Chickens Coming Home to Roost

The domino’s are starting to fall–one by one. I believe the retail sales numbers, which were disastrous, are trumpeting the hell to come. The printing presses are way too small to overcome the decimation.

Today Best Buy (BBY) finally furloughed 51,000 workers–although most were part timers, there are full time positions being furloughed as well as ‘voluntary’ furloughs. You can be certain that involuntary furloughs will be next–within 2 weeks if stores don’t begin to open. The CEO of Best Buy stated that in April sales are down 30%–can’t run full staffs on very skinny margins with this kind of downdraft. I watch BBY closely because of family members working at their headquarters.

In Minnesota business owners are getting very antsy–the governor says he is sympathetic-kind of empty coming from a state employee (although he took a 10% paycut). Listening to the governors daily news conference yesterday it appears there could be a ‘revolt’ anytime–it will soon be the time to take a chance and begin to open some businesses–the economic disaster will soon outweigh health concerns.

I’m kind of watching it all play out today–no real motivation to buy or sell much, although I did buy 100 shares of the Spire 5.90% (SR-A) perpetual preferred to add to my currently holdings–bought at $25.50–I see it is at $26.20 now–this is a “Gridbird” special–he is in and out of this one often–I suspect he bought a pile today down in the $25.50 area–probably looking to sell it now for 60-70 cents of quick gains.

My perfect scenario is that we see equities drift lower–maybe 500 points a week for the next 8 weeks. I hate to see huge multi thousand point days–but prices have to go down–get real.

Plenty of bargains will be had as one by one the domino’s fall–I want to be there at the bottom.

39 thoughts on “Chickens Coming Home to Roost”

  1. While I’ve not commented on this board in some time, the past few weeks have been humbling for me. My REIT preferred portfolio has clearly been down the past few weeks, but there were also some good decisions that I made in the past few years that have mitigated the damage. In hindsight, I should have been a little more conservative with holdings. Looking forward, solid REITS preferreds such as PSA have held up very well. Over the past few years, I’ve been involved in a land partnership and this is holding up well for me with timber and some other real estate operations. However, no guarantee for future results and I certainly expect less in profits this next year.

    As Tim mentioned a few weeks ago, SA is clearly a site that is run for-profit and they make money by posting articles that are bullish on stocks. TipRanks is a website that gives ratings on some of the SA authors. Last night I posted a message to Brad Thomas about his track record, and it was deleted almost immediately. In the past year, TipRanks gives him a zero score (out of one to five) and Rida Morwa has 1/2 of one (out of five), so clearly the “darlings” of SA are now in the dumpster.

    1. BT is the Cramer of SA. Follow his advice and you, too, can be shirtless.

      Thomas makes his money writing, not investing. He obviously makes good money for SA, and SA protects him. Reminds me of how the Yankees kept covering up for the off-field antics of Mantle, Martin and Ford. Worked pretty well until the Copacabana happened.

  2. Anyone wanting to Buy SR-A at 27 I’ve got open sell order up. Making it easy to pick up a hottie!!

    1. max–it moves up and down $2-$5 daily – nothing wrong with it – just misunderstood. I have over weight position in it.

  3. I had never even heard of “IPLDP” until I discovered this site. I ended up buying 3,200 shares at fairly close to par and plan on keeping them since I think it was Tim who called it a “Sock Drawer” holding. Are you guys still extremely comfortable with this company??? The reason I ask is quite simple. You can still buy it for around $25.13 and it offers a coupon of 5.1%. With all the real bargains dissapearing very quickly I was thinking of maybe adding another 800 shares. Would love to hear your opinions from the guys that are very familiar with this company.

    1. end of the day- all that matters is how comfortable you are with it. Given your research of the company – are you confident? That is more important than the opinion of random people on the internet, especially when markets go south.

    2. I sold mine a little higher than where it is now. Nothing wrong with IPLDP I’m just not convinced the coronavirus crash is over. So the risk/reward odds were off. I may buy it back at a better price

    3. Chuck,
      I would encourage you to consider NEE-I. NEE is significantly larger and more diverse than IPLDP by a substantial amount. Both of these offering pay about the same, but NEE offers you so much more diversification – not only geographically but also via the services offered by NEE. I own both but I’ve only been adding to NEE-I and NEE-K. I also own the common of NEE. Throw up a chart of NEE common stock for the past 3 or 5 years and see how large your eyeballs get. They are the premier ute in the US.

