Getting Through the Day

After a really rocky open with a circuit breaker shutting the market down after 6 or 7 minutes of trading markets have calmed–for now. Of course there is no real predicting the end of the day trading–way up or way down? Maybe just a whimper into the close.

Overall I have not taken a severe beating–just a modest spanking in our accounts. BUT when looking at the list of losses in preferreds it is damned scary. Last I looked there were over 70 issues down at least $2/share–and some like the NGL Energy issues are off $8/share–wow!! No doubt for the brave there are some bargains to be had–just depends on your risk tolerence. If some of these energy issues stay way down I may buy a little later this week–don’t know, will see how lucky I feel (or maybe stupid).

While I did not plan to buy today I took a taste of the Gabelli Multimedia Fund 5.125% (GGT-E) at just under $25–but that is all. This issue is call protected until 2022 and is A2 rated.

32 thoughts on “Getting Through the Day”

  1. A lot things now seem backwards and upside down. Lower oil prices and the market crashes? It should it be the other way around. Lower oil prices = lower transportation costs & lower raw material costs & more money in consumers pockets from lower gas prices. In June 2008 oil spiked to $165 a barrel which helped lead to the crash. That made sense. This doesn’t. My corporate bonds have done great in the last month, but my preferred and baby bonds have taken a hit, but with ultra low interest rates, these issues will rebound. This is the best buying opportunity since December 2018.

    1. 16.5% of all high yield junk-rated bonds are in the energy sector. At $30 oil, this will result in defaults and/or bankruptcies according to those who know the industry. See the tweet from Liz Ann Sonders comparing Energy to other industries. Energy is the largest industry.

      Why there is a belief that this will hurt banks, I am not sure. But that’s why banks are getting hit also.

      1. Some MLPs, drillers, etc. may be rated high yield, many aren’t. The bonds from big oil companies like Exxon, Chevron, and others that got hit hard Monday have AA ratings.

  2. Here comes the first shot of fiscal stimulus. Payroll tax cut. Not enough. Expect more in the form of straight up cash from the government to individuals rarther than corporations. The bounce is coming and I ain’t trusting it one bit. Plenty of uncertainty remians and that won’t be fixed by interest rate cuts, QE 4 or payroll tax cuts. We need to get a good handle on how bad this virus will be here in he US and its economic costs.

  3. Wow that was fun. Cracks starting to appear in facade of bravado. I’m pretty sure I also saw liquidity problems in MLP sector today accounting for some degree of the carnage. There were big “arraigned” sales all day pressuring prices. As long as today is the end of liquidity issue and it remains confined today in that sector then the world should continue on. If liquidity problems continue or move into other sectors there could be some real deals popping up. For fun I put limit buy $2 ENBL 15 minutes before close and it went off at close $1.86 down -62% on the day. If you are interested in buying it I’ll make you a great deal only $3.

    1. P, It did bounce after market, so $3 may be a reasonable deal for someone. That MLP is dragging its main owner CNP down with it pretty hard also. Down like 70% in a week.

      1. I don’t think ENBL is going away largely because of CNP but I do think CNP is wishing ENBL could just go away lol. Somebody needed the ENBL money all day long desperate not enough buyers and ran out of time. I think if they are done I’ll get my $3 pretty quick I’m happy but one never knows.

    2. P, it’s my theory that those buys are MLP based CEFs trying to maintain required coverage ratios. It’s a negative feedback loop to the bottom.

    3. It’s fun to look at the range of discount/premium on MLP closed-end funds today.
      Using CEF Connect, the range is JMLP (an 81.75% premium!) to DSE (a 32.87% discount to NAV).
      That seems so bizarre I don’t trust the numbers, but it does look like chaos in that sector

  4. I see several names at the top of the list that i decided to take a flyer on i.e. gamble after reading an article on SA. Wowzers. I had some winners and some losers…probably broke even. But wow, they have certainly taken a tumble.

    The dilemma as I see it is that high quality issues have held up, medium quality issues are down 2% or so and lower quality issues are down 8% plus. Does this make the medium quality and lower quality issues better buys now? Time will tell.

