Once again the S&P500 moved higher last week as the index traded in a range of 3414 to 3509 closing the week at 3508–a gain on the week of around 3%.
The 10 year treasury moved in a range of .62% to .75% closing the week at .73%.
The Federal Reserve balance sheet fell by $20 billion — after rising $53 billion the week before–it has become obvious that the current buying by the Fed of government debt, mortgages and other assets will be pretty lumpy week to week. The globe is awash in money and even a meager coupon on U.S. debt is attractive compared to nothing, or less than nothing in some countries.
The average $25/share preferred stock and baby bond followed along with the common stocks and saw an increase on the week of 10 cents a share. CEF preferreds were up 5 cents/share, banks up 9 cents and investment grade 17 cents.
Lodging REIT Ashford Hospitality (AHT) has begun turning in the keys to hotels they owned as lenders begin to put their properties up for sale–when you can’t come to agreement with lenders they eventually take the properties–all of Ashfords properties are ‘non-recourse’ to the company so they turned over the keys to an 8 property portfolio this week. As I wrote before I think AHT is essentially broke and will liquidate in the year ahead with common and preferreds holders getting zip.
The Fed Balance sheet fell by $20 billion last week–obviously the buying of treasuries, mortgages and other assets by the Fed in the weeks and month ahead will be ‘lumpy’. There is so much money sloshing around the globe that the Fed hasn’t had to do much buying. There have been a number of huge treasury auctions in the last few weeks and the market has had no trouble buying everything available.
Utility Southern California Edison (a division of Edison International EIX) has announced a call of some old preferreds with coupons ranging from a low of 4.08% to 4.78% as well as their 5.10% Trust Preferred shares–the redemption date is 9/27/2020.
All of the old preferred will be redeemed at premiums–with the SCE-D issue garnering a $28.75 redemption price (plus accrued dividends)–it is currently trading at $23.87.
The company has an additional 4 issues of trust preferreds outstanding, but they are not yet callable.
I was reviewing the large volume issues from today (large compared to normal daily volume) and I noticed an old friend of mine in the list–Gabelli Utility Trust 5.625% preferred (GUT-A) had traded just 8,700 shares–but that is 7 times normal volume.
It wasn’t really the volume that caught my eye–it was the ridiculous share price that stood out—$27.81 and optionally redeemable since 2008. I think investors are just daring Mario Gabelli to spank them with a 10% loss.
With the call of the Gabelli Dividend and Income preferred (GDV-A) on Monday you would think they maybe would be keeping their eye on other potential calls–especially because they could replace called issues with sub 5% new preferreds if they desired.
I mentioned this as being an ‘old friend’ as I held it for many years – even after it was redeemable–but I guarantee you it was never this far out of line in price.
Gabelli has always been kind of slow to call issues, but it is becoming more difficult for a fund manager to explain to common holders that it makes sense to line the pockets of preferred holders at the expense of the common people.
While we are still in a recession so this isn’t really a potential ‘double dip’ are going to see the second downward push in the economy soon?
For years I have watched employment and consumer confidence for clues as to where we were heading in the economy–I quit watching these closely during the last 6 months as the Fed and the treasury overwhelmed fundamentals with never ending money drops–but maybe it is time to watch again.
The Conference Board released their take on Consumer Confidence today and it wasn’t good. The Consumer Confidence Index fell to 84.8 from 91.7 last month–this is a damned big drop. ‘Analysts’ (who ever that is) were expecting an increase in the reading–so much for the smart folks. Seems to me with the $600/week extra cash from the federal government going away confidence both by the employed and the unemployed would head south–we are talking maybe $6 billion a week going away–real money (or is it just fake paper fresh off the printing press?).
Last week we had a 1.1 million first time unemployment claims number–up from 910,000 the week before–are small businesses simply running out of cash and having to lay off folks? I didn’t dig into this one, but anecdotally I had 2 nephews get laid off last week–1 in Colorado and 1 in Kansas. Both worked in hospitality related businesses–the businesses simply continue to suffer and eventually lay offs have to happen. In this case both nephews are around 50 and this will be a tough time for them.
