Finished our Buying For The Week

I picked up the CMS Energy 5.875% baby bonds (CMSC) and also the Spire 5.90% perpetual (SR-A) this morning–I had to pay more than I hoped, but I guess given where they were at yesterday it should have been expected that prices would bounce.

The DJIA gains are fading now-up just 189 which is a long way from the plus 1,300 gain on the open. That is fine–we got a good deal of issues purchased yesterday (although just in starter position quantities) so now we can be patient.

Right now I am up around 1/2% on the day–things go lower much faster than they head back up–pretty normal.

Over the weekend I am going to start looking for perpetuals that are of mid to high level quality.

I am thinking (without study this morning) of mREITs (probably Annaly, AGNC or Two Harbors), maybe American Homes 4 Rent (AMH) issues–just don’t know until I go through the list with fine tooth comb.

So for now I am hoping we are by the ‘crash’ type markets falls and will start to move into the slower moves lower (in stocks) as companies in the weeks and months ahead start to fess up to the damage being done by Covid-19. Given that I think we will likely move into a recession later this year I believe common stocks may be too high yet–but who really knows (they why I don’t buy many common stocks).

71 thoughts on “Finished our Buying For The Week”

  1. Are the markets going to remain closed Monday? Will they use Corona virus as an excuse to prevent an epic crash in the morning? Wouldn’t surprise me one bit.

  2. Just sitting here listening to Powell and the boys at 6:27PM. D J futures limit down 1,242 points. The way I see it investor psychology truly has been killed among millions of retail investors. This does not heal once it has been destroyed. So if you are thinking once a vaccine is created all will be well then you are living in an alternate universe my friend. The bankruptcies will come out of left field and will surprise many. When everybody is staying home and not spending there will be casualties.

  3. The Fed went all in. Cut interest rates to zero- 0.25%, $700 billion in QE. Flop goes the market in response. I guess people realized that the virus will not be cured by lower interest rates. Is anyone really going to buy a car or a house at this time because the interest rate went down? Are businesses going to hire more people becuase of lower rates? Quite the opposite, layoffs are going to skyrocket short term and a recession is all but guaranteed. THE issue is the virus and until we get a coherent and coordinated federal response to the health problem in addition to a fiscal response the market will be volatile and likely keep dropping. The virus news will only get worse over the next few weeks but once we are past the virus scare I believe we’ll have the mother of all rallies in anticipation of economic recovery funded by the newly minted QE. Meanwhile, be careful and pick your spots on what you’d want to buy.

  4. This is a time to scrutinize and re-confirm one’s own personal commitment to their very own plan. I have leaned on my plan automatically for decades. The underlying tone is “Bloody Fiscal Conservative”. We have four general tranches we built toward when we retired three years ago:
    – Near term monies/expenses: pension pays, Soc Sec, two-thirds of income generation from taxable sources with the other third of investment income going back in to compound and be reinvested.
    – Taxable funds can be put on an “Annuity Schedule” by age 65 or thereafter with principal whittled down too. Let it become consumed.
    (As a side note: Our situation allows for addition to taxable funds from the sale of two pieces of real estate which we will not 1031 or retain real estate, pay tax, but add to taxable funds and maybe soon. Every plan is different)
    – Ten year monies, Now Trad IRAs are up to 72
    – Roth funds seen as fifteen year funds or blended with IRA RMDs.
    – Oh yeah: Remember it is a terminal plan. Joy trumps fear.
    Each tranche can fulfill its function and forces basic diversification. Living way below our means has worked so far.
    I think somewhere in the back of the American Mind is that things ARE different this time. It’s been a weird twelve years. Scrutinize your plan, stay conservative, buy low, leave room for time to heal any mis-steps and enjoy the ride.
    PS: Swear off CNBC!

    1. Fully agree 101% with Joel A. I will just say this I’ve been investing now for well over 45+ years and have been a student of the market and avid reader and researcher all of that time. Yes, I certainly am ancient. LOL I will just say that in combing thru all of my “watchlist” today and looking towards tomorrow and beyond there are some truly incredible bargains available for those that have the extra cash in tough times like these. Even the blue chip names have been thrown on the bargain bin. Obviously, your time horizon enters into the equation as well. In 5 years or probably less we will look back and many will say: “Damn why didn’t I buy —–“. And lastly remember where interest rates are headed. The operative word is most likely ZERO. Thats why its imperative for fixed income investors who really rely on the income to be seizing the moment at hand.