    1. If you believe that we will need energy for the foreseeable future, you might look at MMP, down over 12 today, closing within ~20 cents of this morning’s blowout low after someone dumped over 112K units at the close. It’s raised its quarterly distribution for almost two decades. I couldn’t resist & bought more @ $40.15 though I already own a bunch. To each his own, he said, as he kissed the cow.


  5. NNNPRF closed at $24.70.

    Good price for an investment grade, cumulative preferred. Call date’s a little close, fall of ’21, though. Still…

  6. Can anyone shed some light on why Aspen Insurance AHL-D and AHL-E took a bigger hit today than all other in the insurance category down close to 10% They are under the Apollo umbrella now and seems to be in the “busted” aka forgotten category.

    1. Aussie,
      Hard to believe that they dropped so much, especially being issued by an A/A2 rated parent company. No specific news that I saw explains this drop and especially the AHL-E took it hard in the face today. Some don’t like the perpetual aspect of the preferred’s, some don’t like the possibility of zero or negative interest rates in the US, etc. These insurance companies need a decent interest rate yield and that’s now gone. Plus, they may have more than a comfortable amount of exposure to this virus running around. I’d say hang in there. I am with my AHL-E. Dual IG and QDI with a strongly rated parent? Yes please…

      1. Thanks Affinity. Makes sense on the interest risk. Of course if we stay low here this is a nice low risk 6% IG thanks to the parent company until it’s (most likely) taken away by the call in 2024.

  7. Any thoughts on why the NGL preferred issues are down so much? I have a small position (thankfully!) in NGL-B and it’s dropped more than 40%.

    1. When panic sets in like it did, their is indiscriminate selling. Anything remotely related to energy got tossed out the window and run over by a steamroller

    2. Greg,
      NGL is down 45% today, 70% YTD, and the common is now supposed to pay ~22% dividend. That’s just not sustainable and there is no turnaround in sight from where I’m looking. I’ve been to this movie before in the last energy crash. Hard to see a happy ending where you don’t end up losing a lot of money here.

  8. I am comfortably NUMB.

    I did buy 1,500 shs of WRB-B at an average of 24.79 today.
    Overall, Down 2% on my preferred holdings

    1. I have 3 brokerage accounts one is unchanged, one is up very modestly and the third one took a beating. I wish I could fire the guy running my TD account that got ran over but unfortunately its me.

      1. The Saudis and Putin sure did a number on us today. Unfortunately I still had a couple hundred NS-A and C and they got smashed (Got out of NS-C early in the day but A kept dropping and I wasn’t able to get out of it quickly enough so that one was a bigger loser). Didn’t do anything else with the other stuff I hold. I’ve been leery of the high valuations in the market for a while so I’ve been at 80% cash, 10% bonds, 10% stocks and prefs for a while. Still, it’s doesn’t feel good to have your gains quickly tun into losses.
        I believe we’ll bounce here, perhaps strongly, but go right back dwon even lower than today. To me, 2400 on the S&P doesn’t seems too far fetched.

        1. Just saw on TV. 2,180 is the low from the Jay powell bear market. Didn’t check SP/500 number from that time but Dec 2018 low seems to make sense to me.

  9. Just wondering what might turn the markets around and I don’t see much. Perhaps the Saudis will put the fear of god in Putin and force him to restrict oil production. Even if this happens, I can’t see much of a rebound from it. Maybe just stopping the carnage or some slight rebound. The Fed really has not many weapons left in their arsenal other than to make sure there is liquidity in the markets for banks. Fiscal policy moves require agreement by both political parties and that’s uncertain in a presidential election year. Recession is coming—let’s just hope it’s mild and short. Guess it’s best just to hunker down and wait it out.

  10. I bought JPS (a Nuveen preferred closed-end fund) at 8.90 today, after an intraday fall of 6.3%. Is it really worth 6.3% less than it was yesterday? I guess I will find out.

    As for most of my preferreds, most appreciated 6-10% from when I bought them or held them over the last 1 -2 years. I thought that was overvaluing them, but I saw no reason to try to time a move in and out of them. Now, they’re back to a reasonable value; why sell them now? I am content.

    1. donocash–it is critical to look over multi years. Last year was fantastic, 2018 a breakeven and thus far down a bit in 2020. 1 year you are a hero and another year a dog.

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