Seems everyone has headed out for the long holiday weekend in the U.S. as markets are pretty darned quiet—even looking at our largest account at Fido it shows daily gain of $2.42–that’s pretty quiet.
Earlier this week we let go of 2 utility issues – the Spire 5.90% preferred (NYSE:SR-A) and the NextEra Energy 5.65% baby bond (NYSE:NEE-N). Of course as happens too often the Spire issue has spiked up 60 cents since I sold the issue and is now over $28.
Our only purchase the last couple of weeks was the Ready Capital 6.50% baby bond (NYSE:RBP).
So, like most folks, we have too much cash–way too much cash–maybe 35-40%. With our accounts up almost 10% since January we aren’t feeling very motivated to move up the risk ladder—but we will be forced to do it. If the Kayne Anderson 3.50% term preferred (NYSE:KYN-F) would swoon like it did a few weeks ago (down just under $25) we would add further to our 1000 share position just to lock up some safe yield while waiting.
Next week my goal is to find at least 2 buying opportunities–1 of which might have to be a dividend capture candidate, which has worked so successfully this year. After capturing dividends successfully many times earlier in the year I have not done anything in that arena for a month–I just haven’t taken the time to scout out the best candidates.
Hope everyone has a good weekend and prepares for what is not doubt going to be an eventful fall season.
Low gas prices will persist as a lot of sweet crude will be refined to capture diesel for IMO 2020 (low sulfur diesel for shipping) and unleaded is a natural by product. Also, sweet crude does not produce as much input for downstream use so these prices have increased which have hurt chemical company margins. Lastly, low crude prices means, most likely, takeunders in the Permian as the independents can’t survive. Probably see some consolidation with fewer wells drilled. Look at HAL and SLB all-time low share prices. Still a back log of DUCs but this work will slow and these jobs pay a lot. But there is a lot of cheap gas.
Everyone should read Understanding American Exceptionalism by David Nordmark.
No, everyone should The End of the Myth by Greg Grandin.
Low interest rates will cause a reset in the discount rates for the remaining pension plans in the US. Many of these plans reside in the public sector and utilities. These plans could see increases in their pension obligations of 10% – 25%, depending on how far the auditors require the actuaries to drop the discount rate.
Sat in a meeting with a PGIM manager last Thursday and they think that lower and a lot longer is in store. The next Fed balance sheet expansion could be over $10 trillion. Not a PGIM comment, it came from Bernanke at a round table meeting that PGIM was invited to.
I’ve lived a long time and have come to believe in American resilience. So my goal is to gear my portfolio for *income* survival, no matter what, i.e., without hunkering down in precious metals or sub-2% money market funds.
This may indeed be the Chinese Century but, in my opinion, any decline America suffers will be slow and our excellence will extend far beyond the lives of all here. We are not going to collapse into chaos like Venezuela. Nor will there be any sudden calamity like the fall of the Iron Curtain.
No matter what extremes we swing to–whether left or right–they will largely be corrected at the ballot box. As long as we can vote, we’ll be okay. It’s our most precious right.
If I were young, I would invest regularly in solid, blue-chip companies that have paid growing dividends for decades and let the magic of compounding make my future secure. I think Einstein called compound interest the eighth wonder of the world. It is truly that.
But I am old. So I look for things that will pay me the highest possible rate for the rest of my days and not be called away or implode on me. If not 6%, then 5. If not 5, then 4. And so on every time I reinvest.
When I look back over my life, I see how incredibly lucky I have been, from winning the birth lottery (as defined by Warren Buffett) to finishing school on the GI Bill instead of re-enlisting to parachute into Khe Sanh and likely die there as a forward air controller guiding supply C-130s onto a PSP runway under constant artillery attack by 30,000 NVN in the surrounding hills. And those are just 2 examples of my luck. Lou Gehrig was not the only man who could say he was ‘the luckiest man on the face of the earth.’
So I hope everyone has a safe and happy holiday. Next week will provide another chance for us to figure it out.
JMO
camroc, …and I consider myself lucky to be able to read your shared story, loaded with sanity, patriotism, optimism and devoid of today’s all-too-prevalent victim mentality. Thank you for your service to our country camroc. Best wishes for a long and healthy life.