  5. With the fed bringing out the bazooka we started a bounce Thursday night in the futures. How high we bounce remains to be seen. I plan on rebalancing again into this rally as I think we will slip into a shallow recession as the world shuts down. QE4 is here but it doesn’t solve all problems as we know from ‘08 experience. It seems the cure for this problem is worse than the virus. This shall pass, have faith.

  6. My son is with Costco corporate in Issaquah, WA. I swear I could see a few more grey hairs around his temples this weekend!

    1. My wife is with Costco, sales are way up on essentials due to panic buying, but state of Oregon asked them to limit food courts and may do more since restricting large groups. All events and museums, shut down. May be a shorter vacation than I planned.

    1. For any particular preferred stock or bond, the details regarding when the issuer can redeem the security are included in the prospectus. Typically (and there are lots of exceptions) there is a date around 5 years from the date of issue, and after that it can be redeemed (called) anytime for par value (sometimes par plus 2%) plus accumulated interest.

  7. My two new buys this week were Vereit 6.7% preferred F shares (VER-F) and Schwab 6% preferred C shares (SCHW-C). I will add to these positions over the next few months depending on how volatile the market is. H/t to whoever mentioned Schwab recently on this forum. I also added to an already overweight position in Tsakos Energy preferred C-shares (TNP-C) which (incredibly imo) briefly fell below $23.

    Also took profits in some low yielding newer issues (BAC-M, ETR-I, and PSA-I) to help pay for the new spending, so there’s still some dry powder left to spend. Time will tell if that was a smart thing to do.

  8. RLJ lodging just filed an 8-K. They are amending their stock repurchase plan to include the possibility of repurchasing preferred shares as well. SMART. That is a very high cost of capital that they are not able to call and if they can capture some of the discount it is much better than buying back common stock.

    1. Love some additional color here but this feels like a binomial outcome. It’s cumulative so as long as it survives you are buying into a 10.9% perpetual yield. If not, the whole things a bust. Bought 225 shares but thinking about picking up more. What I haven’t found is the debt/equity. Thoughts?

      1. Latest 10k: BV of assets 4.6b + 880mm cash vs. debt of 2.2b. EBITDA of 429mm vs interest expense of 91mm. Cash flow from operations 400mm. Preferred dividends only 25mm and common dividends were 228mm. If cash flow from ops cut in half say, they still are servicing their debt, could spend modest capex (bare maintenance) and easily cover pfd dividends. If it gets a lot worse than that we have more things to worry about. Only lodging pfd I would buy now is rlj. Happy and safe investing.

          1. People can get nutty on these things and if panic continues they could easily drop into single digits. Just like many did in 08-09 crisis. I suspect there will be a total crash in hotel bookings. Delta just said the next forward four weeks have had negative bookings… Unprecedented. Cancelled bookings more than bookings..And they are shedding 40% of their routes. And Delta is considered one of the stronger airlines. RLJ preferred will definitely be a battleground issue for a while.

            1. Q4 OpEx ex D&A was $270mm. With $880 of cash they can survive a couple of quarters with $0 revenue.

              1. 730, I wasnt suggesting they wouldnt or even couldnt pay. I was just commenting on panic and its effect and even into the market of preferreds. One might need to brace for significant movements that could be worse than past week. You get one hospitality reit to reach the brink and its quite possible they all get thrown out into dumpster…Ala, the MLP sector as a modified present example.
                As an example, the 08-09 crisis, it was the banking sector as ground zero, like hospitality could be today..In that scenario, basically all banking preferreds cratered 75%- 90% from “par” despite many banks being in great shape. During that time the utilities which were not ground zero were pulled down in 25% range.

