Innovative Income Investor | Innovative Income Investor

Here We Go–Another Wild Week

We know that equity trading will be suspended this morning after the open as the 7% circuit beaker trading halt will kick in after a few minutes. I fully expect that we may close down 10% today–may even hit the second circuit breaker which is 13% during the day.

Personally I have done most of what I can do as far as ‘positioning’ is concerned, but I do continue to hold some perpetual preferreds of less than investment grade (for instance VER-F and AMH-F and others). I may or may not continue to trim some shares, although my intention is to primarily hold at this point.

I have all the ‘starter’ positions I bought last week and am prepared to add to those positions–the only question is when and at what price? The Covid 19 issue is still a huge unknown and I want to be invested when we start to see some daylight on the issue, BUT I don’t know if we are in the 1st or 5th inning–just don’t know. I continue to have adequate dry powder.

For those looking for starter positions I would probably look in the CEF preferreds and the utility issues. It is too early to buy bunches–spread out anything you do.

Monday Morning Kickoff

Well I think we are through the medical panic phase of this selloff, BUT now to deal with the massive losses that will occur domestically and globally by pretty much all companies. Now we will have a giant equity loss on todays open as folks come to grips with ‘who remains solvent’?

Last week we had the S&P500 move in a range 2478 to 2882 before closing the week at 2711. Of course it took a giant gain Friday to get to the 2711 level–and we will give some (or all) of it back today.

The 10 year treasury traded in a wild range of .4% to .99% before closing the week at .95%. Normally I like to watch the treasury markets for signs of economic softness–but their usefulness now – for the short term, is fairly limited.

The Fed balance sheet grew by $70 billion last week–no surprise. Of course it is going to grow massively in the weeks just ahead–and in my opinion the years ahead. With the FED already announcing at least $700 billion in QE (quantitative easing) there is only one way to go and that is up.

Last week we had no new issues sold as far as I know–I have suspended my continuous monitoring of my SEC RSS feeds as markets have kept me quite busy.

Last week was one of the most devastating weeks in recent memory as $25/share preferreds and baby bonds fell, on average, $2.95/share. CEF preferreds were off $1.35/share while utilities (not on the chart) were off $1.24/share. Shippers were off about $5.30/share and mREITs $4.23/share. The only item up last week was the 10 year treasury as it climbed .24%

Finished our Buying For The Week

I picked up the CMS Energy 5.875% baby bonds (CMSC) and also the Spire 5.90% perpetual (SR-A) this morning–I had to pay more than I hoped, but I guess given where they were at yesterday it should have been expected that prices would bounce.

The DJIA gains are fading now-up just 189 which is a long way from the plus 1,300 gain on the open. That is fine–we got a good deal of issues purchased yesterday (although just in starter position quantities) so now we can be patient.

Right now I am up around 1/2% on the day–things go lower much faster than they head back up–pretty normal.

Over the weekend I am going to start looking for perpetuals that are of mid to high level quality.

I am thinking (without study this morning) of mREITs (probably Annaly, AGNC or Two Harbors), maybe American Homes 4 Rent (AMH) issues–just don’t know until I go through the list with fine tooth comb.

So for now I am hoping we are by the ‘crash’ type markets falls and will start to move into the slower moves lower (in stocks) as companies in the weeks and months ahead start to fess up to the damage being done by Covid-19. Given that I think we will likely move into a recession later this year I believe common stocks may be too high yet–but who really knows (they why I don’t buy many common stocks).

Let’s Do This 1 More Time

1 more day–it will be great to get to the weekend. The mental flip flops all week long are pretty draining for me–I suspect for everyone.

It looks like we will see a stronger opening on the equity markets today–but as we all know that doesn’t mean we will finish positive–BUT it feels like a potential change in situation today–for now.

Maybe we (as a country) are going to come to grips (acceptance) that we are going to have a soft economy because of the Covid 19 virus. With all kinds of large events, schools and business shutting down for at least a couple weeks–maybe a month, but in the end–in the near future we will be fine.

Anyway today I have 2 issues on my shopping list. 1st is the CMS Energy baby bonds (CMSC)–5.875% with call protection until 10/2023. Last traded at $23.47. 2ndly the Spire 5.90% perpetual preferred (SR-A) trading at $24.25.

This continues the theme of high quality purchases.

Now if I am correct that markets move to another stage–less craziness–with swings of only +/- 1 or 2% I will move to another stage of adding some higher coupon, junkier issues–which I have only partially identified. I am looking at some REIT preferreds–maybe in the mREIT area–but UNDER NO CIRCUMSTANCES will I be buying lodging preferreds. The lodging REITs preferreds might work for a trader who is nimble, but I am looking for stuff to hold longer term.

So hold on–I see the equity futures are on a halt (an upside halt) so with good fortune today will a calmer day–at least one which may not be such a loser.

I Went on a Buying Spree–Relatively Speaking

In one of my accounts I went on a buying spree of sorts–I hope not too early.

I opened starter positions in a number of issues today as the ‘baby went out with the bath water’ and investment grade utility and CEF issues presented what I thought was a buying opportunity. We will know in a month whether this was a wise decision.

Remember that most of these are just starter positions and if they fall more I almost without a doubt would add more.

Here is what I added today.

More Ellsworth Growth and Income 5.25% perpetual (ECF-A) at $24.70.

DTE Energy 5.375% baby bonds (DTJ) at $23.49.

DTE Energy 6.00% baby bonds (DTY) at $24.99.

Duke Energy 5.625% baby bonds (DUKB) at $25.05.

Entergy New Orleans 5.50% baby bonds (ENO) at $24.39.

Nextera Energy 5.65% baby bonds (NEE-N) at $24.86.

I think being able to secure some investment grade issues around 5.75% to 6% current yields is a small gift–but we will see.

Note that some of these issues have 2, 3 or 4 years of call protection some do not, but at these prices I am not concerned.

I can’t predict tomorrow, but I hope to move to a different account looking for some quality issues.

As many of you know WHEN we come off the bottom it will be the middle grade (and even junky issues) that will head higher 1st and strongest–BUT this is when we come off the bottom and we don’t know when that will be, but we will be holding cash to do some buying there in select higher yielding issues.