A Slow Realization of a Sinking Economy

Yesterday, and again today, we are seeing a slow realization of the severe economic being done in the U.S. and globally by the Covid-19 pandemic.

Today equity markets are off a couple percentage points–but still 20% off of the March lows. Yesterday opened weak and then slowly gained ground until the end of the day when prices sold off again. Today we see prices heading lower, but in a relatively orderly fashion.

Today we see that the congress is near approving another $500 billion aid package and the news that they were very close to approving the package did nothing to boost share prices. This would seem to say that investors are finally starting to accept the notion that we are going to see plenty of pain ahead–more than was accepted earlier.

Now as prices move lower–in a relatively controlled fashion investors will have to make decisions on whether a bargain is a bargain–or whether they will have to wait for the BEST bargains–there is no answer of course. This means one should ‘leg in’ to what they want to own.

I see the investment grade utility issues are off around 1% today–is that a deal? Or will prices move another 1%, 5% or 10% lower?

Some of the mREIT preferreds are off 1-3%–again are these bargains? If you bought them last week 50 or 75 cents higher do you want another bite at the apple today?

I will be mainly watching again today–but it is our belief that we will see lower prices ahead–maybe next month? On the other hand one never knows–if you believe that equity prices being only 18% below their all time highs is presenting bargains then I guess one should buy. If you believe 25-40% below all time highs is more reasonable then one should wait.

27 thoughts on “A Slow Realization of a Sinking Economy”

  1. Does anyone else see PSHZF at a 32% discount to nav as a bargain? Personally, I bought 20k of it and shorted 15k of SPY as a hedge thinking the discount alone makes this a pretty good trade.

    thanks,

  2. Interactive Brokers is on the hook for $88 million in oil losses beyond the equity in customers accounts. Good luck collecting from the busted accounts and I’m sure they’ll change some of their policies.

    I did something foolish I bought 200 shares of the USO fire sale. Not my usual game.

  3. I dont follow LAND too closely despite owning a rather decent chunk of LANDP bought mostly in $21 range a month ago. But I find it interesting the common is up over 4% today and is actually up almost 1% the past 52 weeks which is no small effort for most commons. The preferred is down today and near par and goes exD in a couple days as a monthly payer.

    1. Hey Grid…in similar vein Nustar common shares (NS) are trading up almost 10% today while the subordinated notes (NSS) are down almost 3.5%.

      1. Wish I had the nerve, Citadel as NSS does have a sweet juicy yield at this price point doesnt it!

  4. I decided to let Vanguard and Spire pay for my greens fee and burger today. Bought 500 more shares of SR-A at 25.65 this morning with free borrowed money from Vanguard after the first hole and sold 500 at 25.82 before I walked off the course. After taxes that paid for everything today. It was a good day, lol. I have cash in other accounts but my Spire isnt in them. I need to focus rest of week culling the preferred herd a bit here to get my cash level up a bit more.

      1. And just like a professional golfer my 78 today won me nothing. I gave my $20 pool money to another guy in group and didnt wait around for the rest to get in as no money was coming my way.
        Looks like SR-A did as I thought it would (tomorrow who knows). I saw briefly a 50,000 sell order popped out yesterday, so I knew it would drop the price. They quickly hide it, but it was too late. My error was doubling down too early at $25.85 yesterday and not waiting for the rest to clear this morning and hit the crumb dump hard this morning. The price recovered later in day to over $26 as the liquidity dried up.

  5. I too, am waiting for a big leg down- was doing nibbling on a few, but stopped.
    Doing trading on a couple issues, with success. Cash now 54%
    Still waiting for Schwab portfolio listings & on TDA’s watch lists to correct their price increase/decr reporting on AATRL – just weird.

  6. Down (but not out). Dividends remain intact (only one hit and it wasn’t that bad). Share prices have plunged on certain equities but the dividends are still there and look like they will be safe. So paper loss in share price doesn’t thrill me but never planning to sell so the income is key. Preferreds and bonds it’s been a matter of selling some lesser quality issues (which helps for tax loss harvesting even this early) and upgrading to higher quality. For capital appreciations, short term trades, where are the bargains?