                1. Grid, I am in your camp on this. I remember Citibank going down to $1, and GE suspending their dividend in the great recession. There are lines to get into all supermarkets here in Los Angeles for what little is on the shelves, and the entertainment industry is shutting down. Never have seen this before. So, unless a vaccine is announced, or the trajectory of cases is reduced, the panic will likely continue. This forum is for investors who want safety and dividends. Unless this ends in a month, there are going to be bankruptcies in the travel sector and others which will likely take down preferred stocks also. You have to look at the balance sheets for cash, and know that the company will still have sales. Many of the REITS have balance sheets for good times, but will teeter on the edge under these conditions. Utes are sounding good right now at reduced prices.

                  1. Don, that is just crazy! We got plenty of food around here, but everybody around here has an infatuation with buying every roll of toilet tissue available even the dreadful 1 ply.
                    And your post resonates with me. Most people dont know how to totally synthesize balance sheets, profits, cash flow, leverage, and debt walls. They get some right but not others, and it proves disastrous when chasing high yields and blind sides them. As they dont quite know everything they need to know. I know I sure dont….
                    But by hook or crook the utes are gonna get theirs. You cant even kill the PCG preferreds. The 6% issue hasnt paid in 2 years and is still trading way above par today, Corona or no Corona. It is going through its second bankruptcy in 2 decades and the preferreds will get paid again yet in full. One will get zip from just about any industry preferred that goes belly up.

                    1. Grid, maybe everybody ruminates all weekend about virus and whammy stuff gets stranded Monday. I closed profit flippers Friday for more cash. Maybe I will wish I closed everything out. I think (bet) lots of rollercoaster ahead so people who get scared better just cover eyes now, lol. Everybody wants toilet paper but for me it’s cash.

                    2. P, I dont disagree with you at all, and in fact I 100% agree. But for me, I got to stay invested and if I see a buy opportunity I will get it at the expense of selling for a loss to improve my standing..
                      I would love to sit on cash now, but I would be a horrible timing reentry person. I would wait too late getting greedy, or chase something out of my self imposed limits. if Ute A drops a buck, but Ute B (same credit quality) drops 2, I will sell A to buy B. And in long run make money off of losing money, ha.
                      Certainly not as profitable as holding cash for reentry. But I just dont have those entry reentry points pegged down and dont trust myself. As Barry Sternlicht said Friday. Whenever this is all over and markets are settled down people are going to be back at the same problem. Needing yield in a no yield environment. So one just really needs to make sure they own things that will still be viable to pay yields after the carnage is the most important thing, ha.

                    3. P and Grid, Knowing nothing about timing the market, I’ve been averaging down by adding 10-20% to existing positions at laddered price points. Prices that had previously appeared unattainable have been filling. Also initiating new positions in some, others aren’t there yet. Key I think is only do this with issues that one is willing to hold indefinitely.

                      In a yield-starved world, the snap-back from this price downdraft has the potential to be swift and permanent for the better balance sheets.

                    4. I agree probably it wasn’t clear. Not unusual. I meant close all trading positions. Some I left open Friday. I am staying invested with core holdings. I just don’t want trading cash all stranded out of the money needing to sell losses to buy and that can happen. I don’t care much if market goes down I just try to go down less. Bigger the delta the better.

                  2. Don, 35 miles NW of you and semi-coastal. Supermarkets are stripped – some aisles look like the shelfs were just installed because they’re 100% empty. A well-placed source inside LAPD indicated they’re prepping for an expected LA lockdown.

                    I agree with you re the travel (and other) sector. If they don’t fail, many weaker players will be takeover targets for pennies on the dollar. I think we’d be correct if guessing the board-room lights are on in many companies this weekend variously making survival, merger or takeover plans.

                    1. Alpha, we went to dinner with a couple last night. My friends wife said her grandma (who is a bit long in the tooth and starting to embrace hardening of the arteries) went to Walmart this weekend in a neighboring town. She told her. “Walmart is going out of business and I dont know why”. She had to explain to her Grandma that Walmart wasnt going out of business and why there were so many empty shelves.

    2. RLJ had $880 million of unrestricted cash on their balance sheet as of 12/31/19. I know they were planning on calling $500mm of 6% unsecured notes which were callable at 103% on 6/1/20. The notes are due 6/2015; however its probably of better use to buyback the preferred at a discount.