Black Knight released the latest mortgage data report last Thursday and there was a bit of improvement overall–but with the $600 weekly going away is this going to worsen again? Their report is here.
While overall mortgage delinquencies improved a bit FHA borrowers are not paying their mortgages–a full 16% of all of them are delinquent!! Yikes!! This is up from 9.7% the month before. While I am for everyone that wants a house to have one–the facts are, time and time again, that when you have little ‘skin in the game’ and you lose your job defaulting is always an option. The feds have a forbearance program and payments can be deferred for up to a year–any wagers on how many of these folks will walk away from their property at some point in the future? A short article on the recent number can be read here.
So the time is here to again watch numbers closely. The wild card being how much money congress will throw at the problem in the weeks ahead–not that money will help in the long term–we are creating zombie businesses, zombie homeowners, zombie employees–when will the ‘piper be paid’?
Now just how soundly do you have to be napping to be caught holding the Gabelli Dividend and Income 5.875% (GDV-A) cumulative preferred stock when it is trading at $26.35 and has been optionally redeemable since 2009?
Those holders got a 4% lesson yesterday–as a call was announced and the ‘dump’ was swift–tumbling 97 cents.
The redemption will occur on 9/25/2020.
The company had previously called 1.542 million shares on 5/6/2020 so that should have alerted folks shares were in the company sights for a full redemption–but memories are short nowadays and after a fall after this earlier call folks drove the price right back up.
On the other hand holders have garnered a great, safe dividend for many years by holding shares so I guess holders turned out ok–unless you bought last week.
mcg was on this at 2:23 pm as was Ptrader 3 minutes later noting a volume spike. I was reviewing the preferred share loss page at the same time and noted the large drop in the issue–I instantly knew a call was at hand–it had traded 25 times normal volume. Posting was on the Reader Initiated Alert page.
I will be adding a new link titled “Sandbox” in the right hand menu.
That link will get you to this page.
I had originally set up the “Reader Initiated Alert” page for ‘alerts’. I was thinking this, for instance, might be when a preferred stock is undergoing a temporary selloff and someone wants to let the population know about it quickly. Of course we all (including me) use the ‘alert’ page for general messaging.
I am requesting that we start using the Sandbox page for all general talk, and try to preserve the ‘alerts’ page for ‘alerts’.
I have had a screen up on one of my monitors all week where I see all comments – no matter where they are posted–it is a great page and I wish everyone had a page like that–believe me we all benefit from all the knowledge being shared. I don’t want to stifle any of the exchange of knowledge, but hope to get things a bit better organized by adding the Sandbox page.
Legg Mason, which was recently acquired by Franklin Resources (BEN), had 2 baby bond issues outstanding at the time of merger, which had previously been announced that they were to be delisted from the NYSE on 8/20/2020. These baby bonds were delisted.
Today it was announced that these issues would begin to trade on the OTC market–I would expect maybe tomorrow or Wednesday.
The ticker for the Legg Mason 6.375% Junior Subordinated Notes will be LMICL while the 5.45% Junior Subordinated Notes will trade under ticker LMIBL.
With critical consumer confidence continuing to be measured at a very low level, relative to readings just 6 months ago, commons stocks, as measured by the S&P500 continue to move higher.
The University of Michigan Consumer Sentiment survey tells a different story than the stock market–this will not end well–although it may remain irrational for quite a long time.
The index traded in a range of 3354 to 3400 closing the week at 3397 which was 3/4% higher than the Friday before.
The 10 year treasury, which had closed at a recent weekly closing high of .71% the Friday before fell back to close at .64% Friday. Weekly jobless claims spiked up to 1.1 million versus a forecast of 910,000 which helped to keep rates moving lower. Is this the double dip fall in employment?
The Fed Balance Sheet grew by a pretty healthy amount last week–$53 billion–the largest amount since 6/10/2020. The Fed has announced plans for the period of 8/14 to 9/14 to purchase $80 billion in treasurys–so after modest purchases the last few weeks a large jump is no surprise.
