A Bit of Gyration

Everyone needs to remember that as we get calmer markets (hopefully soon) it will take plenty of time for income securities to move much higher.

It is true that the fall is much more rapid than the rise will be–maybe you are down a $1 or $2 on some issues (or more)–it may take most of the year to recoup this loss.

Looking at my accounts this morning–obviously early–they are up maybe 3/10%–I would be glad for any gains whatsoever at this point, plus we can continually analyze and nibble if appropriate.

19 thoughts on “A Bit of Gyration”

  1. Looking like utes trying to find bottom at least for now so picked up little SR-A under $24. The Ford 1yr senior bonds went over 7% today no thanks.

  2. I saw some interest in bank preferred’s last couple days and want to remind some people new here that bank preferred dividends can be suspended and are not cumulative. I think this may of happened in last recession. Perhaps another reader here could confirm this

  3. Sorry to post this here instead of the sandbox page Tim.
    Just had a interesting conversation with Matthew at Schwab Portland br. I wanted to go in and finally activate a account I had set up a yr ago by transferring funds in. Was told they are open but not seeing clients. Want you to use kiosks in lobby. I explained to him I tried to access the account on my mobile and it wanted me to create a voice activated recording. I don’t want my account to be voice activated and told him so. He said its going to be mandatory in 6 months at Schwab but only if you call in to do trading. Not sure I am getting the correct story here. I only do trades on line. Anyone else have this experience?

  4. On a lighter note — amid the carnage, because of this site I was able to pull off my first dividend capture. It was with UMH-D and executed as a test from what I learned here. Got the dividend yesterday and netted $26.89! Sure it’s not a steak dinner but here in Florida it’s a top-of-the line sushi roll!

  5. Why is it that some of the recently IPOed preferreds declined way more than others. Sure they were relatively low coupon but definitely not ‘garbage’ ! eg. I saw Ford’s F-PRC trading below $17 or AT&T’s T-PRC in $18s way below the $25-$26 they traded at in February!

    also any bottom fishers in AGNCP, or NRZ-PRC or better rated low-coupon COF-PRJ? Are the low prices ‘too good’ or more pain to come before they recover to $20-$22?

    1. msquare – the absolute compression of yield spreads at the time in Feb was at an extreme. Just think of how every issue that came down the pike at that time was gobbled up no matter what the original coupon. Then the next issuer took that info into account and priced the next one even higher still… So once that crushing demand for yield dried up, the extreme compression was exposed and down came the prices as the market first began to widen out on yield spreads. Now it’s most likely gone to the extreme in the other direction, all in a manner of 6 weeks’ time, but who has the cajones to take advantage? Certainly some of us (not me) on here, will score big with an eventual reversion to the mean. More power to them… BTW, I certainly don’t want to make this sound as though I’ve been brilliant enough to have avoided the pain… I haven’t even though I was not a buyer of the new issues.

  6. Some willing buyers this morning. Thank you. Some panicked sellers too. Thank you. Nice day for trading. BPYO BB+ for $15 and 9.8% yield. Now if only Brookfield doesn’t go broke. IBKCN for $18.87 and 8% yield. Now if one of the pallet loads of cash being dumped lands on their roof. Trading trying to keep cash level static. Very possible bigger excitement ahead but I don’t know much.

    1. I’m holding off on the “bargains”. If the market recovers now I’ll be happy with what I have. If it falls further i’ll buy cheaper.

    2. With so many of preferreds, eREITS, shippers, all going down, I collected some divies and got a little lucky picking up 137 shares (2 accounts) on the best of Tim’s CMSC. YBInvestor at Silicon published his list, only AQNA and AQNB (Canadian notes) were deemed above CMSC. As a reforming yield hog, no thanks for me. Doug Le Du has cautioned his followers to stick with his so called 10 criteria. Heck, only the Investment Grade and in this unusual scene, the higher rating above minimum DOES matter. Thank you, Tim.

  7. Question about ratings. When a company has multiple issues in the market, why are they sometimes rated differently? For example, AT&T has 4 preferreds. Two are rated BBB and two rated BB. My guess is I’m looking at ratings given at the time the preferred was issued and never updated. Am I right?

    1. No, 2 of the issues are Preferred Stock (both rated BB, non-investment grade, a.k.a. junk), and the other 2 issues are baby bonds, which in this case is Senior debt and they are rated BBB (investment grade).

      1. Yup, TEF is on it. You’re assuming more risk owning the preferred’s than that ETD, so that’s likely the sole reason for the ratings difference. Well, plus, you have perpetual timeframes on the preferred’s versus a fixed time of maturity timeframe on the ETD. T isn’t going anywhere. I have a huge position in the common and would rather stay there for the better yield. Their payout ratio is better than I remember it once was and their consistency with raising the divvy is very admirable.

      2. I recall T/PRC the 6% coupon one that recently IPOed Feb 2020 being ‘mixed rating’ but now i see it at Ba1 BB+. Is that junk?

        Also, why are these decent company preferred shares such as this trading at $20s or Ford’s F/PRC also rated Ba1 / BBB trading in $16s?

        Is this a primarily temporary liquidity issues or people think Ford & AT&T are going out of business? With all the Fed provided Repo and other stimulus, anyone care to speculate when these go back up to sane levels (say even low $20s)?

        1. T-C is 4.75% as issued. It’s only trading at 6% now because of the massive haircut.

          Ba1 is “Non investment grade – speculative”. BB+ is the same essentially. Both are just one step below investment grade. T gets this rating largely because of the debt burdens they carry, especially with taking on Time Warner and because of the high payout on the common.

          Ford is in worse shape than T. Folks will do without buying a new vehicle, but just try to get 99% of people to give up their cellphones. Ha! With this virus going around, car dealers will be hurting and hurting bad, from what I see. Plus, with so many unable to make payments on time due to employment issues and travel restrictions piled on top of that in some places, buyers will be hunkered in place. Ford debt was recently downgraded if I recall correctly.

          Neither will be going anywhere in the end, IMO. Ford has already been proved too big to fail. T will be just fine if they stop buying things. I own a Ford truckload of T common shares and some of the F-B ETD.

          1. Ford common at $5.01 today is quite below $8.38 book value/share and has cash of $7.8x/share. Also as you cite, though Ford did not take it the other two auto companies were bailed out in 2008 and I definitely do not think the current govt. will allow Ford to go under either.

            Currently they sport a hefty dividend on the common too. Wouldn’t they have to kill that dividend before they stop paying on the preferreds?

            1. In the tech crash I bought Ford for $1.05. Cashed out at 1.40 or so. What’s worse, buying too soon on the way down or selling too soon on the way back up.

            2. MSquare,
              Book values seem to be out the window right now, as you can see. Same with the E in P/E. Nobody knows…

              Ford won’t go under. Ford doesn’t have any outstanding preferred stock that I saw. They would have to kill the dividend completely on the common before ceasing the payments on the F-B notes. Then again, if they failed to pay on F-B or the other debt, they’d be in front of the bankruptcy sour lemonade stand, or pretty darned close to it.

Leave a Reply

Your email address will not be published. Required fields are marked *