Well markets are quiet today–as expected as everyone takes a holiday for the next 3-4 days.
After this year, who isn’t looking for a ‘fresh start’? But we all know that there are high odds that 2021 will hold just as much uncertainty as was presented in 2020.
The 10 year treasury will close the year out around .92%–never making the assault on 1% in a strong fashion the last few weeks–but I think it is coming–I only wish I knew when. I hear all the ‘smart people’ saying it will close 2021 in the 1.50%-2% area, but I know better than to make such silly predictions as no one knows what will happen. With the FED essentially being part of the MMT (modern monetary theory) camp we are heading down paths that have never been explored—well I shouldn’t say never–there was Germany in the 1920’s when Germany hired all the printers in the country to print money. Of course we don’t need ‘printers’–we have computers and a few key strokes will get us a trillion dollars.
So as we go into 2021 the country is laden with ‘zombie’ companies–airlines, the cruise industry, hospitality and lodging–kept alive only by printing helicopter money and spreading it far and wide. Long term most will not be helped by this money–most ‘zombies’ are piling debt on top of debt–I see lodging REIT Ashford Hospitality (AHT) has borrowed $200 million (with options for more) from Oaktree Capital–at the bargain rate of 16%–exactly how this helps a company that was darned near insolvent before the pandemic I will never know–but ‘Wall Street’ has always been able to spin a good yarn.
So we can see as we enter 2021 most anything is possible—cheap or free money cures all your ailments.
Back on a more personal note–investing was difficult in 2020, but I am happy with the 4%ish I earned during the year. Too much cash most of the time, but December ended up being an excellent month and for this I am thankful.
I can’t help but think of the nervous nellies that bought high and sold low. The folks that entered the pandemic fully invested and when the market tumble occurred they sold out at the bottom. It happens every time we have a sharp drop in share prices–unfortunately many times it is those that can least afford it that sell at the bottoms. These folks now have all the money in money markets at .023% interest (I have a little dab still in the Gabelli money market and noticed today I got a 24 cent payment).
It is tough to fight the FED so for 2021 I will be starting off going with the flow–the FED will try damned hard to juice markets every time there is a tiny setback so I have to go with them until they stop. I will without doubt have dry powder, because I am pretty darned certain buying opportunities will occur multiple times during the year–and I will be there.
Happy New Year Tim & to all.
One of the roughest years, for sure- but I doubt that we are out of the woods, for the market, the nations’s finances, or the Covid problem.
For those reasons, I have only nibbled for months, and have 45% dry powder and a good sized list of buys, hoping it can go to work before long. Soon would be nice, but I’m thinking more like 6-12 months to let the problems bubble up even more. The mishandling of the vaccines in this last week, gives a hint at what a huge project this will be, but hopefully, successful by mid-year.
Happy hunting.
Happy New Year everyone. It was a wild and crazy year to say the least, but probably the wildest thing was how profitable it was. By balanced equity-income portfolio was up about 11% with a 3.8% yield. My best holding, even better than AAPL, was the Mandatory Convert IIVIP up 115%. I’ve been using Mandy’s for many years now, and they can often be a great way to play a growth stock with yield. The key to remember is that you are paying a premium to buy the common with income, you have NO downside protection. I’ve built a spreadsheet that shows how the common and convert will perform given different scenarios from flat to up or down 50%. This helps in making sure you don’t pay too much of a premium for that income.
Good luck in 2021 everyone.
Happy New Year everyone, let’s hope 2021 will be much more kind and healthy for all of us than 2020.
Tim, thanks so much for this site. It’s been very helpful and I learn so much from the conversations.
Happy New Year Tim and all contributors…
I’ve now spent 8 yrs investing in Prefs/BBonds, but only the last 3 self directed after shedding an unnecessary advisor. This site remains an absolutely priceless tool..
Thought I had it pretty much down until this year smacked me sideways. At one point in the depths of the turmoil was watching in horror as down over 25%.
Main regret was not having nearly enough dry powder to take advantage. Its amazing now looking back at some of those March/April buys (STL-A for 10.9 ALLY-A for 14!) The problem for me was they were nibbles rather than full on trips to the buffet. 50 shares here, 75 there…if only.
My main mistake was then selling some positions (about 20% of portfolio) on way back up in May, sometimes for a small overall loss in NAV. Was trying to raise more capital for what I strongly felt was another inevitable move back down…which of course never came.
