Another Painful Day

I nibbled just a tiny bit as the utility issues fell off today–but it was just a couple teeny, tiny nibbles.

I also have low ball orders in for some of the Gabelli CEF preferreds–last I looked none had triggered–but my lowball orders are $1 or more below the most recent trades–just to take advantage of any potential dump.

As those that have been in preferreds and baby bonds for many years know–you think you have a safe issue as it trades firm for a few days–then one day out of the blue the issue is taken out and shot!

Today I think I am down 2% or so–actually 2-3%–definitely painful, but not as bad as it could be. I did notice the Gladstone Capital Corp 6.125% baby bonds (GLADD) took a huge drop earlier today–I own this one. It fell as low as the $20/share area on some sizable block dumps–but it is now back to $22.32.

Of course as I mentioned earlier we are seeing dividend cuts and suspensions–get used to it, as it will be the norm in the months to come, and any prudent company would suspend, because survival should be top of mind for them.

I assume folks out there are positioned where they want to be as we have had days to get things either bought, sold or simply sold.

I realize that income investors come in all types–some folks have more money than they will ever need and are happy to ‘ride out the storm’. Others need money to generate future income streams to live their normal lives–preserving capital is of the utmost. So maybe one group is a net buyer while the other is a seller–do what you have to do–capital preservation is a key.

For all income investors the time will come–I have no idea when that will be, that you will need to buy. If you have had to raise cash to sleep at night you must have an idea where you would redeploy when the time is right.

There will be no whistles or bells at the bottom, so have that list ready.

44 thoughts on “Another Painful Day”

  1. Dang, we missed one today…I wasnt aware of this but CHSCM briefly went to $13, another online friend snagged some at $17. It recovered to $22.99. I was watching CHSCO but it didnt really do much of anything. Amazing….

    1. Wasn’t that wild? I had a mini heart attack when I saw that this morning. I bought some CHSCO around $25.25 and some CHSCN under par.

      Also bought SR-A and CBKPP, both steals right now, in my opinion.

      1. If you are holding CBKPP in a Schwab account you might want to get in touch with me. I’ve been in a battle with them having purchased the issue through them and subsequently being prevented from selling them. It appears that this issue is not permitted to be sold to retail investors.

  2. I have overly simplified tracking pot lists of various issues…Wow you really have a bifurcated market of preferreds. Somebody at the right time, right nerve, and right entry point could really see a bounce back in time….Or buy the wrong ones. The bounty goes to the brave!
    I have went the more conservative route. Im not falling on my sword on issues I have no conviction in. So I own a lot of what I own. Sometimes you just cant win and have to hang on. Take EAB which is first mortgage bonds from Entergy Arkansas. Very high quality…A2 debt…Right around its 52 week low with record low interest rates…Its all time low however is $18.68 in 2013. Nowhere near there…However the 2013 low was off taper tantrum when interest rates were rising…So interest rates rise you lose, and interest rates fall you lose…Sometimes you just arent going to win, ha.

  3. I get a great deal of enjoyment out of Tim’s website, but I am basically a buy and hold guy who usually prefers to go with the larger sponsors. That said, in times like these there are usually some real opportunities. Here are some examples of today’s action with closing prices: Goldman Sachs 6.375% (gs-k) due 5/10/24 – $23.25, Fifth Third Bank 6.625% (FITBI) due 12/31/23 – $23.01, Citigroup 6.875% (C-K) due 2/15/24 – $23.37, Wells Fargo 6.625% (WFC-R) due 3/15/24 – $24.91, Citizens Financial Group 6.375% (CFG-D) due 4/6/24 – $21.83, Morgan Stanley 6.875% (MS-F) due 1/15/24 – $24.00. These are all well-capitalized banks with at least $150 Billion in assets and good operating results. Obviously I prefer long dated issues which narrows the field, but the same sort of opportunities are available from large financial institutions with shorter call dates and a wide array of coupons. Banks are in much better shape today than at the outset of the Great Recession. Additionally, when the market comes back (it will) issues from these sponsors will sell at a premium in a low rate world.
    As per usual the above is my opinion only and you should do your homework before investing. I did this quickly so please double check my info before making any commitments.

    1. Agree, some of these are great deals. While some have or will suspend stock buybacks, suspending dividends is an entirely different matter. One key metric for safety of dividends is payout ratios. here are a few that are nice and low:
      FITB payout ratio 32%
      MS 27%
      GS 24%

      1. Hi Franklin; That is very valuable information. I bought both GS and MS preferreds today. I really wish there was a way to send private messages on this site in times like this.

    2. Chenny – I hope you realize that none of the issues you have listed are DUE on the dates you’ve mentioned as their “due” dates… Those are all the first call dates for each perpetual and/or the date at which they will begin to float. Were any of them to begin floating today, coupon would go down probably dramatically on all. However, I’m thinking that if the environment settles down and at the time of these first calls rates remain near where they are today, it’s conceivable that once refinancing become possible again, there could be some incentives for these issuers to refinance/call these in under the premise they might be able to do better even better than the new floating rate because those existing premiums over par on the older issues may end up feeling pretty juicy vs what they could get in refinancings in such a low rate environment.

