A Decent Day–a Little Nibble Here and There

The day started off strong and I waited a bit before getting rid of a small amount of the Proshares Ultrashort SP500 (SDS) hedge that I had–then unloaded that and did a little buying–nibbling.

My nibbles were mostly adding to my utility baby bonds and my utility and CEF preferreds.

The only new positions this week were 100 shares each of the Invesco Mortgage 7.75% perpetual (IVR-B) at $4.60/share and the Hersha Hospitality perpetual (HT-E) at $3.20/share. Purely speculative–not real income investments, but priced for bankruptcy. Both companies have suspended all dividends.

Today as we head toward the end of the day we need to see if this is a ‘buy the rumor’ ‘sell the news’ moment.

We know that we will see various aid packages soon from the government, but these do not solve the Covid 19 problem and the coming steam roller that will totally destroy profits in many industries–that is why I am just a nibble here and a nibble there–using a tiny amount of dry powder, but mostly keeping lots ready. We will still be dealing with the Covid 19 fallout 9 months to a year from now–maybe longer–so I see no reason to ‘back up the truck’–more like load my car trunk time now.

45 thoughts on “A Decent Day–a Little Nibble Here and There”

  1. I need a mental reset. I was so busy putting out fires and either selling or thinking of selling, several existing positions, that I did not spend sufficient time trying to upgrade the portfolio. I did pick up a small amount of NRUC and CMSC, but regretfully missed DTY and many others. I may look into the SCE preferreds–but it is almost as hard to buy after a large up move as it is during a large down move. Stay safe out there.

  2. I am looking at AGO. All 3 issues are under $25 and currently yielding around 6.8%. The S&P rates them A and Moody’s rates them A3. The debt is senior. Does anyone have any specific cautionary advice regarding AGO?

    1. I had my greedy eyes on ago.b for a while

      I suspect that we have popped the cooperate credit bubble and we will see investment grade debt slide a few notches

      and then there will be the muni bond market it could also take a beating – this is where I believe AG is in the business of

      Puerto Rico has been a real headache for them for years

      the bonds are IG rated but it is based outside the US, good luck getting your money if things really go south

      1. Pickle, I am not a big fan of insurers and dabble only a little there. AGO is a smart piece of work though. That Puerto Rico stuff was something else. If memory serves they were buying the bonds at distressed prices and then turn around and get negotiated settlements that benefitted them to some degree…Nasty business!

  3. I had a buy order in place for KTBA at $25/share when it dipped below $25/share a couple days back and it never executed. Now it is up to $27/share and change.

    1. wedgehead, I have fought a few battles on this one. Instead of being conduits for a smooth-functioning trade, the MMs act as gatekeepers scalping the trade in each direction. When trades were filling below my standing buy order I took it to the SEC and FINRA and won. The shares hit my account 30-days later at the original bid price when the shares were trading much higher.

      1. Alpha they are as bad as the bond desk thieves. Someone on another forum was showing the crap they were pulling exploiting the situation. I have managed a few body blows back to mm when available exploiting them. But the bond thieves I cant do anything about.

    2. I had that happen with KTBA last summer on Etrade. I called and complained and they honored my buy at the lower price a few days later

    3. I once called Fidelity to ask why my KTBA order didn’t fill. They looked at it ans said “You’re owed a fill” and gave me that price. I don’t know who sold it to me. That happened once, I called several times to no avail?

  4. Thoughts on why CIM and NRZ preferreds are trading single digits? Are these companies bankrupt now?

    1. Hmmm….based on the massive moves today…I’d say the answer is no lol. It’s just fire sale prices.

  5. I went the opposite way Tim and boosted my SDS holdings at the end of the day. Sold the last of my NRZ-B and AGNCP first thing this morning to avoid the expected rush for the exit. Did add a bit more AATRL though.

    1. NLY and AGNC are less likely to go bankrupt though they still could suspend dividends, NRZ is a bit of a mystery to me, not transparent enough.