    1. I agree. Obviously the bottom is far away, waiting to be tested. Then some dividends should be safe. I sold all the legacy eREIT ETF, the worst rated KBWY shares which tend to bet on high yield names like Mall, MAC, etc) in both non IRA and IRA account and replaced it with BPYPP, Brookfield eREIT preferred and TSLX, presumably the least levered BDC. I also sold DTP an Investment Grade convertible bond and replaced it with STL-A. DTP seems to have headwinds with the pipeline, Natural Gas and perhaps even oil. The shippers are actually doing much better, GLOP, A, B and C, GLMPP, TGP A, B and TNP Preferreds. Some SA writer believe that they may be using their ships to store the oil. I am not sure. Listened to some CNBC, they happened to ask the CEO of STWD, Starwood. The man gave them tons of pep talks, very optimistic. Now I looked at STWD, still holding a lot after selling quite a few taking losses. It did not decline much. He is quoting a bunch of well known government officials’ name. I will hold. I suppose he knows some people and therefore does not seem to be worried. STWD is a large cap and once upon a time “blessed” by Lord Xot of the SiliconInvestors. Wow, as I writing around 1:40 pm EDT, STWD is trading almost the black. Amazing. Thanks to Tim, CMSC, AATRL are holding like a rock. SR-A too. Gridbird’s PW-A, although not a high quality one, got a nod from Hoya REITS Capital because of it is holding very well. Thank you Grid. Thanks to Rida, CDR-C got pumped up. Schwab gave CDR common a F for sentiment. Rida’s machine raised the CDR-C. I do believe that it is unlikely that CDR will be suspending ALL dividends. It does not seem to be terribly over leveraged. One of the few eREIT loved by Rida and considered unusual “value” by Brad Thomas. These days, all the PRO writers in SA are ganging up and very eager to sell membership. The readers do seem to be more skeptical because many have lost money. Numbers do not lie. BTW, UMH has reported that they have collected 92% of the rent not so different from the prior month.

      1. Speaking of PW-A, I saw that Renaissance Technologies filed a 13G in mid-February showing that they had acquired around 90,000 shares of PW common. That would be somewhere around $1M, give or take, at the prices around that time.
        1) Why would RTC make such a miniscule (for them) investment in such a tiny company?
        2) Why would RTC acquire just enough shares to put them above 5% common ownership and trigger the 13G? Some kind of smoke signal?
        I know little of these matters. Any thoughts?

      2. $TGP and $TNP Preferreds are fine plays, just have to stomach the volatility. $TGP is money good and their Preferreds are bargains you can hold for the long haul. Rock-solid contracts, dive into their last 4 earnings reports and you will see where this business is heading. $TNP E and F Preferreds are nice plays on the oil storage/contango story. Tankers are doing very well in this market. I don’t love $TNP as a solid long-term play like I do $TGP but at these prices and in this environment they are fine buy and holds for 2020.

  7. I think the investment grade preferreds have further to fall. This includes also the non-utility ones. Then, I’ll either buy new or add to existing.

  8. Someone around here is even for the YTD and someone else is down 3-4%. They should build statues of you guys somewhere. Wall Street?

    1. David–the beauty (or curse) of having too much cash and getting lucky when holding SDS (Proshares Ultra Short) during the big fall–a ‘blind squirral trade’.

    2. Even? My trading account is up 25%. Though my mostly buy & hold account is down and it’s a bigger account.

  9. Sold the rally last Friday and I am all cash, the dow being ~ 24,000 Monday is completely unrealistic in my humble opinion. The $ amount of dividends missed by being all cash vs the potential downward pressure of potential losses of 50% if the market retests its lows just isn’t worth it to me.

    I feel very blessed to be finally even on the year and will be patient to see if the next month brings a great buying opportunity.

    1. Todd-if you are even for the year congrats—sometimes even is very good. I remain 3-4% down which is where I have been for near a month.

      1. Tim, I am off 10% for the yr and was at 15% cash end of last week. So far UMH-PD RILYZ, GSL-PB have all paid or declared their dividends so in that respect I am on track. UMH said 91% of April rent has been collected wait and see what May will look like.
        I think the question we get back to is like the old western movies, who will be left standing after all this is over and what dividend average you are looking for in your portfolio? A mix of these higher risk with others at 3 to 5 % return ? That is what should help to make your decisions. I am watching and if I can get 5% on a company like WHR then I just might hold my nose and jump

    2. Todd, did the same.
      I want to be on the “right side of the market” which I presume is down. For the intermediate-term the risk/reward does not justify holding long positions; capital protection is priority.

      This morning, liquidated my Preferred positions. Stepping out my remaining SPY position (7% of portfolio) and will likely close in out on further weakness.

      Watching $SPX price action at major support 2730. Suspect we’ll see a bounce – appears to be the next tipping point for the us equities.

      Just took small short position in in REK, SEF and MYY, and will add another tranche if 2730 is broken.

      Cheers! WIndy

      1. Thanks for the reply Windy, good to hear reinforcement on my thinking, we will see if we are correct. I will begin researching REK, SEF, MYY today.

        1. Todd, welcome.

          REK, SEF and MYY are 1x inverse ETFs. They all short major market indexes. REK shorts the Real Estate Index. SEF shorts the DJ US Financial Index, and MYY shorts the MidCap 400 Index. To keep it simple sometimes I use SH which shorts the S&P 500. If you are more daring there several inverse ETFs that are levered 2 and 3 times.

          In my experience short trading a correction requires you are nimble and have an exit plan. Unlike a bull market, corrections/bear markets are volatile and relatively short.

          IMO the next move is down, and will come in peaks and troughs, unlike the falling knife at the beginning of this correction. Well likely see short pauses and sideways action on the way down as a bottom sets in.

          Cheers! Windy

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