      1. 2whiteroses – Good catch – I should have used first call. Yep, the floating tail is always a risk, but at these coupons and first call dates it’s a risk I am willing to accept. Given today’s world 3 – 4 years to first call gives me the elbow room and plenty of time to handle the challenges of the future. In a low rate environment I get taken out with a bump at the end at these prices. In a rising rate environment those floating tails can often give bankers big headaches. In the meantime I retain the option to opt out.

        Thanks for your input, I appreciate it!

    3. All down heavily today. Heck I’ve seen good 25 dollar preferreds (Friday) hit 6 today

      1. Good ones?
        Like the 2 Cowen’s? Most of the stuff below 10 as far I can see is in lodging, which could be devastated if this goes on for a long time.

  4. How’d you like to stash cash away for the next month or two in a AAA/AA+ baby bond and earn over 9% annualized while you do? I bot a bunch of the two TENNESSEE VALLEY AUTHORITY baby bonds today. TVE and TVC. Both have PUTS that will surely be in place as TVE will be puttable on 5/1/2020 and TVC on 6/1/20. Both become puttable if the floating rate aspect of the issue comes into play as it surely will this year. For TVE, the 30 year Treas has to be BELOW 2.52% by the end of next week for the put to be in place. For TVC, 30 Yr Treas has to be BELOW 2.89% the week of 4/24 for the put to be in place. I think that scenario is now a foregone conclusion. TVE closed at 24.92 today. With it’s 3.36% coupon payable on 5/1, purchase at 24.92 provides a 9.75% annualized yield (stripped) to its 5/1 put date. TVC closed @ 24.75. With it’s 3.55% coupon payable on 6/1, it provides a 9.36% yield (stripped) to its 6/1 put date…. TVA will come out with instructions to follow the first weeks of April and May. Having played this game the last time it happened in 2015, all you really have to do is let your broker know you want to put and everything should all handled for you provided you keep to the timetable that will be provide…. I bot TVE today at average of 24.904 and TVC at 24.77…. You get lower yield to put for the longer TVC, but you gain more locked in appreciation as you’ll receive 25.21 from TVE and 25.222 from TVC. That’s pretty darned good for what I’d consider to be a riskless trade. I think the TVA will be around after all this, don’t you? I sure hope so because they’re my ute!

    1. 2WR, I have them on my track list and chuckled when they went under par. I was betting my last dollar you would be on them like flies on stink!

      1. and you were right…. If they stay here, I’ll get out over my skiis on these issues because they’re such a slam dunk. how’s that for mixed metaphors?

  5. Is there any available resource to find who has cut or suspended dividends, without hunting around various sources?

    1. Franklin – Try Yahoo Finance. Put in your stock symbol and then choose the HISTORICAL DATA heading. Set the TIME PERIOD for MAX, set the HISTORICAL PRICES for “Dividends Only” and then hit the FREQUENCY pull down and select “Monthly”. Finally you hit the APPLY button and there is the historical record of the dividends paid/increased/passed, etc. Let me know if you have any questions.

    1. I bought NRUC in May for 25.09 and sold it in Aug for 27.70 for an annualized gain of 17%. I hated to part with it. Then, last week, I purchased it again. I liked it, but, you should do your own evaluation.

    2. JB, A3/BBB+, subordinated note, call protection through 5/2024, 5.5% coupon. Today’s close at $24.15 gives you a YTC of a non-QDI 5.81%.

      I’ve bought/sold at $25.10/$27.82, then $26.86/$27.51. Now rebuilding at laddered bids with a current blended of $25.25 and will be continuing to add until allocation filled and if add price is less than blended.

      Everyone needs to determine their own comfort level though some issues certainly appear worth working our way into here.

  6. I am not a fan of untended limit buys in this type of market. Unless I’m the seller. I put limit sells in Sunday night on some issues for small loss from Friday close. In brief moment before circuit breaker tripped some sold higher than my ask although under Friday close. After power came back up forget it. One I sold is trading $2 lower right now. Anything non-cum or energy is just getting creamed.

  7. Tim- I didn’t buy anything today although there were such drool worthy deals on utes(NEEs, Dukes and SOs) and bank preferreds with 6+% JPMs around par. Feeling too numb after bleeding out from the early buying of last few weeks.

    My munis which had been keeping me alive have folded crushing a few toes. I think it’s okay to watch a few days.

    1. Hster–I saw those tasty deals, but just tried to add a little to existing positions.

  8. I got out of GLADD at $27 so at least I did something right ;o)

    I put trailing stop loss orders on all of my stocks early on and have missed much of the drop. Then I made a plan to invest a certain percentage of my cash when the market is 20%, 30%, 40%, and 50% down, with it back loaded on 40% and 50% by a large amount. But I let 20% pass w/o buying because I knew it was not going to stop there. I have been making money on put options. You can sell them WAY out of the money and still make a couple of hundred dollars. Also, some of these preferreds jump around and you can make a few hundred at a time just flipping them.