  6. Hi Tim, Any thoughts on preparing for a worst case scenario? My safer higher grade bank/utility stocks are still hovering above $20. Sadly I burnt my hands too early in the dip. I can hold out for at least a decade but I wonder if they can go below $15 in which case I better just take the loss on the chin while I can…
    (Not sure if my mreits are left for dead…)

    If $1 trillion in daily repo operations doesn’t prop up the credit market then we are truly toast.

    1. I think there could are a lot of dividend suspensions coming so I’m am staying away from any of the subordinated debt from utility bonds that have the provision that allows them to defer payments for up to 10 years (e.g. DTQ, CMSA, DUKB, etc., etc.) and sticking with those that don’t (e.g. EAB, ENO, EMP).

      1. TEF, better safe than sorry! Since about half my money is in utes at subordinated debt or below Im obviously thinking this will be marginal in terms of stress to pay. Most utes have huge revolvers. SCE when facing the fires drew $2 billion out of their revolver. Most keep the revolver pretty clean.
        Of course if I am wrong…ouch! 🙂

  7. Noticed my portfolio gains for the day dropped by about 10% near the close in that rapid run-up at the the end– guess a bunch of folks took a little profit & finally got out of some they were waiting to sell. Still nice to see all that green.
    Another 42% gain in the DOW, and we’ll be back to the high… only 4 more of these days — waiting.

  8. The argument that the seasonal flu kills x thousand people each year has been repeatedly put forward yet this logic doesn’t fly. Although the jury is still out on the lethality percentage, it’s clear that this virus sends a lot more people to the hospital, overwhelming the healthcare system, and a large percentage of those end up dying. The seasonal flu does not overwhelm health systems of European countries to the point where doctors have to choose who to save and who to just let die.
    The objective of a lockdown is to make it look like it was never needed, that is: to not have many people get sick or die. The alternative is to wait it out and say it’s just a flu and risk getting ourselves multiple Italys. There is now a long list of countries throughout Europe and Asia that are in lockdown but only in the U.S. do we hear officials suggesting that grandparents are willing to die to keep the economy going. Just like that, no grand plan just hubris.
    There is a lot of panic for sure and plenty of misinformation on the disease and what treatments work and which ones don’t. However, minimizing the threat doesn’t help in either limiting the spread of the virus or in finding a cure. We were unprepapred for a pandemic. Now we know and hopefully the next time we are hit with a novel virus we’ll have a cohesive plan on what to do rather than a chaotic combination of panicked responses and shortages of medical equipment and supplies.

    Stay safe.

    1. They deal with non agency mortgages

      Others mreits in that area have had margin calls

      Guilt by association at a minimum or the others were the canary in the coal mine

      1. I just bailed MFA-C with a large loss. It may get bailed out, or not.
        Probably just marked the bottom. Brutal week.

  9. Sold EQH-A and MET-F today

    Tried to buy USB-H just now but my brokerage is not allowing the trade….

    1. Hello Jacob; Just curious as to why you sold out of your “EQH+A” today??? I bought it at the IPO after researching the company and going thru their homepage carefully. Do you now feel they are not going to be able to make the preferred payments??? They have been around for a really long time and seem to be very solid financially. They are rated “A” excellent by A.M. Best, A2 by Moodys, and A+ by S&P. Plus the company itself is 160 years old.

      1. I sold my EQH-A because I was able to buy some last week at 9.90

        Just flipping for short term gains

  10. Mortgage stuff scares me. Vivid memories of what caused the ’08 crash.

    I’ll stick with my NNN & PSA preferreds and add to them.

  11. It is really hard to know. The virus has swept the world and so far there are 18,000 deaths. We often have 50,000 deaths due to flu in the US during a single season. Is the low number due to our efforts, or is it not as lethal as we first thought? As with most things, it may be some of both. Epidemiologists will tell you that the lethality of diseases is always overestimated at first because you are only dealing with the ones who get sick and have no idea how many were exposed to it. If we find out there are even as little as 4 people who have it for every one we have found then we have massively overreacted and can stand down because that would put it equal to a bad flu, depending on whose numbers you believe.

