Month: March 2020

1 more day–it will be great to get to the weekend. The mental flip flops all week long are pretty draining for me–I suspect for everyone.

It looks like we will see a stronger opening on the equity markets today–but as we all know that doesn’t mean we will finish positive–BUT it feels like a potential change in situation today–for now.

Maybe we (as a country) are going to come to grips (acceptance) that we are going to have a soft economy because of the Covid 19 virus. With all kinds of large events, schools and business shutting down for at least a couple weeks–maybe a month, but in the end–in the near future we will be fine.

Anyway today I have 2 issues on my shopping list. 1st is the CMS Energy baby bonds (CMSC)–5.875% with call protection until 10/2023. Last traded at $23.47. 2ndly the Spire 5.90% perpetual preferred (SR-A) trading at $24.25.

This continues the theme of high quality purchases.

Now if I am correct that markets move to another stage–less craziness–with swings of only +/- 1 or 2% I will move to another stage of adding some higher coupon, junkier issues–which I have only partially identified. I am looking at some REIT preferreds–maybe in the mREIT area–but UNDER NO CIRCUMSTANCES will I be buying lodging preferreds. The lodging REITs preferreds might work for a trader who is nimble, but I am looking for stuff to hold longer term.

So hold on–I see the equity futures are on a halt (an upside halt) so with good fortune today will a calmer day–at least one which may not be such a loser.

BlueJoseph posted a statement from the NY Fed –right about now they are doing a $500 billion (giant sized) REPO 3 month AND a $500 1 month REPO – so the liquidity issue I was PO’ed about appears to be addressed now.

The statement is here.

Well the open today will be really lousy–down over 1000 points–futures are halted, but ETF trading continues and it looks like a 5-7% down open.

Yesterday I bought the Interstate Power and Light 5.1% (IPLDP) perpetual—the issue is now redeemable, but I paid only $24.90.

I sold a bit yesterday also – I want maximum cash levels when we hit the bottom (whenever this will be). As the days have gone by and purchases are made I have off loaded some perpetuals, although I don’t own too much of these. Essentially recycling cash to remain at high levels.

I had mentioned that on Tuesday I sold the little bit of Golar LNG 8.75% perpetual (GMLPP) I had–which was obviously a big mistake. Also I sold Brookfield Property REIT 6.375% (BPYUP) perpetual.

Income investors should be continuing to build shopping lists–but there is no way we are at the bottom yet–and there is a high probability that some preferred and baby bond issuers are going to have substantial financial pain through the balance of the year and may suspend dividends for a few quarters.

Here is a list of Lodging REIT preferreds–some of these companies may well suspend dividends later in the year—they are all cumulative and I might be a buyer at much lower levels–months from now. On the other hand I wouldn’t touch Sotherly or Ashford issues.

So the bottom line is I continue to watch and add the highest quality issues. I trim around the edges to keep high levels of cash.

Some investors should be doing some selling to the point that they can sleep at night—while others with very large stashes (more than they will ever need) will likely be holding and/or buying bargains–but the bottom line is we will continue to see better bargains in the future.

2 weeks ago I wrote about Seeking Alpha being a business–not a service that should be used for anything more than an occasional ‘idea’. I follow some folks over there and will take any good idea I can find.

Unfortunately what we are seeing now is that all the folks that were ‘experts’, are now dogs–BUT still everyday they are writing articles on what to now buy. 1 of the most popular groups ‘pounded the table’ on an issue a while ago that is now liquidating with a massive loss–I’m talking a 80-90% loss. These experts will find, before the year is out, that when you lose 50% of your capital that it will take them years and years to gain it back–even with the dividends that some are so insistent is all they care about.

Anyway this is how investors are lost to future investing–they lose 50% of their stash–so the buy high and sell low, then back to cash for the next decade or so. Sad.

So today the futures are way down–we should expect that given the gains yesterday–unfortunately the elevator down goes much faster than going up. While we had gains yesterday we will likely lose all that gain plus more today.

Again we watch–if this continues, at some point all babies (so far it has just been some babies) will go out with the bath water–even ‘A’ CEF preferreds–I want to be there when that happens.

The average $25 preferred and baby bond fell by $1.09 (4% more or less) in the big downdraft yesterday–but we got a little relief today. Today the average share went up around 25 cents (1% more or less).

Weakness continued in a number of preferreds issued by lodging REITs (i.e. Ashford, Hersha, Sotherly and Summit) where there were a number of 50 cent and $1 moves lower–with Sotherly issues moving lower by $1.70, $1.82 and $2.48 respectively–ouch. The SOHO issues are around 11% in current yield.

Some of the mREITs continued lower today as well. Giant AGNC saw all 4 preferreds move lower by 1.5% to 3%, while Annaly issues were all down 1%.

I did absolutely no buying or selling today–with the news of various schools shutting down, the price of crude oil remaining low and airlines cutting schedules it is leading me to pause. I just can’t help but think we will have plenty of opportunities to buy bargains—and shares that look like bargains today, may be much cheaper tomorrow or next week.

We know from past experience that the higher yield issues bounce back best from very low panic prices–but right now I am NOT certain we have seen those panic lows--they may remain to be seen as economic dislocation takes place.

So I will continue to watch–if I do anything it is just more nibbling, but maybe not even that. I will probably sell the ill fated Golar LNG 8.75% perpetual (GMLPP) shares tomorrow. Obviously it was a poor decision to make this small purchase–for which I now have a $6/share loss–I hate losses (I guess I could change my thought process to ‘you only have a loss if you sell’–what balony).

Well let’s see what kind of wild trading will occur tomorrow.