Since then have been slowly redeploying, but still find myself with dry powder in the 30% range.
Overall, 2020 goes in the book as a 5.3% gain, but that maybe the wildest 5% ever earned!
Pretty much the only thing I’m sure about is that my gains would have been way lower, probably negative without this site. Thank You Tim! All the best everyone for 2021
It was 2008 all over again. 2 things to always remember in such markets.
1. Do no harm
2. Swap like for like
I still remember buying mer-p for low teens and I couldn’t get filled order as prices escalated. After it went all the way back to 27 and stayed uncalled way past call date I made a promise to self not to ick around for pennies when dollars were at stake.
Today from dow jones;
Preferred Stocks Recent Price YTD Return Yield
iShares Preferred & Income Securities / PFF $38.17 7.00% 4.80%
Nuveen Preferred & Income Opportunities / JPC 9.34 -3.6 6.8
Qurate Retail 8% preferred due 2031 / QRTEP 98.21 0.9* 8.1
The preferred market, which has been booming, presents difficult decisions for investors weighing risk and return.
Nearly all of the $350 billion sector, which is dominated by bank issuers, trades at a premium to face value.
Currently, preferred securities have little upside and considerable downside if rates rise. Most are perpetual securities, meaning that they have no maturity dates.
Preferred securities issued at $25 a share now often trade in a range of $26 to $28. Yields are generally 3%, calculated more or less to the early redemption, or call, price of $25 occurring in the next few years. Some even have negative yields. Preferred securities can normally be redeemed by the issuer at face value five years after the offering date.
New issues are coming to market with yields of about 4%, down from 5% in the spring. Bank of America sold $1.1 billion of 4.375% preferred in October (BAC Pr O), and it now trades at $26 for a yield to call of 3.2%.
Public Storage, a self-storage REIT and sizable preferred issuer, sold $175 million of 3.90% preferred (PSA Pr O) in November. It trades around $25.50.
One high-yielding preferred that still looks appealing is Qurate Retail’s (QRTEP) 8% issue due in 2031 that trades around 98, just below its face value of 100.
Qurate owns the QVC home-shopping channel and is controlled by media magnate John Malone, who holds about $85 million worth of the Qurate preferred.
The largest ETF, the iShares Preferred & Income Securities (PFF), trades around $38 after a 7% total return in 2020, and yields 4.8%. Closed-end funds focused on preferred yield more, reflecting leverage. The Nuveen Preferred & Income Opportunities fund (JPC) trades about $9, yields 6.8%, and trades at a 3% discount to its NAV.
So 1 of the 12 ideas is pfd…and then tell us they are all overvalued. As if same doesn’t hold true for their other 11 ! I like to track barrons as a kind of sentiment indicator.
If you can boost the returns by trading them it’s worth the risk. Safer than trading common stock they’re a lot less volatile.
Martin, I dont know if we can always say less volatile as March proved they can move more dramatically than commons. But your point is certainly valid as it has worked for years on end for me now (low interest tailwind aside, lol) Trading commons is not even on my radar as I dont have the defined parameters preferreds do. They have the central par price anchor that makes the trading possible. If preferred “A” , “B”, “C” have near similar credit profiles, call dates, sector, etc. they can be traded back and forth based on the price wobbles each direction of near term upper and lower trading ranges. As they generally ultimately move back in sync with each other.
Long live PFF as it is my yearly investment baseline to beat. I love excessively low bars to beat to ensure confirmation bias in my investing skills, ha.
So what’s the deal with QVC paper Grid?? I’ve got QVCD and basically it’s done nothing for me but coupon. You know I stick w 25 dollar paper and avoid 1000 pfd but should I check into qrtep too? Always did well with malone companies
If You Prefer, You partially answered your question, your dealing with a John Malone company and he does things differently. Sticking to big picture what has went on is not surprising concerning the bonds. When a company starts receiving incoming cash flow (at present years pace, enough to totally buy up entire common stock float in 3 years) it can do one of two ways, deleverage (which benefits bond holders) or reward common stock shareholders.
Clearly they are doing the latter with not one, but two $1.50 special dividends in short order and rewarding shareholders with a freebee 8% term dated preferred stock. So really in essence the benefit has went to the shareholders.
Qurate has largely been floundering until Covid hit and has benefitted immensely from it. Management is trying to take advantage here and get the ball rolling again both through ecommerce and catering to a more diversified core group of customers. This is where future of company lies. Can they consolidate the gains going forward? This is where the question lies and for which I have no answer as I have no insight to their progress if any.
