Innovative Income Investor | Innovative Income Investor

Maybe Too Far Too Fast

It is great to have a market bounce this morning–just wish it was a bit more restrained (can’t please me I guess).

I have 4 buy orders in now, but am not going to chase hard–all of the stuff I identified over the weekend moved higher quickly–so I will just adjust orders as necessary and hopefully pick up a few sock drawer utilities baby bonds.

I also have an order in for one CEF preferred (GGZ-A) 5.45% Gabelli Small and Midcap Value preferred.

I note that some folks did some buying last Friday and in some cases have already sold. I did sell one issue just now for a tidy $1/share profit, but it was the common shares of BGS Foods (BGS) which I bought last week–purely speculative, and since I don’t often hold common shares I was out with my $1.

As we look ahead this afternoon and tomorrow I suspect we could see some giveback in these markets–but who knows for sure. Some up and down seesaw action would actually please me–maybe would allow me to execute some buys.

Here We Go!!

The futures markets in stocks were way up and way down overnight–but now are up by over 1/2%. A guessing person would say we will be seeing some pretty wide swings today.

Last week cost us personally around 2%–almost all of the losses on Thursday and Friday and they were biggest in perpetual preferreds–that should be no surprise.

Here is what we are doing today.

1st off we are doing nothing–we are going watch and see if stocks and bonds hold steady in here. I don’t care if stocks fall again–but I hope these moves are kept to the 1% area.

2ndly we are shopping in the short maturity issues-those maturing in the next 10 years.

We are also shopping in all utility and CEF preferreds and baby bonds.

The last area we are watching is the mREIT preferreds. Theses issues are offering plenty of value, but being perpetual they may have more volatility.

So our theme is quality and/or short duration with a sprinkling of perpetual preferreds. Some folks may remember that I have always tended toward the shorter maturity issues–baby bonds and term preferreds–this serves one well with wild markets, but you give up some coupon.

Everyone should note that many of the quality issues are still expensive–but they have a lot less call risk in them–so if they were a good buy at say $27 they are a bunch better at $25.50 (or whatever the number is).

The CEF preferreds are here.

The shorter maturity issues can be seen here (slow loading page). How about the Gladstone Investment 6.375% issue now at $25.35 and not callable until 8/2020 with maturity in 2025?

The utility baby bonds and preferreds are here. How about the Entergy New Orleans 5.50% (ENO) baby bond issue trading at $25.13. First callable in 4/2021 and rated ‘A’ by S&P? This is a first mortgage bond.

As far as selling–I don’t see anything that I plan to sell right now. I have plenty of dry powder and while I hold the Golar LNG Partners 8.75% (GMLPP) which got hammered, I bought only 200 shares. I also have an overweight in UMH-D–I plan to hold the issue. In spite of UMH being ‘hated’ I see little fundamental risk in the issue (although I ‘mark to market’ in my mind everyday–none of this ‘you don’t lose money until you sell–I have lost money on this position).

Monday Morning Kickoff

Wow–here we go!!

The S&P 500 opened last Monday at 3258, after closing the Friday before at 3338 and fell as low as 2856 on Friday before launching a fairly furious rally the last 30 minutes of Friday to close the week at 2954–a weekly loss of 385 points.

The 10 year treasury closed the week 1.12%, this is easily a record low.

Amazingly the Fed Balance Sheet fell by $13 Billion as no additional liquidity was added via repo operations or via QE (quantative easing) purchases.

Last week we had just 1 new income issue sold.

mREIT MFA Financial (MFA) sold a new issue of fixed-to-floating rate perpetual preferred with an intial fixed rate coupon of 6.50%. The issue is trading on the OTC Grey market now and closed Friday at $24.22.

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The average $25/shares issue lost 79 cents for the entire week. Investment grade preferred were off 66 cents. The chart below is truly ugly–most of the losses were incurred on Thursday and Friday.

9 PM Central Time – Global Trading

After a rocky start to global stock trading tonight, China, Japan and U.S. stock futures have all turned nicely higher.

The S&P500 and DJIA futures are both up near 1%–not a giant move higher, but maybe one which is signaling that the world isn’t going to end (of course we all knew that–but are waiting for the markets–to get a bit rational).

Gold is higher, crude oil has turned higher as well.

Thus far we have seen no publicly announced central bank action, but all are thought to be at the ready if necessary. No doubt the ‘crash protection teams’ are at the ready.

Reminder–Seaspan Corp is now Atlas Corp and Tickers are New

As a reminder Seaspan has reorganized and is now Atlas Corp (ATCO) effective 2/27/2020.

We have updated individual security pages and are in the process of updated spreadsheets.

Note that the 7.125% baby bonds (SSWA) are being delisted, but the company has announced plans to call the issue on 10/10/2020. The last day of trading is 3/9/2020.