    The CDC has used the shutdown time to start gathering data. We are going to know a lot more, real soon. And for better or worse, a lot of this uncertainty will be removed. It may very well be we have to protect our elderly until herd immunity is achieved instead of shutting everything down like it is the end times. I very much hope that is the case.

    At the very least, it is psychologically good to have a little optimistic talk on a day when the market is up.

    1. R R

      The average annual death rate in the U.S. for the ‘common’ flu is 36,000 victims


    2. Scott,
      Im checking the cases every day and the numbers are increasing but the percentage that are dying stays at less than .12%. , in the US That is a very low number lower than regular influenza. .Could we have out hyped our self into a depression not recession. ? My opinion from the beginning was that this was overhyped.Hopefully death rate stays low like this, but financially this country is a train wreck.

        1. S Korea was able to test tens of thousands of people and know who actually had the virus and who didn’t. The US is not in this situation even though S Korea was mass testing weeks ago. What we do know is the top people had briefings in January warning this could be the 1918 flu all over again.

          1. The FDA tried to run things and had to be forced out of the way. Even when that happened they still would not issue the exception for any lab but theirs to do testing. Eventually, the president had to intervene. Everything we have accomplished thus far has been in spite of the FDA rather than because of them.

            TEF, I couldn’t read the article due to the pay window, but what you said is kind of what I was trying to get at. This thing is really only highly lethal to the elderly and frail. I think it would be smarter to protect them, and let everyone get back to work with proper precautions like both Japan and S. Korea did. I think we will see something like that come out of the data they are gathering and a decision will be made soon. I would think we would want to emulate the countries which had success.

            At some point, the death toll of a global depression would exceed that of the virus, and that point will come a lot quicker than people imagine. Whether it is a tire that you put off replacing, or someone becomes ill from losing their job, or apartment, or cutting corners in some fashion etc… there will be a cost in lives. Mortality is very tightly bound to prosperity. And a lot of operations, and testing is being put off because of this. My wife works for Quest in one of their labs and there are no pap smears being done now. That will have a consequence.

  12. Its been a few years and I had all but given up ever again, but was able to snag CNTHP this morning effectively below call price since divi is in the bag. Welcome home old friend.

    1. Grid, one of your old friends ASRVP is trading below 24 for the first time in a long time. I have a small position to which I added 100 shares today @ 22.77. Do you still consider it a sock drawer stock?

      1. MFZ, In terms of bank quality, heck no… But that being said I bought 100 at 23.20 today. I have been playing in and out of this past couple weeks. I wish I had $22.77 ha! Im no bank analyst and who knows exactly whats under the hood. But they have been raising the tiny divi slowly lately…To go with the tiny stock price, ha.
        I do love the terms of the issue though. I will never be loaded for bear here but I like having skin in the game here though. Big picture you got a small holding company bank in a non growing area of rural PA. And they are a union wage bank. Lets just say very few banks are allowed to unionize. But dang this issue has been so good to me over the years. I remember a few years ago buying and selling a few times on $2-$3 swings all in a day. The float is only about $13 million anymore, so its not a burdensome issue for them. It was originally a ~$35 million issue but the rest of float was voluntarily converted into common shares about 15 years ago.

      2. MFZ, I forgot to add this pitiful outfit has went in the past without a common divi before, but it never suspended the trust preferred during the 08-09 crisis.

    2. Darn it Grid you are so fast on that trigger! You’re the one who snagged it! Got in the AM a little above. Congrats!

      1. Sunny, to be honest I got lucky in what I got…I saw a bid at $54, and figured it was firm and blew it off. Then I noticed a sell went buy at $52. So I dropped a 300 share bid in at $52 and got 204 shares. So I screwed up and still got lucky.

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