      D, DUK, SO, SRE, LNT, etc. NEE is crushing them all on the performance metrics.

      1. A4I, I agree for most when faced with investing decisions, diversity is important instead of just constantly piling into one company. Its really only one of few variables an investor can control. That being said there are a few differences he needs to be aware of. NEE-I is holding company debt and is not QDI, so that would be a variable one would need to be aware of.
        Interestingly if NEE had a preferred its credit rating would be below Interstate Power preferred. Generally subsidiary preferreds are higher in capital structure than holding company debt is. That being said NEE is a fine secure progressive company.

        1. Not sure I agree with the part about credit ratings. With enought $, you can buy the rating you’re looking for. I understand it gets murkey as you descend down the stacks but go to the top and you’ll see NEE at Baa1 and LNT at Baa2, and then drill down into the balance sheets and service portfolios. Night and day differences in so many areas.

          Like I said, I have both in the stable. I’m not trying to poo on IPLDP but since Chuck said 3K of shares in a full or close to full position, I simply offered an alternative with nearly the same yield and better credit and other qualities, IMO.

          1. You would need to compare NEE debt to IPL debt not LNT. NEE is a very good company though. Wish they had a preferred available. Generally going to Hold Co debt is not going to the top but to the bottom.

          2. A4I (or anyone else) – Do you have an opinion on NEE-O or NEE-P they seemed to be differently and O is at a considerable premium. I feel P is a better buy but I am not sure if I am missing something

            1. Hi Jay,
              I still maintain the position I’ve had, which is to say – that the common of NEE is still the best bang for your buck. Long term holders of it will not only enjoy the higher credit rating versus the equity units you mentioned, but you’ll also get the QDI benefit if held for longer terms. Personally, the equity units are not where I’ve placed my chips. I’m still holding the common of NEE, and then also holding NEE-I and NEE-K.

              Ute equity units/convertibles just move around too much for my tastes, whether you look at CNP-B, DCUE, the NEE flavors, DTP, or any others. Interest rates, inflation expectations, you name it – IMO, seem to push the fixed income side of ute’s around a bit more than the common side of things.

              ~$55 for something like NEE-O is not exactly a bargain for me – but I understand it may be just fine for others.

              I think NEE needs to split the common stock. I think that this would bring a flood of new money from those who actually think a split creates more value – but also from those who just cannot buy a decent position of it with it now sitting at $278/share. It definitely stands alone from the majority of ute’s with common prices 1/7th to 1/4th that much per share.

              I’m still nibbling on the common in slices. NEE-I and NEE-J are not outlandishly priced IMO, but you’ve got to deal with the call risk on those.

  4. For someone looking to buy something with somewhat of a short rope, LANDP is available at $25. It is a monthly payer going exD next week. Next 3 months divi just declared yesterday along with a very modest common stock divi increase yesterday also. If LANDP isnt redeemed by 9/21 there is a punitive 300 basis point tack on taking it to 9.375% par after that date. I bought a bunch in $21 range last month. I tacked on a couple hundred more earlier this week at $24.95 for no particularly good reason.
    https://ir.gladstoneland.com/news-releases/news-release-details/gladstone-land-announces-increase-monthly-cash-distributions-6

    1. Gridbird, like the choice. What are your thoughts on the other Gladstone offerings (PFs and BBs)?

      1. Sorry Sfinley, I am no help here. I have flipped a couple of the IPOs just on trading momentum and then was out in days. I dont own shares in companies that operate in those areas such as BDCs. Many people do like buying and holding these issues, but I simply dont know anything about them to help.

