Category: General Commentary

The S&P500 is down around 3.50% right now with NASDAQ being off almost 5%.

The Yahoo Finance headline is “Why the Explosive Stock Market Rally is Crumbling”. What baloney that headline is–why is a 1 day move lower a cause for the use of ‘crumbling’ in a headline. I think that most everyone is somewhat welcoming of a move lower–I know I am.

On the other hand when I checked my accounts they were almost perfectly flat–some lower, some higher, but overall almost no movement. No bargains are being created in preferred stocks and baby bonds based on this common stock movement–this is normal. If common shares move down 1000 points or more in a day–with maybe consecutive days down we might see small bargains created in income issues–moves like this create bargains in income issues when folks decide to ‘throw the baby out with the bath water’ and that isn’t the case now.

I will continue to watch for bargains in quality income issues–but I will not be holding my breath waiting on a piddling 3-5% move lower in common stocks with interest rates on the 10 year at .62%.

These are just a few items of interest (to some) of odds and ends I have come across this week or that folks have discussed in varying comments.

This morning 2whiteroses posted a notice of partial redemption on the Capital Southwest Corp (CSWC) 5.95% baby bonds. CSWC is a BDC. No harm is done to holders on this call as shares have been trading in the $25 PLUS accrued recently. The SEC filing is here.

CenturyLink (CTL) has announced a partial redemption of the Qwest 6.625% baby bonds (CTZ) issue on 9/15/2020. They will redeem 10 million shares. There are a total of 16 million shares outstanding. The press release is here.

Of course the big item of the week was the surprise call by Southern California Edison (a division of Edison Internation EIX) on old preferred shares that had been outstanding for decades. The big winners were those holding the SCE-D issue which had a bonus redemption price of $28.75 and was trading at $23.87 just prior to the fall announcement. From my reading we had numerous folks holding shares in these issues.

I see that folks are back talking Canadian Preferreds and Gridbird offers up this website for Canadian info. Looks like a good resource for those interested.

Don L posted a press release on the new Sachem Capital (SACH) baby bond–it priced at 7.75%–looks like the issue will be small-around 1/2 million shares. I have not posted the pricing as the SEC filling has not yet been made as of now. Will be a week or so before the new issue trades under ticker SCCC,

Lodging REIT Ashford Hospitality (AHT) has begun turning in the keys to hotels they owned as lenders begin to put their properties up for sale–when you can’t come to agreement with lenders they eventually take the properties–all of Ashfords properties are ‘non-recourse’ to the company so they turned over the keys to an 8 property portfolio this week. As I wrote before I think AHT is essentially broke and will liquidate in the year ahead with common and preferreds holders getting zip.

The Fed Balance sheet fell by $20 billion last week–obviously the buying of treasuries, mortgages and other assets by the Fed in the weeks and month ahead will be ‘lumpy’. There is so much money sloshing around the globe that the Fed hasn’t had to do much buying. There have been a number of huge treasury auctions in the last few weeks and the market has had no trouble buying everything available.

Just a note on a few of the buys and sells I have done lately.

I sold some of my Tri-Continental 5% $50/shares preferred. I held 300 shares for years and this time as it trades up around $57.50 (and sometimes $58.40) I decided to ‘lighten up’. This issue has been outstanding since 1963 and likely will continue to remain outstanding, but with a call price of $55/share I decided to let some go–I am open to re-buying down around the call price.

I sold a 1/2 position of the Wesbanco 6.75% fixed-rate reset preferred which was a new issue from 8/4. I bought it for $25.50 and sold for $26.25. I am not buying any of these small bank issues to ‘hold’–just to flip.

I bought a full position of the new Federal Agricultural Mortgages 5.25% non cumulative preferred at $25.11 a day or two after it was issued. I see it trading at $25.58–think I will hold this position unless it goes totally crazy.

Lastly, I added a couple hundred shares of the Highland Income Fund 5.375% preferred (HFRO-A) at $24.86. While I am not thrilled with the Highland Income Fund (HFRO) as long as it is strongly investment grade (A1 from Moodys) and their asset coverage ratio remains reasonable good – 276% as of 12/31/2019 I will hold it as I can’t get investment grade issues with current yields of 5.40-5.50%.

Up until last week I held the Entergy New Orleans 5.50% baby bonds (ENO) in my portfolio–you snooze you lose on this one. Obviously I sold it–I wan’t snoozing, but I might have been dozing a bit.

Everyone wants safety—everyone–plus a decent coupon. But someone is asleep at the wheel on this one.

This issue becomes redeemable on 4/1/2021–just a short 7 months from now. Al things being equal to today this issue has huge call risk.

The issue is trading at $27.12—a yield to call of around MINUS 7%.

As mentioned by Bob-in-DE (and others) there is a lot of silly pricing out there right now.

Investors in this issue should exit immediately–there is no telling when the Rip Van Winkle investors will awake.