Author: Innovative Income Investor

I had mentioned that I might take a modest position in a Gabelli CEF preferred and I have done so this morning. My buy was very modest in size.

I nibbled on the GAMCO Global Gold Natural Resource 5% perpetual (GGN-B) with a current yield of 6.05% and trading around $20.67–which is the price I paid as well.

Here are my thoughts on this issue. It is rated A2 by Moodys and has a asset coverage ratio of 917% (as of 1/31/2025)–so we have safety covered in spades. The current yield of 6.05% is over my hurdle of 6%—but on top of this IF we get interest rates down somewhat (whatever that means to each of you) this issue has potential for 4% capital gain (or more) in the next year.

I am now leaning toward rates moving lower. Walmart earnings seem to indicate the economy is softening a bit. Employment remains relatively strong, but I am starting to believe we are going to have issues ahead as I am thinking the administration will lower headcounts on the government payrolls and while this in itself may not be a massive number (although there may be cuts in the private sector as well) in combination with some level of savings through spending cuts the economy will slow. For the time being this will be viewed positively by bond investors and will outweigh my never ending concern on the deficit spending (for now).

Now if we get rates moving higher based on the Personal consumption expenditures number which is released next week it will mean I am too early–but this position is small and little damage will be done.

With current interest rates I have found it difficult to be buying much outside of the safe 4.3% CDs – being a total return investor I don’t want to take capital losses in perpetuals if interest rates start to move higher once again. Because of this fear (maybe too strong of a word) I have relegated my buys to short duration term preferreds and baby bonds–and even these I have been very cautious.

Last week I noted that the XAI Octagon 6.50% term preferred (XFLT-A) was trading around $25.00-25.05–an issue which I already hold an overweight position in. Even with the overweight I did buy a few shares–I rounded my position up –I bought all of 45 shares.

In addition I bought

Additionally I bought some more of the Wintrust Financial 6.875% fixed rate reset perpetual (WTFCP)–specifically expecting the issue to be called on 7/15/2025. I paid $25.19 so I gain a little advantage over holding CDs etc–but not a huge long time advantage unless they don’t call it in which case the advantage would be huge for how ever long it is outstanding. The reset is likely to be over 10% so I can’t imagine them not calling it—but stranger things have happened.

So what is next for me? I have CDs maturing pretty much continually in one account or another so I have to make a decision on a non-stop basis. I am pretty sure that I will be looking at the Gabelli CEF preferred–one those with a current yield of 6% with opportunities for substantial capital gains–i.e. they are trading at $20 or so. Obviously I would like to be pretty confident in interest rates moving lower–of course who can predicted that with confidence? Other CEF preferreds will also be considered.

I will get my new purchases posted to the laundry list of holdings page later today.