    I have been hammered, but making a few bucks along the way is good psychologically, and I have to think once the infection curve peaks we should see a pretty quick recovery. Let’s all hope. At the very least I will have a lot more investment grade stuff at prices that should appreciate when things settle back down.

    How is everyone else doing?

    1. Scott, does the saying…”Thank you sir may I have another” mean anything to you? It does to me, ha.

      1. I think this goes for most of us. Still healthy though and that counts a lot more than money.

        1. AKJ, My GF emailed me from work and asked if I had jumped off the roof yet. I told her I chickened out, and jumped off the couch and landed on my feet. 🙂

          1. Grid you always land on your feet! …but the GF’s question could be seen as yet another buy signal I think. Common shares down 30% was overdue and makes perfect sense, though the declines in higher IG preferred in a yield-starved world; not so much.

            Ignorning the news cycles and continuing to intitiate, add and trim up postions in the better balance sheets every down day and without hesitation. 10% adds at laddered prices and trimming up any full positions that decline 5%. Today again added to DUKB (24.51), ENO (24.29), FPF (17.75), RZB, AGNCP (16.65) and trimmed up PSA-H (24.50). Still a few stubborn illiquids I’d like to average-down but no sellers – yet. Not smart enough to know when we’re at the bottom, so I will continue adding until the market stops declining. Some capital losses for sure, though scheduled income is rising sharply with a steadily declining average-entry price.

            The same higher IG issues being bought at wildly over-priced levels only 30 days ago are now being shunned at prices that appear surprisingly under-priced. Definitely not raising cash here and not a market timer. For the capital allocated to these portfolios, hoping to run out of cash at the market nadir, then the divvies can do the buying from that point forward.

            1. Alpha, I am stuck in the 1970s despite being born in the mid 1960s, so that means I keep a monthly tally on my stash on a pen and paper ledger. I am all the way back to end Oct in dollar amount, so I have given up 5 months of gains (I reinvest everything too I need to add). I guess that isnt the end of the world, but I have been used to monthly gains for several years. I was spoiled, I even made money in Dec. 2018. The luck has ran out ha…
              But I have been lucky having moved a lot to “lesser losers” a few weeks ago or it would be worse. I mean some of issues I had owned and sold have been roached! A few examples…I bought RPT-D just a couple weeks ago in mid $53s and sold a few days later at $55 having a better idea. I just looked today and in that short time it is down to $36.81…You got to be kidding me..It was just 2 weeks ago I was online complaining about UMH-D being a dog at 24.70 and dumped it for a pittance $50 gain (including the divi) and it is now$19.20….Incredible… If I had held on to some of these who knows how many more months of money I would have lost….Yet at some point some of these will be the big winner bounce back, I concede…I dont have the nerve though…As of now about 90% of my money are IG rated quality or their debt is. I suspect I will stay in this investing foxhole and hide.

              1. I topped off EPD @ 13+% & MMP @ 12+% yields. Incredible. If this virus thingie kills us all, it’ll be moot, natch, but I couldn’t resist.

                The bulk of my buying, though, went to IPLDP & SR-A today. I’m not a complete fool. Or am I? 😉


                1. I will see SR-A drop $3 tomorrow and wonder why…Then it will hit me. Camroc pulled out the wallet bazooka and single handedly kept the price propped up with all the buys. Yes I did buy a little more too today, so I will go down with you.
                  Like a marriage for better or worse its my biggest hold. I have no idea where the price is going, but I damn well know they are giving me a helluva a lot more in dividends than I am paying them back yearly for heating my house and water heater.

                2. LOL – you probably bought some of my IPLDP. I was selling it to buy more SR-A and CMSC. Basic premise was exchanging one lower yielding UTE preferred for two higher yielding UTE issues (one preferred, one baby bond). Was able to get both whee they are yielding over 6% based on my cost – which is an upgrade from IPLDP

                  That is my strategy with some other riskier high yield preferreds that have nosedived- if I can sell one at a loss to buy another at a similar price that is from a stronger company

                  And like you, I added a small amount of EPD to my existing position

  9. Tim my Friend; Before the market closes take a serious look at both “GS+K” and “MS+K”. Both screaming insane bargains with great call protection. In 6 to 12 months we will all look back and say something like “Damn why didn’t I buy those when I had the chance!!!!!!”. WELL I DID!!!!!!!!!!!!!

    1. Chuck–I will put the MS issue on the list–I have a bias against Goldman–no reason, just don’t like the company.

    2. Not adding anything here. I have zero confidence that we are anywhere near the bottom and we won’t be until we get some clarity on the virus issue. This is not a money and interest rates issue, it’s a fear for you life situation. Judging by how things are evolving in Europe, this is not looking good, not good at all.

  10. As of today I am 89% cash, waiting for the Dow to hit 17,000 to jump in. I might miss the bottom if it doesn’t go that low, but I would rather buy on the way up.

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