Covid will be around for a while, so I feel I have time to let things play out and maybe sell some shares later. I consider this personally a higher risk play so its in my high risk bucket and treat it accordingly. And when doing that one must compare it to issues of that ilk, not Alabama Power.
That being said your note should be (I havent researched) a subsidiary senior secured note of QVC not the holding company which in effect is a positive. The preferred is a holding company (Qurate) issuance and responsibility. Though the debt issue you have has a considerably longer maturity than the preferred it sits in a better position under QVC not Qurate and higher cap stack status. As far as buying the preferred in addition to debt, I would be wary of any overexposure play doubling down.
To use NFL vernacular, one doesnt know yet if its a 3-0 rabbit out the gate, but ultimately will wind up 6-10 and out of the playoffs. Unless of course you are the 6-10 NY Giants and the Washington Football Team loses tonight and they actually would make the playoffs, lol.
Thanks a lot. I build positions… so am always looking for who to keep on a potential buy list. I think my first exposure to John Malone was TCI communications making a move to buy out Bell Atlantic. They issued 10% pfd. I put in for 10,000. I meant dollars. Got an email “Congrats on big deal” …I had purchased 10,000 shares!
Anyway the Justice dept pulled biggest bonar of all time and ruled against merger citing monopoly. To this day I still don’t get that.
And to quote football analogy …
“The ball don’t lie”
IYP, You certainly have a long history with him! I notice with your QVC note they intentionally keep their coverage ratio at around 2.5, and will let the holding company run with more leverage. So that is a positive for you. The preferred is on the rise today I see.
here’s an “anomaly” to start off the new year. I mentioned this issues in October. “USB-H” plus the newly issued “Q” and the common all yield essentially the same. I know it’s now ex-dividend an price should dropped Monday, but I’m holding my breathe it’s not setting up for a call.
2020 was good for me..my barbell approach to my portfolio was successful in protecting my capital and earning a very good return. I looked outside the US for the first time in years and found some good buys. I have a lot of dry powder to put to work..about 80%..but remain cautious w mkt at all time highs and yields low.
With SA making drastic changes to free content access and pay for contributors causing many to leave, I look forward to sharing more here on Innovative Income Investments!!
I have recommended the site many times to good commenters and contributors and see them here. Hopefully in addition to pfds/bb bonds/CA ideas, that leads to more REIT, Common Stock shares and participation here if Tim feels comfortable with those ‘chats’ and ideas.
Thank you Tim and all commenters here for your shares and a prosperous and healthy 2021! In an ode to the past, here is to “Yield Hunting”.. memories of one of the best idea sites of the last 20yrs. Bea
I second this and am moving away from SA. I have shifted to more of an income mindset, and then watched the cap gains go crazy, but I missed the boat. Still can’t buy the high flyers – I just dont get the ROI regardless of the idea the market PE goes up as the interest rates go down. ~2% down and 40% up!! So, picking pref’s and some bonds – they’ve done well. But having to shed them as the gain is well past the divvy to be collected. Making new investments tough. I welcome ideas!
Happy 2021 to all !
Many thanks Tim for this great website and all the smart investors that share their thoughts and recommendations.
Wishing you and everyone a healthy, joyous and prosperous 2021!
Gary H
Happy new year everyone. Don’t fight the Fed. The trend is your friend. Buy the dips and sell the rips. All of these work in bull markets. When the Fed inverts the yield curve many years down the road it will be time to turn out the lights, the party’s over. Until then, party on! ATB.
Good Morning and Happy New Year to everyone!
My big investment regret from 2020 is having essentially no exposure to tech stocks. Even lost some money trying to short a couple. But if I thought they were overpriced last year…..what to do for this year?
