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Adding Insult to Injury

While I shouldn’t have been surprised that Morgan Stanley is acquiring eTrade, it feels a bit like adding insult to injury.

All of us have had to fight to try to earn a decent return and after being with eTrade for around 25 years it now looks like I will have be concerned with how our accounts will be handled.

I have used eTrade as my ‘go to’ account given that our accounts at Fidelity are generally less versatile–i.e. not allowing us to buy certain securities.

Oh well–when the time comes I will just review all the commenters chat on which brokers they prefer. I guess Morgan Stanley will have to earn our business–too many changes–and in particular too many restrictions, and we will be gone.

Preferreds and Baby Bonds are Red Everywhere

As Landlord Investor noted in the comment section preferreds and baby bonds were pretty red today.

I personally am not aware why we would be seeing red so widely–except for the fact that every damned issue is overvalued (when has that mattered?).

Today we saw investment grade issues off 14 cents, banks off 15 cents and overall we saw a fall of 13 cents. The big losers were shippers which were off 30 cents (not on the chart below).

Maybe we will see a buying opportunity?

Buy/Sell/Hold Decisions – Short Term Trades

We have discussed on here many times ‘sock drawer’ holdings–those that we really like for the dividend/interest they pay us, but also for the safety they bring along. These many times as what I call ‘base holdings’. I try not to sell them–and many times I don’t pay attention to them daily.

It is obvious to all on this site, that I, along with many others, have been reluctant to jump on the spate of low coupons issues that have been presented to us during the last many months.

This leaves us with excess cash in accounts that is earning maybe a 1.50% money market interest rate–sometimes even less.

Because of this I use some of my excess cash to buy some short term holdings (flipping and dividend capture) with the desire to earn just 1-1 1/2% in a month—I’m not asking for much–just a friggen 25 to 40 cents/share.

NOTE–nothing here should convey the idea that myself and folks on the site are about short term trading–quite the contrary–we love to buy and hold, but we have to have issues that are of the right risk/reward and allow us to sleep at night–the low coupons offered currently just don’t cut it.

Well for the most part this has been like ‘shooting ducks on a pond’-for months and months, although January was much more difficult than December in this regard.

But as some commenters have noted today there are a number of decisions that have to be made–and here are a few examples–some of which I may have outlined on the Flipping and Dividend Capture discussion page.

Triple net lease VEREIT has a 6.70% monthly paying preferred (VER-F) outstanding which has been a great preferred to own. Unfortunately the company has been redeeming shares–in chunks of 4-8 million–as you can see here. Fortunately it is a 43 million share issue so it will take a while to get all the shares redeemed at this rate. During the last partial call in December shares fell to near $25–I owned a small position at that time and added a decent chunk after the fall. Today the issue hit $25.73–I am out after collecting 2 monthly dividends and a capital gain.

So the decision was–let it ride and see if it goes higher–or will they call some more shortly thereby driving the price down? I decided that it best to exit with the gains and wait for the next partial call and see what develops.

I bought a full position in the TravelCenters 8% baby bonds (TANNL) on 1/21/2020 for $25.43 looking for shares to rise into the ex-dividend on 2/13. I have a GTC sell in at $25.90 right now–today it closed at $25.79. I have achieved my initial goal with a near 1 1/2% gain and obviously could sell right now–but I believe that there is just a bit more upside in the issue prior to the ex date next week. If my GTC executes fine–otherwise I will have to decide whether to take my gains or hold through the ex date for the 50 cent capture. The issue has been callable since 2017–but I believe it has no risk of a call.

Lastly for now–I had bought the B Riley 6.75% baby bond (RILYO) at $25.71 on 1/13 hoping for a quick and profitable dividend capture. It went ex-dividend the next day 1/14 for 42 cents.–poor idea. Typically I want to buy on a dividend capture 2-3 weeks before the ex date, but I made a bad decision to buy the day before–just antsy with too much cash on hand. Anyway I continue to hold the issue and finally today see about a 20 cent net gain–all in all not really that bad, but timing was really bad and this isn’t really an issue I want to hold long term. So my decision is to exit immediately for just under a 1% gain, hold a bit longer and see if I can squeeze out another 5-10 cents–or just be patient and hold closer to the next ex date in April before selling. As alway I want to have a rib eye steak gain–hamburger steak isn’t that great.

Sliding Into the Weekend on Uncertainty

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.