Comroc-
Thoroughly enjoyed your insights. Let’s hope you are right on our ability to vote fairly. Thank you for your service. SKG
Camroc
It appears that I am older than you but basically invest the same way with approx 75% of my portfolio in preferred issues or funds holding preferred issues. I rarely sell for the ‘gains’. Also hold some NNN Reits , a royalty trust, and my largest holding is a Canadian CEF( equivalent ) with a Dec 2024 termination date unless it renews, which it has done a few times already. I let the youngsters
buy and sell almost daily. My goal is safe income and to mitigate drops when the market sells off.
PS; China has plenty of internal problems and many
they keep to themselves, so it remains to be seen if
it is the Chinese Century. Looks as if there is ‘resistance’ within the mainland, not just in HK ).
They would help themselves by agreeing to a
balanced trade agreement with he U.S., in my opinon.
Thanks for your comment
Thanks Tim, looks like all qualified for 2018.
Big Lou – You might want to take a look at SPE-B if you’re interested in KYN-F… Not a similar business but terms are very similar only it should be around a little bit longer until 8/21 vs KYN-F’s 4/20.
Just dont bid it up if looking at SPE-B. I dumped mine today over $25.50. It matures in about 2 years, but it is technically past call right now and can be redeemed at any time.
2whiteroses, thanks will take a look.
Sold NEE-N for a nice gain this week, thanks for the suggestion Tim. Hoping you and all a pleasant holiday weekend.
Hi Tim,thanks for all your work on this website.KYN-F how are the dividends
taxed variable? better in a tax deferred account?
Thanks B/L
Big Lou–I hold everything in IRAs so I don’t worry about the taxes–being a CEF year to year distributions change relative to being qualified or not. Here is a link to the 2018 tax information.
https://kaynefunds.com/wp-content/uploads/kyn_series_f_preferred_2018_form_1099_div.pdf
Tim, I think you mean RCP rather than RBP, minor typo – I have a small position too.
Heading into Labor Day, saluting the dignity of the working man and working woman, I would also like to salute you, for the dignity of your intelligence, the courtesy of your discourse, the generosity of your social endeavor.
Used to be understood among millions of us, without any commentary, as the American Way. God bless America and God bless us all.
Have a great long weekend.
“I would also like to salute you, for the dignity of your intelligence, the courtesy of your discourse, the generosity of your social endeavor.”
Amen.
“God bless America and God bless us all.”
Amen.
Just closed a one week dividend capture position in CTBB this morning and got a smidgen of capital gain to boot. I like these!
The President just fired a huge artillery barrage in the tariff war and China responded with a huge barrage of their own 1 minute later.
The Asian and European markets are going to be a wild ride tonight with most US investors forced to wait by the sidelines.
Justin–these are about to flow through to the consumer–inflation ahead?
Yes, tariff’s are hugely inflationary and disruptive to economic activity and more importantly, business planning, which can cause a slowdown in economic activity across industries that are not impacted by the tariffs
Well if it happens Justin, rest assured the official inflation figures will under report it. The govt always assume we substitute out of things. So they will expect us not to buy say Nike shoes, and order Holland wooden shoes instead, lol.
Tweet storms notwithstanding…American consumers are enjoying the cheapest gasoline prices in three years this weekend as the US treasury is on course to rake in over $100 billion dollars in tariffs.
Citadel-
I guess one person’s positives are another person’s negatives. I think these two points you cite are both terrible. Low gasoline prices should be seen just as bad as low cigarette or gun prices for damage it causes. $100 billion in tariffs collected is looking at the issue in a vacuum. The effect on our economy and our standing in the world is terrible.
Skg…I was simply making an observation that despite enhanced tariffs on some imports, other cost factors that more generally impact the price of goods sold were actually lower now than three years ago.
-btw I’m not sure I’ve ever run into anyone who thought lower energy costs weren’t an all around blessing…can you expand on your POV?
I think in terms of all the local people in my area having to drive 40-50 miles one way to make $20 an hour to work. Low gas prices are appreciated.
Lower gas and fuel prices are a boost for the entire economy.
Citadel- I guess you were looking short term and I am looking long term. Short term, low gasoline cost may be good for the economy in the same way that low cigarette cost or low gun costs are good for the economy. Long term, I think none of these things are good for anyone. Personally, I’d rather have gas costs at $10 a gallon, forcing us to move to energy sources that won’t kill us all.
Off my soapbox. In fairness to you, this is a board dealing with market prices and stock/bond performance, not broader issues so I wasn’t exactly being fair jumping down your throat on this. Hopefully you see my broader point.
Have a nice night.
skg,
you do have freedom to travel.
Don- you set the bar pretty low. 🙂
Yes. There has to be some of us low bar people supporting the temple people. Read the book please.