Almost everywhere I turn I see folks saying it is time to get into preferred stocks.
Now even Brad Thomas is pushing preferred shares—I guess better late than never. This is not on Seeking Alpha but is on the Wide Moat Research site, which as I understand Brad no longer owns, but is owned by flea bag publisher Marketwise. For entertainment value the article is here.
At a minimum these drum beats for owning preferreds are giving all us holders continuing nice gains.
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I think our bond market last year was like pushing a ball under water. Once you let go its shoots up but eventually comes down. I am letting issues just float up. It is hard to sit and just watch (for me), but it is a simple and effective strategy. Buy em cheap and stack em deep is what I did on IG paper.
As far as inflation, I use PMs, REITs, mining stocks, oil/gas/coal to hedge. Seems to work well for me so far. These were the leaders in the stagflation era from my memory. Stagflation used to be higher prices but not higher wages. I hate econ though. Gimme cash money.
I think we could get some seesaw with near term geopolitical events. Load up when there’s red. I haven’t seen a sea of red lately in bonds, so I don’t buy.
PSA-M through PSA-S yields are averaging 5.141% with 2 of them below 5.1%. Hopefully a miracle will occur and I can unload some of them I purchased a few years ago when rates were low. I did average down, by buying as rates went up and could average down even more if I get a chance to sell as rates go down. If I don’t get to do anything, I still get a 5.126% average yield across all the various series that I own. Not great, but it could be worse.
New2This, they say the younger generation doesn’t want any of our junk but I just saw another multistory self-serve storage building going up in town.
Should swing by and start asking questions. My wife’s cousin in Iowa converted a veal barn into storage rental and it took him a while to fill up the units but that isn’t Calif. Another local business that used to make modular classrooms converted their building to storage rental and their lumber yard to a parking lot for boat and RV storage. Then they put in covered roofs with solar panels on them. Win, win, RV owners got sun and rain protection and the owner is making money off selling the electricity generated.
Time to ring the register?
“we’re almost certainly entering into a period of lower interest rates”
Almost certainly?
You might want to ring the register on the junkier positions. If we really do have a bear market event, some of the fixed income will go belly up or at least go with the baby thrown out with the bathwater phenomenon. Right now we are getting really fully priced for a 3% Fed reserve rate.
At the very least if there is a market shock event that takes us back to zero, there is going to be another opportunity to buy on top of what we have had the past year. Some may prefer to not be fully invested in that scenario, especially if you trade frequently anyway.
Agreed but is it a recession or a big inflationary mess that’s right around the corner? A recession would entail some combination of responsible fiscal and monetary policy right and tough decisions. I just can’t see that happening right now regardless of who wins in November.
Maybe this will raise up the few dogs in my portfolio that are lagging. All the dogs have not missed a payment (yet!), so I sleep pretty well with them in my portfolio. I also have mainly invested in preferreds and some Baby Bonds / Notes, so I don’t have any CDs to mature. I tend to be a buy and hold investor mainly, but do have some cash I use for short term investing. And yes, this is the most informative site I have ever read for information. I greatly enjoy Tim’s articles and posts by some very knowledgeable posters. Thanks Tim and it is about time to press the donation target again!
Tim;
I had a small amount CD mature today, don’t have any good ideas for prefferds at the moment so I mostly just bought the preffered fund PFFA, it pays 9% monthly dividend. Only other buy was another 200 shares of SPNT-B.
Bill S – I had one mature Friday and took the easy way out and added to my Carlyle Credit Income Fund (CCIA) 8.75% term preferred.
I wonder where/when the financing of the massive fed debt will inject itself into rates, particularly short to medium term.
billo–that actually is my ‘prediction’–actually I said ‘rates will fall into the fall and then bottom as debt issuance comes into play’. Of course when (or even if) this happens is anyone’s guess.
My thinking exactly. I can’t decide whether to start selling some of my long term munis , but my hedge of shorting a little TLT has definitely not worked. I guess I’m glad TLT is going up because I have 20x as much in long term munis. Read somewhere and probably correct that 97 pct of munis are held to maturity
Unfortunately sizeable chunks of my CDs/Treasuries are maturing now and in the next few months. I rarely sell my treasuries so I didn’t stockpile the preferreds as much as I should have.
