Yesterday was an interesting day for income issues.
With interest rates falling yesterday I noticed that preferreds and baby bonds bottomed and rose a fair amount, before falling back off again as the ‘nervous nellies’ took the opportunity to sell into the rally. This is exactly the way it works–prices fall and continue falling for months while eventually there is a reason to buy like yesterday (falling rates and whispers of Fed pausing). Then as buying sets in and pushes prices higher all of the ‘nervous nellies’ take the opportunity to sell. I watched my accounts yesterday and I had a gain of around .5 or .6%, before ending the day up .2%.
Am I saying the bottom is in—NO. No one will know when the bottom is in and we may need to see numerous replays of this price action and then it will be weeks or months before we know the low is in (20/20 hindsight of course).
Today we have important economic news being released in a couple hours with the 1st read on 3rd quarter GDP being released. The forecast is 2.3%–a beat or a miss could move interest rates. We also have the durable goods report with a forecast of .7%.
For what it is worth (not very much recently) the S&P500 futures are pretty close to flat at this moment with the 10 year treasury yield bouncing between 4.06% and 4.08%.
I will be out of the office during trading hours today so will not do any buying–I don’t make any trades on my phone.
I know this is a common refrain; but the longer this goes on, the more puzzled I am.
PSBpY closed at 12.85 today.
It’s weird, because I have on several occasions put in a low bid on one of the PSB preferreds; I always seem to just miss on them.
Then I look at them again after a week, to find that they are lower than my previous “good for the day” bid.
They now look to me like they are trading close to a “50-50%” chance of default, which makes no good sense at all.
Feel free to have fun with it, but I can’t seem to find the bottom.
Does anyone have a sense of why the PSB preferreds appear to have been thrown out of the airplane without a parachute?
Not like something disastrous has happened, but a slow grind, grind, grind lower.
I suspect there are three main reasons
1. First and most importantly, the fear of the unknown. With the acquisition, some people worry about what happens down the road. We have seen the multiple posts here about some people asking will they go dark on the expert market even though Blackstone made a very public statement they will not so long as there is at least $75 million aggregate liquidation value of preferred stock outstanding. But sometimes the new or unknown scares some people
2. The company has changed – as Blackstone, like most acquirers do added on debt to help pay for the acquisition. PSB never had much debt so this is a change but completely normal in these type of buyout situations
3. The market malaise in general. Preferreds in general and reit preferreds even more so have taken hits so that impacted things as well
As I mentioned, I owned some in the 13’s and nibbled on more today in the very high 12’s as I think the risk / reward with a 10% yield is attractive. It is not like we are talking about some sketchy fly by night outfit. Blackstone is huge and has a very good reputation
More of a thought, but it partly feels like the entire preferred market has a lack of institutional buyers at this point. The only thing that concerns me is that maybe something needs to break before they step back in?
I have been doing a tiny bit of nibbling, but I have also been doing a bit of selling/donating things like that have sneaked up in price during all this turmoil. For example, XOM, which I picked up in the low $30s in 2020 and is now peeking over $109. I am not dumping, just trimming a little.
Donations of appreciated property is one of the best little Easter eggs in the US tax code. If I can donate when the price is around $109, the charity gets the full $109 value, and I get a tax deduction for the full amount, which yields about $35 at my tax bracket (US and CA). Given that I paid less than $35 for the stock, everybody wins (except the IRS).
Private, I’ve held XOM long term too and rolled Calls out consistently in the IRA. I have an Oct 28/112 which I am going to see if it gets called , but there is only one more trade date. If not I’ll trim too, then resell out after the Nov div.
I like the idea of charitable donation, but sounds like it requires Sch A or D /8949? I’ll look it up.
ATLC common is at $28.14, up $1.03 while their 6.125% Senior Notes due 2026 are down $1.19 to $20.94. Any idea why Atlanticus Holdings Corp is acting this way today? I am long the Notes. Thanks.
I have these too. I think ATLC is just backing off the price spike from yesterday. Very nice YTM for 4 year money. Not the greatest clientele, but there’s compensation for the risk.
Meant to say ATLCL is backing off from the price spike yesterday.
There is a good article on ATLC on SA w good comments; I am long the pfd..the author is quite knowledgeable on the company and provides good insight..feels even worse case they can still do $6/sh next yr and have a ton of cash on the bal sheet maybe $20/sh at 6/30 to weather the downturn. Definitely not IG! but maybe niche winner…the company has been around a while. DYODD. Bea
Healthcare Trust (HTIBP) which looks like a solid company has a preferred (HTIA) that is down almost 9% today after being up 2% earlier today. If I don’t own a lot of HTIA I’d be a buyer here. Currently $20.51 and $22.88 offer with current yield over 8%.
$22.44 the ask price….absurd illiquidity
I once owned this prefferred, but sold due to the very questionable management. Look at the history of the people involved with this company.
PCE is out tomorrow. Core PCE will probably be higher.