The average $25/share baby bond and preferred stock moved slightly higher–up 13 cents/share. Banks were the strongest group – up 30 cents. Investment grade issues were up 16 cents, CEF issues up 4 cents and utility issues up 17 cents. mREIT issues were flat.
Last week we had 3 new issues price.
Prudential Financial (PRU) priced a new 4.125% Junior Subordinated Note. I am not aware that this issue is trading as of yet, but I believe I saw a few folks buying via their brokers bond desk in the $25.30-$25.40 area.
Small bank holding company CNB Financial priced a 7.125% non-cumulative preferred. The issue is trading now under the OTC temporary ticker CCNEL and last traded at $25.26.
Lastly lodging REIT DiamondRock Hospitality (DRH) priced a new cumulative preferred with a coupon of 8.25%. The issue is now trading under OTC temporary ticker DRHPP and last traded at $24.70.
I asked for input on a new commenting system this week and I got lots of good suggestions–of course more good ideas than could ever be implemented in total–but lots of thoughts that can probably be added in.
I will print all the suggestions and then try to match them up to the commenting systems out there and see what might be best.
Also on the topic of commenting I will ‘dial up’ the monitoring of comments. What does that mean?
I have a master page of all comments as I have mentioned before–no matter where on the site a comment is made it shows up on the screen so I will be able to act if necessary.
I ask that everyone be ‘civil’–what does that mean? It is ok to have disagreements, but state your case and move on. We don’t need to have back and forth Pendragon’Y type exchanges (you know back and forth for 100 comments).
The reason I have never made a recommendation on buying a security on this site is because each and every one of us is different–hardly ever is there a right or wrong answer—just the one that works for you.
It seems to me that 100% of people reading the site should be able to comment on their position without any personal attacks–certainly there will be differences of opinions, but they can be stated civilly without personal attacks.
Honestly with over 100,000 comments made there has only been a dozen or two that I know of (and of course I don’t know them all) that should not have been made (in my opinion) and a reasonable person has to be happy with that–there is just no way we are going down the road of the old Yahoo Finance message boards–no way.
Of course over the years this issue has been PARTIALLY redeemed many times–it was a giant issue to start–almost 43 million shares. With this new call outstanding shares should be in the 18 million shares area.
About a year ago folks asked for the ability to ‘edit’ their comments after publication–the native wordpress system did not allow for editing. At that time I thought I would go ahead and change the entire commenting system.
Then I found a wordpress ‘add in’ that allowed ‘editing’ of comments (which is set at allowing 5 minutes for edits)–which took care of that immediate issue.
NOW it looks like it is time to upgrade the commenting system to something that allows a more robust search capability–to search by user name–maybe to allow ‘scoring’ of comments–to get notification when someone responds to your comment–etc, etc. There are many, many possibilities in commenting systems.
So what I am asking ALL OF YOU is if there is a commenting system somewhere that maybe you use that you think has lots of great features? If you could let me know the website I could look at it.
If there isn’t one that you are aware of then simply what are some features that you would think would be desirable?
In about a week I will make a decision on a change. I have about 10 options so far–and of course they all sound great, but without seeing a live system who really knows. If I choose the wrong one–oh well we will just move onto a new one.
Please leave some feedback for me – it would be helpful.
Just a note on a few of the buys and sells I have done lately.
I sold some of my Tri-Continental 5% $50/shares preferred. I held 300 shares for years and this time as it trades up around $57.50 (and sometimes $58.40) I decided to ‘lighten up’. This issue has been outstanding since 1963 and likely will continue to remain outstanding, but with a call price of $55/share I decided to let some go–I am open to re-buying down around the call price.
I sold a 1/2 position of the Wesbanco 6.75% fixed-rate reset preferred which was a new issue from 8/4. I bought it for $25.50 and sold for $26.25. I am not buying any of these small bank issues to ‘hold’–just to flip.