    3. That’s actually fabulous news. And smart on their part. Frankly I’ve often wondered why more well-capitilized companies don’t do this. The 8-K says a lot about where they see this going. They operate premier properties which based on history – should recover fully when the current crisis settles down. There may be a few tough quarters but risk-adjusted the shares appear to be a bargain. Not sure I’d be a big buyer here but not selling a single share at a loss. (famous last words)

  9. An up day. Not bad, but I don’t think we’ve seen the lows just yet. I have a shopping list of issues I want to add to or start new positions but I haven’t bought anything yet. I sold a couple of bond funds. The disruption to the economy will be massive.

  10. Tim and all:
    since this is my first post here, I wanted to thank you all for the many great contributions – and ideas I got by reading silently along over the past few months.
    The spreadsheets with updated price in-/decreases are terrific and allowed me to grab some RLJ-A yesterday and some NLY-G today – in both cases lowering my cost basis significantly.
    Keep up the great work!

    1. I too want to compliment the contributors and organizers of this site. Thank you.

      IMHO: we won’t see peak virus for several weeks. Ohio just stated they est 100K infections (1%) and see that growing for weeks (most docs est mid April+ in the articles I’ve read, such as: http://www.cidrap.umn.edu/covid-19). I nibbled on several preferreds (I think the banks are safe in this crisis), but also took out a good position in SDOW for a hedge. I hope I’m wrong, but I don’t plan to back up the truck until ~15K DOW – I’ll average in on the way down. I’m a long term bull and I’m almost salivating at this once in a dedade opp to get some quality income positions. Thanks again to all contributors.

        1. Great! Now will y’all kindly stop buying up all the TP & Purell?

          But PLEASE keep selling your EPD. Thank you very much. 😉

          JMO

          1. Camroc, if toilet tissue and purell run low in your area, just think outside the box. I betcha your local Ace Hardware or similar type still have them.

        2. China isn’t testing people in the locked down areas. New cases are only being reported from other areas.

  11. Bond funds have gone parabolic and are reversing this week, TLT -IEF. I would be taking profits or trimming imho. ATB.

    1. I agree, I sold all my bond funds In retirement accounts about a week ago. Thought it was a no-brainer, refuse to own them at those crazy rates and they had spiked. Luckily built up a solid cash position before plunge and have moved a tiny bit into overall stock indexes. Will keep adding there, though slowly. Been adding Preferreds too, no-brainer in my opinion if you have a long-term horizon. Some really solid high yield issues getting absolutely devastated due to forced selling in ETFs, CEFs and leveraged products. Just be selective. You will kick yourself at some point not taking advantage of these yields in this low rate world. JMHO.

  12. CHSCO is paying ~7.7% but you get a $.49 rebate if you buy today. I don’t like that company so only bought a little. Lots of other people like it so maybe they will buy it from me later.

    1. CHS thru put oil stock should get a lot cheaper for them, especially in US and if they were naked forward prices. Should get to their bottom line. This past few months has been a good time to hedge for commodity producers and users. Prices were much higher to sell, now they are lower to buy Just like any buyer or seller…when and how much? Speculators are the liquidity.
      I bought CDE in IRA after reading up on their year forward, no cost, collared hedging positions first. Da’cheap! I like a dabble of commodities this last week, global players with highly wrung out balance sheets, some big oil and BHP/RIO/PICK types. They have been thru EVERY bit of BS for decades and survived the swings and decent options plays too for me. Not many prefs in this sector. Never really know since the rules are like sandlot stickball now.
      Flushed up some SR-A and all of CN reset positions. Now to go fishing. it’s Spring.
      I hope everyone has been able to sleep well. Live long and prosper!

      1. Joel, I went fishing Tuesday with the neighbor “kid” who had been bugging me. Took him out in my drift boat. I only hit one rock (barely) all day but he got all excited (scared). We were lucky and caught some fish and he forgot all about hitting that rock. Now he wants to go again.

