I continue to focus on economic data–I need data to make my decisions on investing. For months I wrote that we would not see a Fed Funds rate cut in March–the data simply didn’t justify a cut. I stick with my opinions on March and honestly thus far see no reason for a cut until summer–but there is so much data yet to be released a definitive statement can’t be made. I continue to believe that employment will be an important component to interest rate decisions–and there has not been ANY employment news that has screamed ‘rate cut’. Always–we’ll see.
Equity markets are quiet again today after ending some lower yesterday. Interest rates this morning are at 4.27% (10 year treasury)–just pretty well stuck in this 4.2 to 4.3% range and that is fine as far as I am concerned. With all the March and April CD maturities I have higher interest rates give me more options for potential investments. I wrote yesterday I had a modest CD mature–and I simply rolled it over into a 3 month 5.35% CD–no muss, no fuss.
A couple topics I want to get around to looking at more closely in the week ahead is a history of CHS (Cenex Harvest States) and their massive preferred stock issuance which was meant to fund a nitrogen fertilizer plant in Spiritwood ND. A failed plan which resulted in the CEO getting canned—I love CHS, but there is history. I first wrote on CHS preferred stock in 2008–I wish I could access some of those original articles–but alas, they are long gone with the Yahoo Sitebuilder platform I was using at that time.
Also I want to try to hone in on business development companies (BDC’s)–as can be seen on my ‘laundry list’ page I own 4 different issues of BDC bonds and I want more. From most of the earnings releases these company’s are doing just fine–flat to rising net asset values, minimal bad loans etc. I don’t want to own bonds of the best BDC’s I want bonds with the best risk/reward proposition. Both Midcap Financial (MFIC) and New Mountain (NMFC) reported last night as posted in my headlines of interest last night–not perfect earnings but solid.
Well let’s get the day rolling and see if e have market movements or if we just have a comfortable flat day.
Tim, if you remember the plant cost was escalating out of in control. So instead of building the $3 billion and more each day plant, they instead invested in $2.8 billion in a minority ownership in CF Industries Nitrogen LLC. So they in essence spent the same amount of money into a company.
https://www.northernag.net/chs-backs-out-on-building-fertilizer-plant-in-north-dakota/
Tim ..When the banks give 5.35% CDs there buying, Bonds and Preffered for 7-8% and keeeping 2-3 % for themselves.. Georges
Tim ; I see lots of people are chiming in to say ; “yes I have some BDCs and they name them. the only one I saw that was a BDC was TPVG ; all the rest are BDC Notes ;
Tim I’ve added several names in the past couple months to my BDC holdings
GBDC GLAD FDUS NMFC PAX ; sold HRZN ;
long time holding ARCC I consider a Core Holding; this is one ‘to dip your toes in the water) for anyone wanting wanting to enter this space;
also adding to a long time holding CSWC
Tim,
I hold a few BDC’s, CSWCZ, TPVG & SAJ. There are so many doing well now I decided to take the easy road and bought shares of BIZD, an ETF BCD index fund with a yield around 10% and they hold 26 BCD’s. I think that will be the extent of my BCD holdings as they seem to be very interest rate sensitive.
Bill S – I just stick to the baby bonds–want the priority position in he capital stack.
Tim, for what it’s worth, re BDCs, I hold CSWCZ, RWAYZ, CGBDL, and SAZ and like them in that order, holding the common of the first two as well. I got them all around par. At the current price, I would get more RWAYZ if I didn’t already have plenty. I wish I’d gotten more CGBDL at the time, but it quickly slipped away from me. I see you’ve already got CSWCZ and SAZ. I’ll be interested to see what your research leads to.
WKF–I don’t do super deep dives–watch NAV and review for bad loans etc—like to know there leverage also–but of course they are all levered.
Picked up more EICB today at 25.02. Gives me a full holding.
WKF I sold my SAZ Tuesday for 25.19 look to reinvest in a better BDC note or preferred.
I agree there are better BDC baby bonds. Those I’d prefer are generally too far above par for me, even ex-div. I’d be interested to hear what you’re looking at.
WKF I am looking at the chart in this article as a starting point. Scroll down about mid article to the chart showing non accrual loans of each BDC
https://seekingalpha.com/article/4660349-ares-capital-40-plus-big-yield-bdcs-compared
It’s looking like interest rates are going to stay higher for longer, at least that is my personal opinion. The rate relief that borrowers are hoping for especially on floating rate loans maybe farther down the road. With spring coming there will be a possible pickup in the economy making it harder for the feds to justify lowering rates. BDC’s non actual loans and defaults will go up.
The chart is out of date since we are in the first qtr. of 2024 but if you extrapolate the chart You can expect a rise in the problem loans for most of these. The author notes some of the BDC’s sold holdings so their charts might be deceiving, But another way of looking at it is they are being pro-active and getting rid of their losers and reinvesting the money.
An example here might be HTGC Hercules Capitol which in looking on Quantum on line has a baby bond HCXY been nice to have picked it up last Nov 23 at a 6-1/2% yield But is that enough? Not sure, But the return on holding to maturity would be a nice Capitol gain. At the current price of 25.05 It’s not a compelling reason to own.
Tim,
I found the dividendyieldhunter site on the wayback machine archive.
Saved 353 times between October 23, 2006 and October 31, 2023.
https://web.archive.org/web/20240000000000*/http://www.dividendyieldhunter.com/
What was the uirl of your old yahoo pages? Maybe we can find it.
Eladio—funny I was on there early today digged for some original articles–they would be back in 2006, 7, 8, 9 way back. I don’t even know there original website address it waws so long ago.
Tim; Like You I too own one of their preferreds. I own their CHSCL which befuddles me “somewhat”. As I type this its trading at $26.17 and is callable on Jan. 21, 2025. Now if you do the math it really makes no sense to be trading this high. I spoke to their Treasurer just the other day and they are very non-committal about if they will or will not call it. So I guess people are either betting that they will NOT or option B they are not doing any homework on call provisions. I truly got lucky as a few months back when it was down to $25.17 I loaded up on it bigtime.
The yield to first call that I compute for CHSCL is pretty unappealing at today’s price.
A decision not to sell is basically the same as a decision to buy at the current price. CHSCM is out there and it’s trading a lot closer to par.
i sold the chscn yesterday.
hope to buy back after div.
closer to par
bob,
CHSCN and M are now fixed perpetuals until redeemed at 7.1 and 6.75%, respectively. At current prices the N is 6.82 and the M is 6.65 but is not as high above the 25 call price vs N. Little chance of either being called as the L is a higher rate. Plus CHS didn’t commit enough money to the buyback to be able to call any of them completely. They can start by calling the crazy high CHSCP if they want to do something logical but again I doubt they’ll do that.
I have a full position in a mix of N, M and L purchased a few pennies above 25.