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A Most Interesting Day – Red, but Interesting

While interest rates are higher by 7 basis points that is only 1/2 the 14 basis points higher move earlier in the day.

Equities are down–but a very orderly market–no panic.

My accounts are red–but only mildly–I was braced for more downside action. We’ll see if markets hold up–remember we have the employment numbers for October tomorrow morning. Forecasts are calling for 205,000 new jobs with an unemployment rate of 3.5%–flat with last month.

Today I nibbled on (added to a position) the Affiliated Managers Group (AMG) 5.875% baby bonds (MGR) that have a current yield of 7.16%–investment grade. Yield to 1st call in 2024 is nearing 20% (not that they likely will be called)–maturity is out in 2059 so YTM is the 7% area.

For now that is all I am doing for today–obviously not a rush.

18 thoughts on “A Most Interesting Day – Red, but Interesting”

  1. Picked up a little bit of AGM PE today for my wife’s account at 20.50 giving me about a 7% yield not rated although Quntumonline says its backed by the USDA

    1. FWIW:

      As a government sponsored enterprise (GSE), what are Farmer Mac’s key ties to the U.S. Government?

      We were chartered by Congress in 1987 as a corporate instrumentality of the United States.

      The President of the United States appoints five of our fifteen Board members, including the Chairman of the Board.

      We have the ability to borrow up to $1.5 billion from the U.S. Treasury to fulfill our guarantee obligations.

      We are regulated by the Farm Credit Administration (FCA), an independent agency in the executive branch of the United States government.

      The U.S. Congress has oversight over Farmer Mac through the following Congressional committees: Senate Committee on Agriculture, Nutrition and Forestry; House Committee on Agriculture; House Committee on Financial Services.

      The United States Federal Reserve Bank (the central bank of the U.S.) serves as our depositary and fiscal agent, and we have access to the book-entry system of the Federal Reserve System.

      We are subject to periodic reviews by the U.S. Government Accountability Office (GAO).

      Are Farmer Mac securities guaranteed by the U.S. government?

      Although Farmer Mac was created by the U.S. Congress and is regulated by an independent agency in the executive branch of the U.S. government, the U.S. government does not guarantee payments due on Farmer Mac’s guaranteed securities, debt or equity securities, dividend payments on preferred or common stock, or profitability.

      As a corporation chartered by Congress to serve a public purpose, Farmer Mac’s debt and guaranteed securities carry a 20 percent capital risk weighting for many federally-regulated entities.

      1. Just trying to understand exactly what Farmer Mac is and isn’t, I’ve also found this Debt Investor Fact Sheet on its site regarding its debt, NOT the preferred – https://www.farmermac.com/wp-content/uploads/2022-Q2-Debt-Fact-Sheet.pdf

        Also found this interesting but 20 year old article from the NY Times regarding confusion over whether or not Farmer Mac carries credit ratings.. . https://www.nytimes.com/2002/06/09/business/investing-ratings-for-unrated-farmer-mac-debt-create-confusion.html

  2. Well Tim I was hoping for a red day panic but no such luck. Looks like for once investors baked in the 75 basis point raise and didn’t act as surprised as they did in Sept. I picked up some more CUBB today at 19.25 to yield almost 7% My personal account was up a whole $6.25 today.

      1. I’ve considered ARGO-A as well, but find it difficult to assess all of the restructuring ideas. They were trying to sell themselves, but no takers. They’re now looking for a possible merger-type deal. Would that mean going private? Being a shell company for some private company to take over and become public? What does an “all-paper merger” really mean?

        I wouldn’t want to purchase the preferred stock, only to find it delisted, as some fear with the PSB preferreds. I wouldn’t want to buy it, and find it is now a company loaded with debt. I expect others have similar fears, and that is why the preferreds have such a high current yield.

