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I Want to Nibble Something–Which One?

I feel a strong urge to buy something today–I have no clue what issue I want to nibble. Very likely I will add to a current position–just a nibble.

I feel like a ‘addict’ this morning–just that urge to buy. This urge is in conflict with my view that while interest rates are going to remain flat or move lower in the next 3-6 months they will be driven higher by huge treasury issuance by the government. Of course no one can predict the direction of interest rates with any degree of success – so maybe I am totally wrong (which would be normal) and we have seen the high in interest rates in which case I want more preferred shares and baby bonds. Don’t know–we’ll see.

Yesterday the 10 year treasury yield bounced up a strong 10 basis points to close at 4.65%–and this morning it is at 4.63%. Again today we have little true economic releases—just a few Fed yakkers, so we’ll see where interest rates want to go.

Business development company New Mountain Finance (NMFC) sold a new baby bond yesterday–a coupon of 8.25%. NMFC had a 5.75% baby bond which was redeemed in 2021 so they are not new to the exchange traded debt market. What caught my eye was the investment grade rating–most recent baby bonds from BDCs have been rated by Egan-Jones, but not by the big ratings agencies (S&P, Moodys or Fitch). This means that this is more interesting to me, but I know little about NMFC so will have to do some reading and understand a bit more about their business.

I see the hated AmTrust Financial declared their dividends on their preferred shares yesterday. With current yields of 13.4% to 14.2% these shares are tempting. Just wish I had a decent idea of company financials–will have to dig around.

Well equity futures are soft this morning–means very little–anything less than 1/2% moves are just normal ‘wiggles’. Let’s get to going and see where interest rates move today.

59 thoughts on “I Want to Nibble Something–Which One?”

  1. I know the “want to nibble” feeling. I have an out-sized position of treasuries maturing on 11/15 and 11/30 and need to roll into something. I still do not trust this market so may just look into putting into some short-term treasuries. Last A couple of weeks ago, I bought 2 shares of TLT and $82.31 just to have them in my account to better monitor – now I wish I had gotten several HUNDRED shares instead. But it is down today after almost reaching $90.

    1. With yield close to 7% investment grade and a dividend payment due in about 3 weeks, I bought 100 shares today.

    2. It floats on Jan 1. I haven’t seen anything on how they plan to handle LIBOR replacement but maybe I missed it. Does anyone know ?

  2. Looking at OAK-B down almost 6% today a BBB rated preferred yielding almost 8%. Common barely moved, anybody following this bond?

  3. I bought a small position in the new Simplify Mortgage Backed Security ETF (MTBA) that started trading today. Harley Bassman made a good case for buying newly issued MBS… More coupon, less duration…effectively credit spread+ without the risk.

      1. From what I saw, coupon of 6.1%, YTM of 6.2%, duration under 5. Obviously there’s a risk of repayments accelerating if rates fall… so I think of this as fancy cash. Better yield than IG with no credit risk, and a kicker if rates fall.

        1. Won’t there be a negative kicker if rates rise?

          Also, what are the tax characteristics of the distributions? I tried looking up taxation of TBAs but quickly got confused.

  4. I am sitting on my hands and not doing much. I recall some famous investor saying he made the most money doing nothing and waiting for the right moment. I have seen several ‘right’ moments, and don’t think now is right at all.
    I am still letting my weekly 26week tbills roll over, and happy with that for now.
    Give it time, buying season is around the corner. And I know nothing, am often wrong, but that is how I feel.

    1. I have been flipping a bit, but a lot is just looking to lower my basis (sell and buy back cheaper). Helps when I am jonesing to trade…

  5. How about an A rated bond?
    TCF, Coup 7.2804, Oct 30, 2029, just above par today, I’d wait until it MAYBE? goes lower? Why get greedy? Put it on a Watchlist.
    Let it mature if it doesn’t jump in the mean time while collecting. A lazy buy.

      1. Truist…is my memory faulty on symbol? Ooops that was The Chicken Fryer.
        Looked over there TFC. My bad.

      1. TFC CUSIP:89788MAQ5
        Sorry, I do know what info to post, but have been distracted by load up to go deer hunt this week. Actually good weather to go golfing!!

  6. Tim, I understand the urge. But selling some holdings into this rally then it seems like adding to existing holdings at a higher cost is like doing it just to be doing something.
    We are entering the end of the stretch for the year, under normal years we have a year end rally but what happens in the new year?
    I have sold out of some holdings partly because I have been unsure about them say like merits and another reason hoping I can move up in quality.
    No one has a crystal ball, more like a snow globe. So I have to ask myself what has changed or what to look for in change? I think there is still opportunities so I will play the game but the same as before with just putting in low GTC hopefully they hit.

  7. I was a seller last week, getting ready to buy back,
    RITM-D best float rate, underpriced because it doesn’t float for several years.
    NLY-I floats in 8 months, comparable to NLY-F then.
    CUBI-E/F if you believe the banking panic is over
    FITBI if you can get it under par, floats soon and a call would be a short term gain.

