Category: General Commentary

Yesterday I posted some info on the Uhaul Investors Club. I have removed it for now as I want to continue to research items and then will republish. Simply I would like the information to be correct and there are some terms and conditions which are confusing and I want to clarify. I will then republish later this week.

Common stocks are slipping by about 1% today as the corona virus takes it’s toll. I think VinL hit the nail on the head in some comments that it is really about uncertainty in China as their information may well be less than transparent and of course stock markets hate uncertainty.

The 10 year treasury has slipped again and is now trading at 1.53%. With uncertainty in the markets yields are likely to slip some as folks like to move to a safer position–or at least what they think are safer positions.

We note today that the U.S. airlines are starting to announce suspensions of service to China with Delta leading the way–others will follow I am sure. We’ll see how far these various disruptions go–and then try to discern whether there will be GDP effects.

I am not seeing any real disruptions in the preferred and baby bond markets. There have been quite a few ex-dividend issues yesterday and today (35 issues more or less), but they have not put much of a damper on prices–on average.

One item I have noted that in recent weeks it is becoming more difficult to try to successfully do a dividend capture. While the ‘capture’ part is easy enough the security exit part is getting much more difficult. My personal idea on a dividend capture is to buy the issue around 2 weeks prior to the ex-dividend date and then hold through the date and look to exit within a couple weeks with a net 1% gain. For instance I bought the B Riley 6.75% baby bond (RILYO) earlier in the month to capture the 42 cent interest payment. Shares went ex dividend on 1/14–and I received the interest payment today. I am now looking for a bounce back in share price but thus far nothing–nothing at all. The bottom line is that I am up by a number of cents–but far from the net 25 cents I am looking to garner. Whether this is simply an issue of being B Riley or one of buying the wrong issue (they have 6 baby bonds outstanding)–or simply not entering soon enough I have no idea–but one gets used to ‘easy pickings’ so when I have to wait to exit I get ‘antsy’. Oh well I will just hold the issue for now.

January has actually been a decent month overall. I always have a modest goal of 7%/annually–and really would be most happy if I could get to 6% this year. Depending how markets close today January should be a gain of around .6-.7%, which would be plenty acceptable to me—I am sure others have done better (and some worse), but as we all know we all have different needs and styles when it comes to investing–not necessarily anything right or wrong–just what works for us.

Last night and early today I thought “it looks like a down day” in stocks (based on futures and early trading)–I think all of this was related to the corona virus, although maybe it was a delayed reaction to the FOMC not giving common stock traders and investors anything new to trade on at their meeting yesterday. Whatever the reason I guess the clowns decided it was time to drive prices up at the end of the day and we closed up by .3 or .4%.

On the other hand the 10 year treasury wasn’t buying into the stock move as it closed almost 4 basis points lower–again. Whether the corona virus reduces growth globally or not is a total crap shoot at this point in time. No one can claim to know the answer to this at this point in time–honestly we have huge numbers of flu cases each year and literally thousands of death (37,000 estimated in the U.S. last year) from the flu–I could go on and on, but it is just silly. Not that we shouldn’t take the corona virus seriously, but a little common sense would be helpful.

Anyway, let’s take a look at how preferred and baby bonds have done for the week thus far.

You can see from the chart below that it has been really quiet–prices seldom moving, on average, more than a couple pennies week to week.

The grand total movement of the $25/share preferreds and baby bonds tracked here (661 issues) has moved exactly ZERO since last Friday. mREIT preferreds are off 4 cents and investment grade preferreds are up 3 cents since that time.

Note that the 10 year treasury is almost 30 basis points lower than 12/1/2019. This is what makes income securities interesting. It isn’t always true that higher rates drive prices lower while lower rates drive prices higher. That is a big–maybe–sometimes–it depends. More than pure interest rate movements go into pricing these securities–as the chart above shows prices moving sharply higher while rates were a bit higher and are totally flat while rates are tumbling.

Obviously there have been ex dividend dates this week and that always sways the number a penny or two–but all in all this is extremely ‘Goldilocks”–and for some of us we like it quiet. On the other hand there are more active preferred stock traders like Martin G. who would like the see more movement so they can take advantage of the volatility.

One thing that is almost certain–as soon as all of us get lulled to sleep an ‘event’ will occur which will wake us up quick. We shall see what the weeks ahead bring.

We still have a little confusion on posting of comments on the website.

Any commentor can start a new thread on any page/post by going all the way to the bottom of the page. Sometimes that is a long way down (i.e. Sand Box Page, Reader Alerts etc) but if you are on a laptop or deck top computer (that rules out Gridbird) you can hit your ‘end’ key and it will take you to the bottom of the page.

To Summarize–It is NOT necessary to alway just do a ‘reply’–by going to the end of the page you can have your post show up on the top of the comment section.

Early this morning I wrote the post on the new preferred issue from ARMOUR Residential. The post was not as complete as it should have been and had a couple typos. My apologies.

Last night I had a 8 pm flight out of Minneapolis–which got held up for 90 minutes so they could de-ice-why it took 90 minutes I have no idea. I ended up not getting to my Scottsdale room until about 1:30 am mountain time. I thought I could get the pricing posted in a coherent fashion–obviously not.

The good part is as usual everybody had data in the comments that completed the story. Thanks all.

The other good part is the weather in Scottsdale is beautiful–70’s and sunny–the bad part is that by Sunday night late I will be at my desk–hopefully with enough recharge for a few months.