Every so often I have to be reminded to play in the sandbox I know (income securities) and stay out of the one that bullies me.
playing mostly in retired brokers sandbox(Income securities) Finished my final look at 2020 results over 4 accounts this morning. Like Tim I posted a 3.92% return year over year and although not earth moving I’m satisfied. based on my “super conservative year end asset allocation”, as follows common stock & mlp units 11%, Div etfs/cef’s 6%, prefferred stock 8%, taxfree and taxable muni’s & mutual funds 42%, fixed annuity 5% and 28% Dry Powder plus checking with SS direct deposit for living expenses, that is the gravy an basically the wife” domain. Tim touched on this and its what concerns me the most. I’ll include https://www.usdebtclock.org/ Happy New Year to all
RB, I’m an income investor. I don’t ever want to be looking at my portfolio trying to figure out what to sell to pay this month’s bills. The portfolio should have spit out enough cash to just write a check. That’s the theory. So far, so good, 15 years into retirement. My approach to tech since they’re notoriously low yielders is to put money into BST, a BlackRock closed end fund dealing with science and technology (and some financial applications of same). They sell calls against their holdings to force a decent yield. (4.2%). Not generous but it has come with a sizeable capital appreciation. And at my age, even if some return of capital finds its way into the yield, I don’t mind. Happy New Year everyone. Next year has got to be better.
Vin
Best has certainly been a winner. But the same team also manages and open ended fund BGSIX which has done even better. It does not sell covered calls so that the yield is much lower but the total return is higher. You might want to take a look at it. All the best to you and other posters on this board as value the chance to learn and exchange views. SC
Tim and all of you here: thanks for the thoughts, perspective, and generous knowledge sharing. Here’s to more of that in 2021.
Yes there will be buying opportunities. Unless they’re the beginning of a major crash. I still don’t know how to tell the difference.
My accounts and my wifes accounts are all up 10-25% except one where I did some hedging against a second crash. I played the March crash well, lots of arbitrage trades. Couldn’t keep up with the price drops, then when the rebound happened my profits started showing up. Then I turned cautious way too soon otherwise it could have been a huge year.
Tim, thanks the daily insight provided on your website. I have so much respect for the many knowledgeable contributors. Wishing all a happy and profitable new year. (It will be for me if I can get rid of several loser energy related MLPs.)
Thanks to Tim and to the many contributors who help those of us less experienced in the way of preferred stocks. It is much appreciated and this is a great community.
Thanks to this site I went from 3% of my portfolio in preferred stocks to 14% during the year. Most if not all were researched here.
I feel like 2020 was a constant battle – at one point my net worth had dropped 10% and I finished the year with a 2% gain and a lot less hair.
Onward to 2021. Happy New Year all.
TIM, Thanks for having such an informative web site. I have been following you for many years.
Have a Healthy and Happy New Year, STAY Safe.
Thank you Tim and happy new year!
I turned one position from 75,000 to 3,000 or so in less than two weeks. Went from par to less than 3….and back, close to a full round trip. Now 70% up 3 to 9%. Other 25% up 25%.. Five percent down 10….
I can tell you there was one bad night…..
Indeed, quite a year. Some good, a pretty fair amount not as good, but we’re blessed to have a rebound like we did. As others have said, thanks a whole bunch to Tim — this is educational, and often profitable. 🙂
HNY & best wishes for 2021…
Happy New Year, Tim.
Happy Investing to All.
Here’s to a healthier ’21.
Happy New Year, Tim, and thank you as ever for your sensible commentary and this wonderful site. Wishing you and the whole III community good health, strength and clarity in the year ahead.
Happy New Year Tim, and thanks for all your efforts making this a great site.
Tim should have put this in ” sandbox”
Tim should have put this in “Sandbox” but what the hell? My wife and I walk everyday and we’ve been seeing thousands of “sandhill” cranes since around thanksgiving feeding in harvested corn and soybean field along our walk. Looks like “SUNDAY MORNING” WILDLIFE footage ON CBS everyday.
thought I’d share with new friends and thanks to Tim, and Happy New Year to all
nice, thanks for the image.
You must be hogging all the sandhill cranes where you are this year, Mike . We haven’t heard, (and, as you know you hear them before you see them), any sandhill cranes this year in Eastern Tennessee at all and we normally have them visiting by now as well… Maybe they know the annual cranehill festival in nearby Birchwood, TN is going to be virtual only this year and in protest, they’re not bothering to show up – https://www.allaboutbirds.org/news/event/30th-annual-tennessee-sandhill-crane-festival/
2WR We have them every year with more showing up each year. Its like a “marriott” with an all you can eat buffet for migratory birds in our county in southern Indiana, There’s also a Wildlife refuge with 2 lakes, smaller ponds and several thousand acres of wetland about 6-8 miles from my house looks just like there summer nesting grounds in the Dakotas. They usually stay as long as the grub holds up and there’s no snow. For those not familiar there like a 25# turkey on stilts. Will send some your way. Mike