  3. A lot of duration, but a nearly 7.2% yield is decent compensation wait it out for an investment-grade issue

    1. agree, put it on hot list (MGR). A service I used to be in had the company common in the mix. Bea

      1. For those who hold commercial REIT preferred. When META announced its earnings yesterday it was buried in the report they plan on spending 2.4B to break leases.
        List of companies included.
        Not on the list is HPP which has downtown San Francisco properties. its possible other big Tech firms follow suit since a lot of firms have not made a push for employees to return to the office.

        1. Charles:

          I read many REIT conference call transcripts. Here is what commercial mortgage REIT TRTX said this week on the office sector (TRTX booked a $132M increase to their CECL (currently expected credit losses) reserve mostly due to their office exposure – which resulted in a 11% drop in book value to $14.28/share):

          “In management’s judgment, this significant increase was warranted by the rapid and material weakening of the debt capital markets and the investment markets for office properties, which we have observed since we downgraded eight office loans at the end of the first quarter of this year, and that pace is especially accelerated during the past four months.

          We are cognizant of market reality, but this morning’s message should not ignore some positive trends. For example, Office is a share of our total office of our total portfolio has declined to 28% of commitments from 43% one year ago due to loan repayments, asset management and targeting new loan investments in multifamily and industrial profits.

          Of our year-to-date loan repayments of $1 billion, a full 45% were office loans.

          In the past 12 months, our office borrowers have infused $204 million into their loans via partial principal repayments, replenishments of interest reserves and borrower funded interest payments, capital improvements and leasing commissions. Included in this amount is a $62 million partial principal repayment on our largest office loan and office property here in Midtown Manhattan. For the office loans that contributed most to the general reserve increase, all are performing and have a risk rating of four or better.”

          I had put options on several of the office REITs that I have long since sold. The charts appear to say that many of these stocks have finally bottomed after being truly bludgeoned in 2022….but who knows.

          1. Rob – along those lines of REIT disclosures, GOOD put this out yesterday. I guess to address all the nervous nellies out there

            Gladstone Commercial Corporation (GOOD) (Nasdaq:GOOD) (“we” or “Gladstone Commercial”) is a real estate investment trust (“REIT”) focused on acquiring, owning and operating net leased industrial and office properties across the United States. We are providing the following monthly business update regarding our portfolio performance during a time of market volatility.

            100% of October cash base rents have been paid and collected.

            Portfolio occupancy is at 96.3%, as of October 31, 2022.

            We amended, extended and upsized our credit facility by adding $145.0 million of term loans and an additional $25.0 million commitment to our revolving credit facility, thereby upsizing the full facility from $325.0 million to $495.0 million.

            We acquired a 68,674 square foot industrial asset, in Denver, Colorado, for a total purchase price of $12.0 million.

            We sold our 31,293 square foot office property in Columbus, Ohio.
            We extended the lease on our 29,257 Egg Harbor, New Jersey office property for two years.

            We leased 20,682 square feet of our Mason, Ohio office property for a term of seven years and four months.

            Year-to-date, we have acquired 1,173,680 square feet of industrial real estate comprised of 12 properties and six tenants with an average remaining lease term at acquisition of 14.6 years for a total cost of $109.5 million.

            Year-to-date, we extended or executed 551,440 square feet covering 11 tenants with a weighted average remaining lease term of 7.6 years. The annualized straight-line rent of these transactions totaled $6.6 million.
            Judy Carter joined the company as Senior Vice President, Asset Management.

            Since January 1, 2022, and through September 30, 2022, we have issued 1,992,706 shares of common stock for net proceeds of $40.6 million.
            We continue to have ample liquidity and a strong capital structure. As of October 31, 2022, our current available liquidity is approximately $35.6 million via our revolving credit facility and cash on hand.

            We have never cut or suspended our dividend since our IPO in 2003.

    2. Mr.Cat–yes lots of duration but I could see 2 years out it being called and at 7.16% I’m happy to hold it.

      1. According to Quantum, Moody’s has it at Baa1 / S&P has it at BBB- .
        Is one of those a misprint? It’s a bit of a spread between those two ratings.

        1. Appears debt was rated A1, downgraded to BBB+ in 2020, but that’s the last news clip I found doing a quick search.

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