talking heads on the boob tube want to make yesterdays and todays selloffs a ‘plunge’ they obviously weren’t around in 1987 when every news reader on the old Financial News Network (FNN) was literally green–they were truly scared shitl— (no cussing allowed). Down 23% in 1 day is truly a plunge–I remember it well.
I actually did a little speculative buying today–not my nature, but the risk reward seems ok. I bought a few hundred shares in the Golar LNG Partners 8.75% perpetual (GMLPP) and I added more shares of the pig UMH-D 6.375% perpetual–a dividend capture gone bad-but I am patient and have lots and lots of dry powder so am willing to hold it for a while. Lastly I added some shares of VER-F 6.70%–a monthly payor that I already have bought and sold a number of times. Hopefully I won’t regret these buys–but they are minor in the big picture of things and I will lose no sleep over them.
Average $25 preferreds and baby bonds are off today around 15-20 cents so we are at least getting pricing down to where it is more tolerable for us potential buyers.
mREIT MFA Financial (MFA) has announced the issuance of a new fixed-to-floating rate preferred.
Yield talk is in the 6.50% to 6.25%.
The issue will be unrated and will trade on the OTC Grey market (ticker not yet announced).
MFA has a 8% baby bond outstanding (MFO) which is to be called with the proceeds. These baby bonds were at $26.00 yesterday and are at $25.38 ttoday. They have been redeemable since 2017.
The company also has a 7.50% preferred (MFA-B) which is currently redeemable and they potentially will call a portion or all of this issue. It was redeemable starting in 2018 and is trading at $25.40 after falling from the $25.95 area yesterday.
With a breather in the downdraft in stocks and interest rates on pause–for now–it is a great time to once again review holdings to see if there are issues that you are laying awake nights worrying about.
While most of the folks we hear from on the website are fairly seasoned in their investing we have many, many newer investors stopping in and reading comments and many of them likely panicked and sold yesterday–using the “buy high and sell low” technique which is pretty normal for newer folks.
It is very likely we will see some more downdrafts in these markets in the days and weeks ahead related to the corona virus, or affects on companies because of the virus, so better to have too much cash than to lay awake nights worrying.
The equity close today was kind of soft–but not in a panic sort of way. Tomorrow should see less movement, but I wouldn’t be surprised to see a mildly down opening–assuming we don’t have new reports of large virus outbreaks in the U.S., or Europe (or Africa) overnight in which case it’s anyone’s guess.
Shippers were off 36 cents today–with LNG shippers really slammed. Golar LNG Partners 8.75% preferred (GMLPP) was off $1.08 to close at $20.97. Shares were at $26 only 3 weeks ago. I see the company announces earnings tomorrow. They had other negative news in late January which is buffeting these shares as they opened a large ‘at the market offering’ of these shares.
We end the day down 19 cents on the average $25 preferred and baby bond. Banks were off 19 cents, Investment grade off 16 cents, mREITs just 5 cents with CEF preferreds off just 7 cents.
$25 issue prices are now lower than anytime since late December.
Even though we have seen the DJIA off over 1000 points there is no reason to lose your cool. With the website down for 5 hours I lost my cool about the downtime, but I haven’t been excited at all about the DJIA fall. Like all security moves the ‘fear of the unknown’ is a big factor–and that is what we have now–lots of unknowns–about growth and about the progress of the corona virus.
I don’t like to see “red” in my accounts, but thus far today no significant damage has been done–down maybe a few 1/10’s%–but I hold almost no common stocks which is where I see some real damage being done. Cruise lines, shippers, container owners, oil and gas–real damage with many 8-10% losers.
I mentioned container owners Triton International (TRTN) and CAI International (CAI) last week and that if I owned those shares I would be studying my options. CAI is off around 8% today and Triton around 3-4%. TRTN preferreds are off 1-2% today, but the CAI preferred are hanging tough.