    2. P, They sold off sharply yesterday end of day, and I grabbed a basic position at 25.35. Probably will just hold them.

      1. Grid, I bought lower quality on average today than yesterday. Today I had 24 buy or sell transactions the last one being AHH-A around 7.9% at my purchase. I flipped this one after IPO for a nice gain. Not very liquid though as someone just discovered. Yesterday I had 47 trades. I like free trades. Some days I don’t make any trades. This was a rough week I think everybody is bloody or a liar. Of course I am still bloody too. Market started patching me up nicely today though. I’ll survive it. I think I got some deals out of it

        1. P, I think when the dust settles, those trades may prove my profitable. AHH-A was one I bought and sold for a quick 50 cents a few weeks ago. I track it and it has had a delayed drop than others had. Its got my interest also. I just dont know if market is sending it to yield levels of other rocked reit preferreds or not. As I dont quite know the exact credit quality and what it category it is being lumped into. As it is a bit of a different type real estate reit.
          Personally I like your thinking though.

          1. Oops, need to correct…”your trades will be more profitable”. Have no idea what my profitable means, ha.

  13. Sold more of yesterday’s buys. Bought some AEL-A yields 9% BB rated and some UBP-K yields 7.5%. I don’t know if those are cheap or it just looks like it to me.

  14. Gabelli’s GGT-G & GGT-E have the best YTC of 6.48% & 6.18% on offers of $23.90 & $24.66. The other Gabelli’s don’t come close. All the Gs have about the same cash yield (5.25%-ish)

    EFC-A at $24.70 (plenty offered) has a yield to float of 7.43%. (10/30/24) if LIBOR is zero perpetual yield becomes about 5.32%

  15. Tim; Just another suggestion for you if I may. Sometimes, I will see a comment about a specific issue and I will ask a question to them. But many times I don’t think they even see it and hence they never make a reply. It would be nice if there was a way that they would get an email or something so they know they have a message waiting for them. Over on S A you can send a message to someone, etc etc. Thank You.

  16. Tim, Pricing movement aside, Laclede (Spire, or whatever they want to call themselves tomorrow) will be solvent and around longer than you and I will be.

    1. Spire is one CorEnergy’s customers and factored into my buying some CORR-A today.

      I’m hoping the payments they receive from Spire are enough to keep the preferred dividend going. Who knows though.

      1. CORR-A might be the most mis-priced preferred out there. Preferred divvy is $9mm per year and they have $121 cash and $137 available on the revolver. Virtually $0 net debt, the revolver is good through 2022 and the only Notes are due 2025. Very hard to see how there is any risk to the preferred anytime soon.

        1. Thanks Jacob and 730,

          I own CORR-A at just below par, so hope you’re correct. I’ve hesitated to catch this falling knife but I will took a longer look this weekend to see if I should add to my current position.

          1. I share your pain; i bought at 24.50. Its hard to throw money in that direction after losing so much already.

          1. Aarod, Lol, Its of no interest to me. Laclede will be paying long after those programmers who entered their dubious formulas are under ground. 🙂

              1. Aarod, BTW, I should add so others dont think I was being snarky with you, we correspond frequently off another forum PM service.

      1. Steve, I looked but dang I would have to sell something. And I dont need the adjustable PP offers, and I dont know how long CBKLP lasts after the dust settles. I got good quality bought that has similar yield with better cap appreciation potential and longer duration protection. Certainly great issues and good entry points no question.

  17. Trump today is declaring a National Emergency and most likely will inact the Stafford Act. Just now on CNBC. I did all my buying yesterday in a whirlwind day. Bought 4 things and sold 6. Wanted to kinda clean up some things that I just didn’t feel all that good about. Even bought some AAPL common yesterday. Over time I know these things will come back up. Big money gets made when everybody is throwing the baby out with the bath water.

    1. Not a fan of an unscripted news conference at 3pm on Friday before a 2 day market close no matter who the President is.

    2. Chuck P, Totally agree. For whatever medium, the best transactions we’ve made over the years share one commonality; they all occurred when the over-leveraged or panic-prone were selling. Been net-selling unreasonably low credit spreads one issue at a time over the past few months, but have been buying preferreds every day straight thru this eco-storm and only sale was a two-day flip of CNLHP for +.64/share. Focused on the income, never looked at (intentionally avoided) account balances and zeroed-in on the individual issues. It’s been an incredible opportunity to build-in and average-down excellent preferreds.