    2. Grid
      What about someone looking for a sock draw holding . What looks interesting to you now in that cateogry. Not all of us are good flippers so we like to buy and hold. tia sc

      1. Sc, Typically to be honest, most issues I flip in general (with exception of IPOs) are sock drawer issues that I am 100% fine holding. So really 90% of my issues are one in the same. Its just going off price chart movement to guess if I can re enter at a better point. And typically a flip will also occur if a better value pops up on another issue that sells off with similar credit profile.
        In other words for example, I dont care if I own AILLL or CNTHP. It makes no difference to me. What matters is the price. If one goes up or even stays same, but other drops and becomes available, I will sell the former and buy the latter. There are probably 30-50 issues from different companies I could care less which I own.
        So I just wanted to mention that to make sure I didnt leave the impression that flippers were different than sock drawer issues…For me anyways.
        Man, its tough to recommend anything. Not in terms of safety in getting paid, but safety in terms of capital loss. Most sock drawers are really pushing their upper end limits and yet our economy is only beginning to fall off the cliff. Are you comfortable getting paid while the price drops? Some can and some cant so that is an important question to answer. Its a personal decision and comfort thing.

  5. We are going to have to open at some point.

    Get face masks, ventilators, gowns and tests produced at real scale as rapidly as possible.

    Minimally, we need to protect the best we can, test as quickly as possible and isolate as quickly as possible. There is no reason the United States can not do the minimum necessary.

    This is just common sense at this point

    1. The problem with opening is that not all places are under lockdown, so the virus is still spreading. It has a fairly short incubation period, so the numbers should drop considerably in the places under lockdown by about week 7-8, enabling easier contact tracing.
      As bad as it is, it will get much worse if there is something like what happened in Chicago or Albany Georgia where a handful of infected people went to large gatherings and were responsible for hundreds of additional infections by themselves.
      This is like a forest fire. It will only stop when you take away its fuel.

  6. Tim,
    People in general are getting antsy about the lockdown. We had a demonstration organized by the Michigan Conservative Coalition to demand that the Democratic governor lift the stay at home order. No indication of what the governor will do but I believe manufacturing and some other businesses will be allowed to go back to work early May. The bigger question is will the consumer want or have the money to buy whatever the businesses have to sell? I have my doubts. Stocks can do a V-shape bounce, consumer spending will not.

    1. You are correct. We can open all the business we want. Where will the sales and consumer demand come from? I have serious doubts also.

      1. A lot of folks are losing their paycheck AND their health care coverage. This will not be a V shaped recovery.

        Nibbled into NAVI today and looking to add some more of BRENF (Brookfiled Renewable).

  7. On grid’s recommendatuion I looked t SR-A and bought at 25.62. How much finder’s fee do I owe if I make a profit?

    1. Martin, I know our posts are brief so they may be misleading. Some issues I own for a shameless flip, and others with intent to hold. I never buy SR-A with intent to flip, as I view it as a core hold, and typically a large one. But you know how it goes though… Things start moving and then if it bounces the itch to see if a better reentry point will come on the flip. But I do prefer holding just as a core hold. I like to consider some issues or specific company preferreds as core holds. It keeps me grounded.

  8. Ha, Tim you read my mind well.. And I did! Its my favorite liquid core hold, but it has been so damn easy to flip it over, over and over. If I could trace my original initial 1000 share purchase from last summer, I would bet my cost basis is considerably under $10 a share. Everyone has a core issue they are comfortable holding though through thick and thin and up and down in price. This one is mine concerning the liquid genre of preferreds.

    1. Yea–I know you–you watch these things much closer than I do. When I bought my dab this a.m. the spread was wide so I kind of low balled my bid–was surprised it filled.

      1. Yes, Tim it was very wide for normal circumstances. The best day was that crazy March day. It had an ask of $22 and bid of $14. I threw out $17 and somehow it went off at $16.30. And sold all 500 plus a slew of previously purchased ones over $25 about an hour later. You dont know how much I wish we could do that every day, lol.

        1. I remember that day. I was going to be tied up all day and put in a pre-market bid of something like 19 in case it really got hit. And checking my fills later I was floored to see that I was filled at 16.30 on the open also. I still have those shares. Crazy day.

  9. Very well said Tim. The Federal Reserve can only manipulate financial asset prices to be artificially high for so long. Throwing more debt on already existing historically high levels of corporate and government debt generally ends…. well not good…

  10. Germany ~ opening small businesses and shops on April 20, we’ll see if this expands to other European countries and the US

    1. I have heard from a friend in Munich that the Army was delivering groceries in Germany for weeks since citizens were not even allowed out of there house to go grocery shopping.

      1. Hi. Sorry. I’m German. But I don’t heard of that. It’s allowed to go out for shopping. To see the doctor or so. But, you have to do this alone in Munich

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