  8. VZ has good momentum and a 7.5% dividend with rising free cash flow going forward….I own

  9. Tim, AmTrust insurance, rock bottom price from its fearless Hungarean self made billionaire Michael Karfunkel, had its days when he was alive. After his death, his son in law Zyskind, presumably a MBA from NYU made several bad mistakes such that he had to take the company private. With all my due respect to Doug Le Du, it was Maiden Holdings, its British insurance and collaborator had no significant biz except from its association with Amtrust. I have sold all my shares of Maiden. The likelihood of Maiden came out of bankruptcy is remote IMHO. I still hold all my legacy shares of Amtrust, one was bought by mistake, all the symbol changes. To my best knowledge, both Schwab and Fidelity will not let anyone to buy Amtrust pfd or its baby bond, AmBest Insurance rated (the baby bonds was rated one notch higher). I had to thank Zyskind and the widow of Michael Karfunkel, who continue to pay dividends or interests without fail. Nonetheless, I do believe Safe Bulkers with its two super ethical and honest Greek brothers are trustworthy than Amtrust. Of course, the yield is more modest in comparison to Amtrust.

      1. I agree that Fidelity does not allow buying of the AMTRUST issues, but I don’t know any other mainstream broker that does. I would suggest that the AMTRUST baby bonds AFFS or AFFT are safer than the preferred issues, albeit they yield less. Both are trading around close to half of par. Unfortunately they don’t mature for a long, long time, so YTM isn’t much different than current yield. AFFT is trading at current yield around 11%, obviously it fluctuates with price and due to the illiquidity of trading, this can vary quite a bit, and anyone who buys should be prepared to hold this for a long time. Obviously, as a baby bond, you are not subject to AMTRUST deferring dividends as you are with the non-cumulative preferred shares. Although maturity is far away, there is one catalyst that might pull them to par sooner – and that would be AMTRUST going public again, which would result in the baby bonds (and preferred) trading at a higher level when re-listed.

            1. I have a typo in my previous comment – and it is past the edit time so I am correcting it in this reply. You definitely CAN buy AFFS/AFFT and the Amtrust preferreds at Fidelity – I’ve done it. Also I have bought other “expert market” shares that you can’t buy elsewhere at Fidelity, which is weird because most of us think of them as a “nanny broker” that won’t let you buy things they don’t think you should buy. What I was trying to say is Fidelity does allow it, no other mainstream consumer broker does, and there is an unfortunate “not” in the first sentence that totally confused everyone. Sorry, multi-tasking while typing.

    1. The zyskind/karfunkel group are scum. Its that simple.

      Look what they did to Maiden. Go search about how K got slapped down for trying to sneak through some self dealing through in an annual report (!). Just not trustworthy.

      As a preferred holder, you are at the mercy of management. Can you trust them? In this case, I think the answer is a resounding no. If they can find a way to screw you, they will (again, go look at how they raided Maiden for their personal benefit).

      There are a lot of companies out there to buy – anything these guys touch is of no interest to me.

      1. I agree, that’s why if someone feels compelled to make a play in AMTRUST, stick with the baby bonds over the preferred to remove management’s discretion from the equation. Of course, I wouldn’t touch it if it wasn’t artificially depressed due to the “expert market” illiquidity that has it trading lower than it might if freely trading. For me, it’s a speculation with income while you wait, not an income issue, and I have sized my position accordingly small and recommend anyone else contemplating this do the same.

  10. I have a similar dilemma. My ‘addiction’ is locking in short term gains, particularly when they are as quick as last week.

    I have some appreciated positions that I bought in the past few weeks that I’d like to swap and I can’t find anything that justifies making the trade. That’s nothing new for up moves since there are far fewer price dislocations than when preferred stocks are tanking.

    I’ve started realizing some losses 1) in order to reduce taxable cap gains from previous swaps and 2) I have to resolve my wash sale issues so that I don’t add to the tax burden. The problem with the latter is that it blocks trading in those issues for 30 days. It’s harder to get a ‘fix’ if there’s less ‘smack’ available.

  11. Also…

    Give a glance at the fixed income offerings at your broker.

    Bargains are dwindling, but still exist.

    I was able to snag a small lot of federal realty notes yielding over 7% this morning.

          1. No worries SC.

            Your typo of “main” vs “Maine” reminded me of a semi-attractive offer out there.

            Main capital has a relatively liquid bond that has been on offer for a while. It currently yields close to 7.4% at the ask. Nothing sexy for a BDC but I put it in the “not too risky” and “it keeps me out of trouble” category by preventing me from trading with those funds.

            I favor it over other BDC notes, as it matures in 2026, and MAIN is best of breed for BDC land. They constantly trade at a large premium and use relatively low leverage.

            Cusip is 56035LAE4

  12. You ask, you shall receive.

    Floats at LIBO +648 bps Sep 2024

    MITT is merging with WMC, thereby increasing the pref cushion
    MITT is focused on non-agency residential, therefore minimal credit risk
    MITT uses securitizations for funding, less mark to market risk
    TPG/ Angelo Gordon generate fees from this business. they will find a way to keep it alive during trouble.

    It is prone to prone to volatility as the name is misunderstood.
    Small market cap.