I am concerned with interest rates–the Fed has no real dry powder to help the economy (if it needs help–not sure it does). Today’s overnight REPO was normal at around $40 billion so no special overnight liquidity being announced–I suspect the Fed is watching closely, but resisting any extra REPOs–or maybe it is just that the primary dealers have not requested liquidity.
Today I did buy some of the new Priority Income Fund 6.625% term preferred (PRIFF) as it tumbled down into the low $24.30’s. I bought a full position and will see where we go from here–this would be a flip only as I already own the 7% PRIF-D issue.
Buckle up for the close today–if the markets fall into the close look for a weak open again tomorrow. If we get a bounce of a couple hundred points into the close we could see a bounce tomorrow morning. We need to watch for overnight news on any corona virus outbreaks in Africa where it would be a true disaster.
For the 2nd time in 2 days the website was down for 4-6 hours. This time I was working on the site at 6:46 am this morning when it went down–no word from the hosting company for hours after that, until a note came 3 hours later.
I understand that they may have maintenance needs, BUT the Sunday outage was ‘planned’ and no notice was given–if they would have let me know I would have posted a warning on the outage. The Monday outage was not planned–stuff happens.
Chad (who handles the tech end of things) has other hosts available, but for now I will stick with our smaller, local host–but if this happens again I will have to strongly consider a move.
This is abbreviated as the second outage on the website in 2 days makes it kind of irrelevant.
It looks like the week is going to start off with a bang as the corona virus spreads and is threatening to disrupt global economies in a big way.
The S&P futures are down between 2 and 3% and for the first time in quite a while stock movements to the downside should be getting everyone’s attention. Oil is down by $2 while gold is spiking up by $35.
We never advocate making rash moves (i.e. buying or selling) during these times of big equity moves–let’s sit back and observe the morning and see how it shakes out. There are high odds that most income securities will be just fine this morning–although we could be surprised.
Last week the S&P500 opened last week (which was a short holiday week) at 3369, hitting a low of 3328 on Friday and closing the week down 3338 off about 1% on the week.
The 10 year treasury has moved lower to closed last week at 1.47% after opening the week at 1.54% and hitting a high of 1.59%. Obviously global investors are piling into the safety of government debt as the corona virus spreads. This is in the face of the Fed slowly reducing liquidity–I guess the Fed will now reverse course in the face of falling equities. The 10 year treasury is now at 1.37%–near record lows.
The Fed balance sheet fell by $11 billion last week which continues to keep the balance sheet flattish for this entire year.
Last week we had only 2 new income issues sold.
Brookfield Renewable Partners LP (BEP) priced a new perpetual preferred unit offering with a meager 5.25% coupon. The issue is trading under OTC temporary ticker BKFRF. The issue opened for trading around $25.39 and is now at $25.80.
Priority Income Fund (non traded) priced a new issue of term preferred (PRIF-F) with a coupon of 6.625%. The issue is trading under OTC temporary ticker of PRYFP and last traded at $24.60.
I need to apologize for the website being down for 4-5 hours Sunday morning.
Unfortunately the hosting company was doing a server upgrade this morning, but gave no notice that this would be occurring. Fortunately for them this was only the 2nd outage in 27 months so I can’t be too hard on them–if this was a regular occurrence I would find a new host.
UPDATE–OTC TICKER IS PRYFP. I don’t see it up yet at eTrade or Fico yet.
Untraded CEF Priority Income Fund has priced their most recent issue of term preferred stock. This issue will have a mandatory redemption in 2027.
The PRIF-F issue has been priced at 6.625%–better than I thought it would come at–but some readers had it on the nose.
The issue will trade on the OTC Grey market, but the ticker has not been announced. Actually their filing shows the ‘trade’ date for the new issue as 2/21/2020 (tomorrow) so maybe the OTC data will be delayed–we will update this page as soon as the info is announced.
