I bought a 150 shares in total in this ‘gift’ today at $30.97 (a 100 share buy and then a 50 share buy) to add to my 100 in the sock drawer. AATRL which is a $50 trust convertible issue from Affiliated Managers (AMG)—the yield at my cost was 8.3% for an investment grade issue.
I had wrote ‘mark my word this will trade much higher in the month or two ahead“. Looks like I should have written much higher in the next hour or two as shares are now at $36.59. Sometimes it is better to be lucky than good and we are lucky today. Thanks to all discussing this issue–gave me something to buy and write about.
Hope you all got the sock drawer stuffed down at $30 (or below for those that were in early).
This is such a calm market today that one has to wonder about whether this is the calm before the storm. I watch the news out of New York and shudder to think about a similar situation moving across the country.
Each day I see more and more layoffs and as we all know the median American has almost ZIP money in their emergency reserve–I feel fortunate to have months and months and months of $$$ in my cash reserves–I think I could get through 2020 without income–the result of having too much money in my checking accounts and having almost no debt. I have to wonder what we are going to see on defaults on mortgages/rent, car payments and credit card debt. Yes I guess the helicopter government money will tide folks over a bit–but not really for long a couple weeks–congress is already reloading the freebies.
Some businesses have seen decent business in the downturn–but I have to believe that folks ran up their credit cards to buy equipment for home schooling etc and that demand is going to fall flat in months ahead and those businesses are going to implode.
This week Friday we are going to have employment numbers for March and we already know they are going to be bad–but I believe the cutoff on the employment report is early in the month so next month will be disasterous. I would post an economic calendar, but no use really as the forecasts and results are pretty useless for now.
So I hope to get back to normal on the website. I have a lot of work to do to get caught up–ticker changes, suspended dividends etc. my time is very limited and these daily whipsaw markets have taken all my time.
I know folks have been talking about AATRL which is a 5.15% trust preferred from Affiliated Managers(AMG). Right now this is a gift at $31/share (a $50 issue) –8.3% current yield. The company has a $25 issue 5.875% debenture (MGR)trading at $23.75–current yield of 6.05%. I have just bought 100 shares of the $50 issue @$30.97. I already owed 100 in my sock drawer. Mark my word that this will trade much higher in the month or two ahead–folks are sleeping (except all our readers who have been right on it).
I see no significant difference in these 2 issues–the trust preferred was originally a private placement and both can defer interest payments for 20 quarters.
On a relative level today is kind of a calm day–equity markets up 1.5% or so. I am very leery of this market–everyone is trying to pick a ‘bottom’ without firm data to really be able to see clearly.
I have made 2 purchases today–no sales of investments (except most of my Proshares Ultrashort SP500 (SDS) early in the day).
I went ahead and started a position in the RLJ Lodging $1.95 Conv Preferred (RLJ-A) @ $17.05–see it is up to $18.xx already. I chose this one because of the strong balance sheet–I think they will remain in good shape for a couple quarters without much business.
So for now am just slowly moving back into the marketplace and staying with quality sprinkled with a few others that have more of a speculative twist to them.
Well here we go into what no doubt will be a wild week.
Last week the SP500 traded in a range of 2175 to 2629–an incredible 20% range–before closing at 2489. This was a huge gain on the week and is highly likely to be a rally in a bear market.
The 10 year treasury, which for the time being has become fairly meaningless, traded in a range of .72% to .90% before closing the week at .75%.
The average $25/share preferred stock and baby bond closed the week at $20.40/share which was a gain of about 10% from the week before which was around $18/share. mREITs are still the laggards at $16.01–even below shippers at $16.76. We urge caution when buying the mREIT preferreds–after the bounce back in preferred prices last week there is potential for large losses if mREITs suspend dividends (those that have not already done so)–a 50% hair cut would like occur. Investors should ‘leg in’ to any mREIT preferred purchases for another week or so.
Utility preferreds are at an average price of $24.12 which represents big gains for holders–we personally experienced these gains. Additionally CEF preferreds closed higher and now are at $23.22.
A CASE STUDY ON CEFs
Investors should look at both Kayne Anderson MLP and some Tortoise closed end funds for what is total destruction. Many of us feel fortunate that what was a ‘near cash’ type holding in Kayne Anderson MLP 3.50% term preferred (KYN-F) was redeemed a month or so ago. KYN traded as low at $1/share–down from a 52 week high of $16.49. Tortoise Midstream (NTG), which used to have some very nice term preferreds outstanding, closed last week at 99 cents/share–down from a 52 week high of $14.65.
Both of these closed end funds had broken leverage limits (they have debt and non traded preferred for leverage now), but it looks like while the common holders have been virtually vaporized, the senior security holders remain covered.
In the case of a very specialized CEF like the 2 above, which hold MLPs, they are self destructing when prices fall this fast. The company has to sell securities to meet leverage limits, which causes prices to fall further, which requires more selling.
Well it has been a decent morning for me–not profitable, but not negative.
As you might suspect I bought modest positions in Proshares Ultrashort SP500 (SDS) late yesterday. As always when you hold these short positions it is a question when to unload the shares.
It seems like on these 500-1000 DJIA down days the safer issues (CEF and utility preferreds and baby bonds) are not moving much lower–seems like shares have moved to stronger hands after the illogical sellers unloaded them last week.
On the less than investment grade issues seem like there are still plenty of bargains being created–although todays bargains may be next week fire sales. Look at the big loser list.
This afternoon it will be interesting to see if folks ‘bail out’ prior to the close. Odds are I will hold my SDS position through the weekend–opening myself up to a spanking on Monday if we get a pop–thats life.
After the strong market performances this week my personal accounts have now moved nicely toward breakeven for the year–not quite there yet. I have 1 account down 2%, one down 4% and another down 5%. If I had more time to spend at the computer those numbers could be better–but I am satisfied.