    And don’t forget to put in a limit order.

    1. MITT may be riskier than most but you are compensated for the risk, I have MITT-A and MITT-B so I can hop between them, MITT-C harder to evaluate by comparison.

      1. C’mon Martin!

        If you are already comfortable with the credit risk, then get on the C train!

        SOFR + 675 beeps.

        If that doesn’t get your blood flowing..

        I know I am preaching to a small choir here.. many won’t touch MREIT prefs “no matter what.” I didn’t blame them. Levered retail widgets are usually suckers bets. But the main secret with the prefs.. is that they survive because management needs them to survive to keep fees rolling. Plus, they usually get margin called before common book value gets obliterated. Then they issue more common shares. Rinse repeat, haha.

        MITT trades cheap for many reasons, mainly that it blew up during COVID. But… they took that as a learning lesson and now employ a completely diff strategy.

      2. The spreads on the MITTs are pretty wide and the liquidity isn’t great. Are you able to get decent fills or are you just trading at the market?

        1. It varies.

          Every now and then a seller shows up with a low offer.

          Agreed. I would just hit the ask, be careful.

          Word is that Scott kennedy has been buying this name, with the last purchase in the high 18s.

        2. Patience. Use limit orders and it may take days to get a fill. Sometimes the range narrows and jump on it, if you snooze you miss it.. Often you get price improvement when buying at the offered price, no guarantees but it happens often enough to change the odds.

            1. I pretty much moved away from Mreit, but MITT really choked in 2020-21 and had to do a reverse stock split just to stay alive. Doesn’t sound like a management team that is on the ball – but that is just my impression based on no research.

              For high yield from (hopefully) more solid management teams at reasonable prices, I went with NS-C which is paying 12.35%, ZIONO paying over 10%, and even WDS which is paying about 10.5% .

              If you want to chase yield, QRTEP is paying something like 27% ( I still own a couple of shares that are so far under water that I only keep them as a reminder…).

          1. I use price alerts (it pings when price is hit) so if I want to, I can snooze :->)

            I’m always looking for pairs trading candidates. Got any others that are interesting?

            Thanks for the info.

    2. Newman, that was one I sold a part position in. Been buying tranches to lower my overall cost. Not worried about tax loss selling in a IRA.
      If it goes lower and still a good risk I will buy it back.

  13. I sold off my NY banks yesterday.
    DCOMP at 16.39 (I know I lose the div, but I had put in a high number to sell at, and presto, it was done) and NYCBU at 36.63 and 36.50.
    I think we are in a trading range. That’s also why I sold.
    I hope the Preferrred price appreciation these last few days holds up.

  14. Anyone knows what happen to B Riley? It dropped by 22% yesterday and I did not find any news. If there is nothing special, RILYO could be interesting

    1. there is a bunch of stuff on twitter yesterday
      the ceo has a several personal loans from AX
      I don’t understand it but it seems to be gaining traction as it might be a problem for rily
      I’m sure someone knows more of the details and of course this is from twitter(x) so who knows

      1. The way I understand it is, the connection presently is only Rily bought a decent stake into FRG which may have been involved in the shenanigans via the CEO. Presently there is no direction connection to Rily to the actual ongoings other than their investment could potentially take a hit. But everything seems to be conjecture now.

        1. I see where RILY has taken the unusual step of moving up their quarterly report by one day so they report tomorrow…. You have to suspect that they have positive news to report that they hope will help dispel this swoon in share price otherwise why bother….

      1. I got out of these awhile ago. There is trouble in paradise. Best to get off the bus before it crashes. IMHO. Avoid anything to do with RILY. They are in some shakey items, shakey ownership, and conflicts of interest. Why bother playing that gamble?

        1. Tizod:

          RILY EPS out today and the stock dropped another 15%. They issued $115M in equity in July in the $50s….the lost souls who bought shares in that offering from this so-called investment “bank” now hold a stock trading for $30.

          This guy called it right in August. Madoff-like auditor conflicts.

          “Importantly, these aggressive practices appear to revolve around B. Riley’s extremely close relationship with recently SEC-sanctioned Marcum LLP. Marcum is not only the auditor for B. Riley, but also does audits for numerous B. Riley portfolio companies (for example we have confirmed AREN, FAZE, BEBE, and APLD are all Marcum clients)”


          Anyone buying any of the RILY baby bonds has to accept a much greater than zero probability that the position will result in a total loss. It would take an hour to list all the numerous red flags on this company.

          But good luck to all.

          1. Article may be very valid but keep in mind it is written by someone how is shorting RILY.
            RILYO (6.75% note) matures 5/2024. At the moment it’s $24. Is it worth the gamble?

            1. “Kid Twist” seems to be a shortie himself, which is fine. Love the gratuitous Madoff reference.

              I don’t think RILYO is much of a gamble. They have plenty of money to pay it off, and any lawsuit will barely have gotten rolling by May. The market seems to agree since the CY is only 7%.

          2. Kid Twist – I have for years and years called out the unsavory characters at RILY. The amount of nepotism in all the deals B Riley gets involved in is near criminal.

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