      Now, as for RLJ-A and the couple of common share purchases (XOM comes to mind), I’m tying myself to the whipping post. Good good thing they were starter positions. lol

      1. Alpha, we had a nice little bounce back today. Surprisingly very unmoved by the losses, or thrilled with todays gains. Just glad I got high quality issues and was able to sell some things at losses to get better issues that had dropped more and increased my yield. Flipping if its available is fun and fine. But the core essence for income issues is there ability to pay through good times and bad.
        I admire the high yield buyers as they are extremely volatile. And my distrust of their balance sheets would cause me angst with prices cratering than high quality ones dropping.
        Steve, made me think and ponder, and I did buy a small amount of CBKLP at $97.50 before close. I only did one foolish thing today. I bought 200 more EP-C at $41 today. That one made me more nervous than loading up for bear on SR-A yesterday on sell off.

        1. Grid, I think you’ll be a winner on EP-C though have to confess staring at it today, balked and never threw the pitch – mostly because I already have enough and I can wait. Like you said, issues that looked decent a month ago – now look terrific.

          We waited a long time for this “event”. Like you I am very focused on balance sheets. Our account values may be dinged, but the income is up, duration increased, quality increased and base position improved. I was fully loaded in CBKLP, though did add or add-to CPKPP (missed that $80! trade), NRUC, AGO-F, DUKB, RZB, ENO and PSA-H all at what I think we’d consider “normal” pricing – which we haven’t seen in a long time. Depending on how we look at it, I’d count the last week or so in the win column.

          1. Alpha, I think so also. Solvency for 8 years is the only concern. I saw that 7.5% ish YTM this morning and bought more, ha.

            1. Much as I was tempted to buy some CMSC jewel found by Tim, I really have no appetite of selling either now considered junk such as RLJ-A (obviously currently faced with EXTREMELY poor quarter no matter how big cap RLJ is), or Rida Morwa type of assets (CLNY-G, the 7.5% coupon which I acquired at IPO bewildered why this Company with no obvious need to issue preferred, always having greedy CEO including the current Tom Barrack, Jr. bluntly stealing money between off balance mortgage subsidiary paying ridiculously high dividends never covered …. now the new CEO approved by the activist should set the path … While I still have a few “good assets”, I hesitate to sell these like JPM preferreds to buy CMSC or the low yielding baby bonds or illiquids. Even the Canadian reset ones declined some. So, I concentrated on trying to finish income tax for filing estimated tax anticipating some changes and late Schedule K1’s for filing the final tax sometime in May or June. I thank you (Grid), Tim, and everyone who contributed their views on many positions, especially RLJ-A. a little over 1,000 shares with 60% in IRA accounts. Despite headwinds, the market “could be” over-reacting as seen by EPR Properties, faced with tenants (cinemas) with obvious potential existential threat (these folks never made money except for refreshments and snacks and meals). Then EPR is the landlord, not the tenant. After one or two brief potential downgrade, senior unsecured debts were rated IG by Moody and/or SP. EPR went from $70 now “$35” with last Friday’s “semi recovery”. It is still better to hold the preferreds than commons. I own lots of EPR-G. IPO plus once upon a time, EPR-G keeping on rising when J Powell became the best friend of preferreds. It was then and then it is NOW, no thanks to Putin’s evil war vs. Saudis plus whoever else. LOL. Perfect Storm, indeed, best described by Tim. BTW, I still stay with the assumption that Brookfield is one or two or three notches above Blackstone who recently remarked that they wish theey were in the renewables. Numbers do NOT lie. BEP (TERP), non Brookfield AY vs. the best of fossil which I own EPD, forget about ET, trashed by its own GREEDY CEO, the drawdown is deeper for the fossil. Hence, I hold onto the now so called market beliefs BEP and BPR with resulting enormous percentage pro forma yield and many of the preferreds. All TOO preferred units owned by Brookfield all trashed. So, I wait and see.

                1. Very good for the oil tankers. TNP Preferreds should benefit. Been big sellers there so could go lower even with great fundamentals in place.

                  1. Ken…I agree. The Saudis are driving up demand for crude tanker transport which is the primary focus of Tsakos Energy (TNP). Provided the demand for crude in China has been restored this could be a very good year for crude shippers. Companies that store oil should also do well in this environment.

                    1. Agreed, oil tanker company commons have actually been a safe-haven lately in this sea of red. Rates are spiking to crazy levels. I own some and am happy with them.

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