Author: Innovative Income Investor

2 weeks ago I wrote about Seeking Alpha being a business–not a service that should be used for anything more than an occasional ‘idea’. I follow some folks over there and will take any good idea I can find.

Unfortunately what we are seeing now is that all the folks that were ‘experts’, are now dogs–BUT still everyday they are writing articles on what to now buy. 1 of the most popular groups ‘pounded the table’ on an issue a while ago that is now liquidating with a massive loss–I’m talking a 80-90% loss. These experts will find, before the year is out, that when you lose 50% of your capital that it will take them years and years to gain it back–even with the dividends that some are so insistent is all they care about.

Anyway this is how investors are lost to future investing–they lose 50% of their stash–so the buy high and sell low, then back to cash for the next decade or so. Sad.

So today the futures are way down–we should expect that given the gains yesterday–unfortunately the elevator down goes much faster than going up. While we had gains yesterday we will likely lose all that gain plus more today.

Again we watch–if this continues, at some point all babies (so far it has just been some babies) will go out with the bath water–even ‘A’ CEF preferreds–I want to be there when that happens.

The average $25 preferred and baby bond fell by $1.09 (4% more or less) in the big downdraft yesterday–but we got a little relief today. Today the average share went up around 25 cents (1% more or less).

Weakness continued in a number of preferreds issued by lodging REITs (i.e. Ashford, Hersha, Sotherly and Summit) where there were a number of 50 cent and $1 moves lower–with Sotherly issues moving lower by $1.70, $1.82 and $2.48 respectively–ouch. The SOHO issues are around 11% in current yield.

Some of the mREITs continued lower today as well. Giant AGNC saw all 4 preferreds move lower by 1.5% to 3%, while Annaly issues were all down 1%.

I did absolutely no buying or selling today–with the news of various schools shutting down, the price of crude oil remaining low and airlines cutting schedules it is leading me to pause. I just can’t help but think we will have plenty of opportunities to buy bargains—and shares that look like bargains today, may be much cheaper tomorrow or next week.

We know from past experience that the higher yield issues bounce back best from very low panic prices–but right now I am NOT certain we have seen those panic lows--they may remain to be seen as economic dislocation takes place.

So I will continue to watch–if I do anything it is just more nibbling, but maybe not even that. I will probably sell the ill fated Golar LNG 8.75% perpetual (GMLPP) shares tomorrow. Obviously it was a poor decision to make this small purchase–for which I now have a $6/share loss–I hate losses (I guess I could change my thought process to ‘you only have a loss if you sell’–what balony).

Well let’s see what kind of wild trading will occur tomorrow.

Although the futures are up quite a bit this morning (700-800 Dow points) I am under no illusion that we have seen the end of the sell offs as announcements of capacity reductions from the major airlines serve to remind one that there will be fundamental pain ahead. Of course no one knows when Covid 19 will peak–I suspect it will be awhile–a month or two.

Yesterday was pretty painful for our personal accounts with losses of 1 – 1.5%—virtually all in the perpetual preferreds that we own.  The ‘sock drawer’ issues we own did well–barely moving.  As we mentioned we snagged 1 CEF preferred yesterday at $24.99-the Gabelli Multimedia Fund 5.125% (GGT-E)–the issue closed the day at $25.46.

Today we will continue to study and watch the CEF preferred–and some short dated maturities in the baby bonds, although I have concerned with some of the BDC baby bonds as they may incur sizable losses if we do fall into recessions later this year.  If I make so buys they will be small positions–no use burning up dry powder as there likely will be plenty of time to find and buy bargains.

As tiring as these markets are everyone needs to stay vigilant.  We will reach a point–maybe in a week or 2 where we tamp down the wild trading and instead only move higher or lower by 1% each day–I would be quite happy with moves this small.