Lastly, I added a couple hundred shares of the Highland Income Fund 5.375% preferred (HFRO-A) at $24.86. While I am not thrilled with the Highland Income Fund (HFRO) as long as it is strongly investment grade (A1 from Moodys) and their asset coverage ratio remains reasonable good – 276% as of 12/31/2019 I will hold it as I can’t get investment grade issues with current yields of 5.40-5.50%.
As is pretty typical of most websites I have ever been on comments on articles tend to drift ‘off topic’. No giant surprise on that happening–at least not to me.
At this time I need to reinforce the need to comment in the correct areas. If the comment isn’t relative to the topic (for instance a new issue) it should be made in the correct area. Some areas for miscellaneous chatter are listed below.
A popular page–obviously to have quick announcements on new issues–redemptions etc. Since I can’t monitor all the data 24/7 this page is the most timely. While I get to the new issues etc–it is usually an hour or two after some folks have the news.
Again–obvious–for Canadian related issues. Many folks buy the Canadian preferreds and discuss them here.
All of the available pages are in the RIGHT HAND COLUMN.
Because of the ‘off topic’ commenting the thread is ‘hijacked’ to another topic, which makes it difficult for those wanting to find older comments to find them as they have to wade through 100’s of ‘off topic’ comments to find what they need.
If folks could try to adhere to some level of on topic commenting things will be a bit more organized in the comments.
Prudential Financial (PRU) has priced the new baby bond previously announced with a rock bottom coupon of 4.125%.
Of course the issue is investment grade.
There is no OTC grey market trading in this debt issue–and in fact the company didn’t even announced a tentative ticker symbol. Anxious investors will need to contact their broker with the CUSIP if wanting to buy the issue before exchange listing.
The S&P500 traded in a range of 3326 to 3379 before closing the week at 3373–there was a gain of a bit less than 1% on the week.
The 10 year treasury yield traded in a range of .55% to .72% before closing at .71%–the highest weekly close since June 5.
The Fed Balance Sheet grew by $12 billion last week–the 1st increase in 3 weeks. With interest rates popping last week because of relatively massive supply from the treasury we may well see the balance sheet grow at a faster clip ahead–we will see if there is enough liquidity sloshing around to soak up the issuance.
After pausing 2 weeks from relentlessly upward movement the average $25/share preferred stock and baby bond moved higher again last week. The average issue moved 1% higher with lodging issues moving 3% higher, mREIT issues moving 3% higher while utilities moved just 1/2% higher. Investment grade issue just barely moved higher by less than 1/2%. Obviously the theme is junkier issues drove the week higher.
We had 3 new income issues sold last week.
US Cellular (USM) priced a new issue of baby bonds at 6.25%. The ticker will be UZD when the issue begins to trade (no OTC trading)–I note that eTrade has the ticker ‘set up’.
Self storage giant Public Storage (PSA) priced a new issue at the rock bottom coupon of 4.125%. In spite of the coupon the issue closed trading last week at $25.48–trading on the OTC market–ticker PSAGL (note the OTC ticker below is not correct–changed after publication.
Lastly Federal Agricultural Mortgage Corp (AGM) priced a new issue at 5.25%. The issue is trading on the OTC market under ticker AGMFP—closed trading last Friday at $25.02.
Federal Agricultural Mortgage Corp (AGM) has priced their previously announced new non-cumulative preferred.
The issue will carry a coupon of 5.25% and will be non-cumulative, but qualified.
The company also announced a call (although no official notice of call has yet been issued) of the 5.875% series a issues (AGM-A) which has been redeemable since 2018.
Holders of the AGM-A issue are sleeping a bit as shares closed at $25.80 today–with 30 days notice of redemption holders will likely take about a 50-55 cent loss. My guess is the lack of information has left most holders in the dark.
There will be a SEC filing soon on the issue, but in the meantime the issue will begin trading immediately.
EarlyBird had the details on this issue at 1:22pm this afternoon in Reader Alerts. We always wait for published details before posting our announcement–watching the Reader Alerts page is always most timely.