Yesterday preferred stocks and baby bonds ended the week with a bang–more than a few issues jumped 1-3%. The most notable jumper for me was from the Jackson Financial 8% fixed to floating issue (JXN-A). Given that the issue is one of my top 10 holdings (in share count) the 2.29% jump stood out for most of my holdings. It looks to me that gainers outnumbered losers about 5-1. No doubt the moderate inflation numbers as indicated from the personal consumption expenditures report contributed greatly to the festive mood.
After all the dividends and interest hit our accounts we surprisingly hit new highs in all accounts (recall that we make no withdrawals from any of out accounts–at least for now). I don’t look at my future income stream closely so when a gaggle of dividends hits sometimes I get surprises. Right now I am happy with my approximate 50/50 allocation to individual issues and to CD/Bond type investments–the ‘yield chaser’ in me wants to buy 8-9% baby bonds or term preferreds, but the conservative side of me had prevented me from going crazy in that direction. Obviously the 3-4% yield advantage is a giant draw, but that advantage can disappear in an instant when share prices fall.
As I noted yesterday the new NewTekOne 8.50% baby bonds (NWETG) started trading and I took a small position. The issue closed the day at $24.82 so it is available for a nice yield for those with a little bit of risk tolerance.
Tim, Westie commented he has a similar balance of holdings and I think it was Tues. or Wed. last week he said his balance of his 50/50 portfolio moved about .07 %? One day moves shouldn’t be a focus, but like you our accounts hit all time highs. Right now my wife is taking out a modest 3% withdrawal and that leaves about 2% of the dividends and interest to add to the bucket. She still has 4yrs before she has to do RMD.
I am taking on higher risk in this account for capitol loss if we have a black swan event like March of 2020 but 6% is house money.
I invested in 3 phases or I should say my objectives have changed 3 times.
I started out investing in perpetual and long term preferred & BB’s in solid companies paying out 5 to 6% with the thought that long term going on historical averages this was a good place to be. I added in tranches but I admit that on a few of these holdings I am underwater, but you don’t have a loss until you sell.
Second phase, as rates continued to go higher, I bought in market drops last year in March, June?, August, Nov. I bought preferred and BB at heavy discounts. I didn’t catch the lows but I am satisfied with my entry points.
Third phase, I am still buying a few preferred and BB under par but these seem to be higher risk and lately I have been balancing this with paying over par to get a higher yield in what I hope are less risky companies.
Final thoughts, I know in a market drop I will have a capital loss ( on paper) but hopefully what I am invested in there is no loss of income. It’s hard to tell what the future holds so on one hand I wouldn’t like a swoon in the market but on the other hand being one 1/3rd in cash it would give buying opportunities. To me the economy is sending mixed signals. It’s hard to tell from what I read in the news with articles meant to grab attention and eyeballs.
Enjoy it while it lasts as over half of my gains were in the final 15 minutes and with the higher volume in those issues no doubt it was due to month end rebalancing. I am expecting to give back most of those last minute gains on Monday, that’s been the history unfortunately.
I don’t understand rebalancing at the last minute when they often get the worst price. Why don’t funds plan ahead and get a better a price? What am I missing?
A lot of trading is done by algorithms, as institutions have target allocation models and the computers do the magic. Add that to thin and illiquid securities and you get Friday’s late day meltup.
I know that but Algorithms are only as good as their programming. Surely they could be programmed around this flaw. Garbage in garbage out.
Martin and RMH, to my knowledge all of the large block trades reported right around the 4:00 Eastern close are negotiated “off market.” This is the standard operating procedure when PFF makes large changes say 100K to 300K shares. In the old days when most trades were done on the floor of the NYSE, the specialist would tell you to “take it upstairs” where large block traders worked out the deals. So the deal is worked out during the day but is only consummated right at the close. It is not like they could put in a market sell or buy for 200K shares in one of our preferreds. There were several of these large block trades on Friday. Ishares has professional traders that are really good at doing these trades without much market price impact.
In addition to the PFF type large block trades, somebody was in with what appears to be “market” buy orders with smaller volumes starting at about 3:50. There were a handful of issues where the prices were irrationally bid up like this. You can’t say what type of buyer did this, but my guess is that it was NOT a professional fund buy more likely to be a large private investor. Some III’ers trade in those quantities. Private investors have access to algo’s that will handle the trade details.
The 3:50-4:00 trades were unusual, whereas the large block ~4:00 trades are very common and are seen the last trading day of most months.
Tex, One piece of information I take away from this is it shows which preferred the movers and shakers are interested in.
Outside the Reddit crowd chasing GME or the market bidding up NVDA you have a group of traders interested in the same stocks us III’s are interested in. Gives me comfort knowing I hold a few of these.
Yah, none of the ones I own or follow had anywhere near those kinds of volumes. I saw 2k to 10k shares trade in the final 10 minutes or so and even that small volume sent the prices up 2-4%. So my take is that it was algos and the volume was not high enough to have a negotiated block trade. There probably isn’t anyone to negotiate with in these very thin and illiquid preferreds. JMHO.
Thanks!