Even when one has the right notion, executing with the right allocation is a separate matter. But I also feared an unwinding of a credit cycle.
H-ster. I think all of us a few more CDs and bonds that haven’t been deployed to preferreds, but am fortunate enough to have started buying plenty of preferreds a year ago.
Hyster, name of one of my favorite forklifts although I preferred a Cat. Don’t mind the corny joke.
I didn’t understand the interest in CD’s and Treasuries since I was trying to build a income portfolio I wanted access to the money quickly so I kept all of mine in a ultra short term Treasury fund and the MM fund I use for trades. As I mentioned before, The rates on both as of last week was down to 4.9%
My concern now is things seem to be moving in one direction with everyone buying and driving the yield down faster than a speeding bullet. Far more than a small rate cut by the Fed justifys.
I moved up a few of my bids on GTC I have in but some I refused to and I even cancelled a few as some have recovered in price so much its way beyond the point of my bid being ridiculous.
Tim- For some reason, I imagine your financial drawers are always overflowing with a surfeit of bargain preferreds leaking juicy yields. I have a very modest target of wanting ~4.5% yield. I’m probably the most unambitious investor on this board, but seeing how consistently diligent so many are on this board is giving me some motivation to do better.
Charles- My husband brought home a Hyster a few years ago to move a lathe. I hid the Y and took a fun photo. I have forklift fulls of SPAXX loitering about that I have to do something about. I fell asleep at the wheel last year and missed out on the best deals but all I can do is be more vigilant every day going forward.
must be a big lathe!
Interesting story H-ster! Way back in the 1980s I was the Plant Engineer in a major facility with a 55 person Maintenance department. The facility had 75 fork trucks of every Manufacturer, variety, and make with some interesting attachments. All were electric except for the two big ones for maintenance use only. Within the Maintenance department I had two fulltime mechanics who did most of the repair and also the preventative maintenance inspections. I sent both of the mechanics to multi day training course of the various manufacturers. Still remember having to convince the man (I hired the first woman ever in the maintenance department as the other mechanic) to go to one about 100 miles away for several days as he had never traveled outside the county! Also remember the Hyster trucks. They were not bad trucks as I recall. Many memories of those 75 trucks and how they were used. I was at the facility for 18 years, After I became a hired gun contractor running my own company for three decades.
DJ- Thanks for sharing your story in a little known part of the economy. I used to be in maritime logistics- container lifting equipment including forklifts zipping around were a site to behold. Actually straddles were zippier, reach stackers not so much. I could tell you some gruesome tales as heavy equipment and lapses in human nature leads to tragedies.
Charles – The lathe built during WWII is much too heavy for thieves to cart away.
H-ster I once pulled green chain for Masonite. What you might be calling straddles we had a similar equipment called a carrier. I had my you know what chewed when I didn’t have a stack of boards narrow enough so they could drive over to pickup. I was unloading rail cars with a portable ramp and pulling the air brakes and pushing 10 cars up the line then jumping off the fork to climb the catwalk and spin the wheel to lock the brakes. A week after I quit to take a opportunity for a sales job at another company the guy who took my job slipped and caught his foot between the railcar couplings
I hope for more gains and have plenty of punch to share with late arrivals to the party. However this may be a sell signal. The memory of legendary pumps like was it American Realty Capital Properties (“I know the CEO”) and The Franchise Group lingers on.
To paraphrase a great poet whose name I can’t remember – “Just as the tree retains the shape of the wind long after the wind is gone, so the investor retains the pain of the loss long after his money is gone”
JMO. DYODD.
I am not sure at what stage in my investing journey that I stopped finding most articles on investing websites to be almost useless. The endless regurgitated chow mein dish served up again and again.
When I read the article above my eyes quickly glaze over due to my skeptical nature on how so much of it is aimed at getting people to pay for a service which will make them wealthy. There is really nothing of substance in the article. Just a post to get people to pop in their email address to get the true sales pitch.
I realize this sounds egotistic but that is how most investing websites strike me now days. I do not expect solid info to be free but at the same time this cookie cutter approach to get people to pay for investing advice grows tiresome.
fc–you can be certain it is only a ‘pitch’.
‘I do not expect solid info to be free’
Thanks FC, you reminded me to hit the ‘donation’ page with a token of thanks to our host, Tim. This place is great. Thanks to all.