Being a CEF Priority Income must have a asset coverage ratio of over 200%. The company estimated that after this offering was floated that they would be at 292%. This offering is larger than they anticipated–they estimated 1 million shares and this is 1.2 million plus over allotment possibilities of another 180,000 so coverage would be under 292%
While todays moves in stocks is NOT really too scary, the further plunge in the 10 and 30 year treasury bond yields has to give one a bit of a startle. In addition gold is spiking a bunch higher – up $29 last I looked.
The 10 year treasury yield fell as low as 1.44% before bouncing a bit to 1.47%–we are not quite at new record lows, but at this pace it could happen soon. The 30 year bond was at 1.91% last I looked which is a record low–can you feel all of your investment grade investments being ‘refinanced’ soon? These falling yields are in the face of reduced liquidity from the Fed–obviously the fear trade is overwhelming other factors.
This corona virus issue is started to take hold in a big way–I mean riots in the streets in Ukraine overnight shows the power (and maybe danger) of social media. Information–both factual and ‘fake’ moves very fast.
Then on top of the virus issue we see that the purchasing managers index at 49.4 showing a slight potential in the economy slowing. It was only earlier this week that the Philly Fed Manufacturing Index came out extremely hot—everyone will have to make their own determination as to what the hell is going on for sure.
1 thing I know–if I was holding shares in either Triton International (TRTN) or CAI International (CAI) I would be studying trade disruptions carefully. Both of these companies are huge providers of containers moving back and forth between Asia and the rest of the world. Thus far the common stock of the company’s have not really reacted to virus related trade disruptions–certainly their preferreds haven’t suffered–all 6 issues are trading really strong. Certainly if the disruptions are a short term item the companies will do just fine–but a larger spread–who knows–these companies carry a ton of debt and need a continuous flow of revenue to make their payments–no room for error.
Looking over $25/share preferreds and baby bonds today I see mostly green. Investment grade is up 2 cents, while overall shares are up 3 cents. There is a lot of complacency in the income arena so it seems.
This is one of those days to fasten your seat belt into the close of the markets in 2 hours–with the weekend ahead will folks unload their risk assets (stocks)?
I look at the ticker after the market open today and see stocks off to another modest move higher–that’s all I need to see–I don’t watch minute by minute each day–maybe once per hour.
The next hour I look and the DJIA is off 373 points, so I did turn on the TV to see what was going on–as typically happens all I find is folks speculating on what happened–no one really knows. 1 explanation I heard was that traders all of a sudden realized stocks were out of sync with interest rates and gold prices–well no kidding–this has been the case for a very long time.
More interesting is that the 10 year treasury had dropped to 1.51%–off 6 basis points–we just keep getting closer and closer to all time lows in the 1.36% area–to me this is pretty scary–and I always take bond prices/yields more seriously than stock prices.
Oh well, checking our accounts I find no damage in the issues I own so I guess I am not too concerned about today’s action, but lower interest rates do concern me as I really wonder how long the economy can keep moving higher in the face of the Fed reducing liquidity and the unknown affects of the corona virus. Guess we will just have to keep watching.
I note today that the new Brookfield Renewable Partners 5.25% issue, which is trading under temporary ticker BKFRF is trading in the $25.70 area–fast out of the gate. I had an interest in this originally, but I am not paying this price–I am interested if it would tail off a bit in price.
Today we are seeing a little bounce back from yesterdays modest sell off in preferreds and baby bonds. Overall shares are up 5 cents with investment grade up 3 cents.
While I shouldn’t have been surprised that Morgan Stanley is acquiring eTrade, it feels a bit like adding insult to injury.
All of us have had to fight to try to earn a decent return and after being with eTrade for around 25 years it now looks like I will have be concerned with how our accounts will be handled.
I have used eTrade as my ‘go to’ account given that our accounts at Fidelity are generally less versatile–i.e. not allowing us to buy certain securities.
Oh well–when the time comes I will just review all the commenters chat on which brokers they prefer. I guess Morgan Stanley will have to earn our business–too many changes–and in particular too many restrictions, and we will be gone.