Illiquid Securities

On this page folks should comment and write about illiquid securities–preferreds and baby bonds. By Illiquid I am talking about those issues that seldom trade–or only trade in very small volumes.

We have a lot of discussion on the site about these types of securities–normally $50 and $100/shares issues and the commenting gets scattered about–by using this page we can keep this topic more centralized.

A caution to all investors, but in particular those will little experience in illiquid securities. Tight limits must be used on all of these securities–if you don’t use limits you will butchered. Also while some of these issues have been outstanding for more than 50 years they can still be called–it happens and if you overpay (pay more than liquidation price) you may be setting yourself up for a loss. Always do your own due diligence–always double check the facts–everyone makes errors (certainly I do) and you need to know the facts.

Investors should know that illiquid securities will drop like a rock if there is a large move higher in interest rates. One of my current and long time holdings has been a $50/share issue from CEF Tricontinental (TY-P or TY-) with a 5% coupon–very high quality. This issue is now trading around $56, but in its life (issued in 1963) it has traded as low at $18/share–so there should be no doubt they can move sharply.

88 thoughts on “Illiquid Securities”

  1. Someone is selling shares of UEPEP for $102.50. That’s a yield of 4.45%.
    Redemption price is $102.47

  2. Here’s a fun one: BMYMP:
    -way past call at $50
    – Priced last at over $1,000
    – Convert at any time is pegged to common within reason
    – A bunch has probably been redeemed over the past
    – 4% to the company, 0.19% to the holder
    – Seems this was a preferred done right in the old days, but still lingers
    This market sorting is starting to feel like a game of solitaire where I’m counting the jewels on the king’s of diamonds cape instead of playing the game. I’m sitting in the perfect place too, a coffee shop in Raton NM that used to be the Silver Dollar Bar…silver dollars laid into the floor…when does Clint walk in?

  3. I picked up some more UEPEP today for $102. There was a lot of selling today with the volume being much higher than normal. Sometimes these selling sprees tend to last multiple days so it’s possible the selling continues Monday. At $102, it’s a yield of 4.47%. Redemption is $102.47.

    1. Dick, I wasnt around yesterday so I had to check. The last traded purchase was for 2000 shares on the nose $102.10. So is that your personal definition of “picking up some more”. 😁.. Hey if you dont mind for the benefit of the illiquid haters here, could you give them a little advanced warning of what you are going to say. This will allow time for the Paxil to kick in and keep ‘em regular.

      1. I definitely wasn’t buying lots of 2,000. I’m just a guy with a job so I picked up another 200.

        I really appreciate the ability to get 4.47% under redemption price. I definitely don’t understand the hate. I think a lot of these people haven’t followed these issues closely enough to really understand them.

        I don’t see how they see utilities and think bad and see REITs and think good. For a good CPA, I think writing paid articles on Seeking Alpha is one of the worst ways to make extra money. Delivering food through Uber Eats would probably be more lucrative.

        1. Congrats on the buy, Dick.

          Purchasing under redemption price is great because you have a cap gain if called.

          I have owned UEPEP for about a year now, bought it at around $101.50.
          Only a small amount, unfortunately.

        2. Dick, Im dissapointed in you that wasnt your 2000 share block late day trade. You are “small ball” like me, ha. Ya I dont get the reit superiority thing. I own a few reits and certainly dont judge one over the other. But I owned ones that didnt drop like CDR preferreds into single digits, off 75% while these illiquid utes hung right around par if not over it during that panic. And you and I both know there were panic sells from that reit rout.
          Everyone can think anything is a great buy when everything is fine and dandy. But when s##t hits the fan people panic, and having a ballast that sits like the Rock of Gilbralter in the center of a storm suddenly becomes a welcoming friend.

  4. I think it would be great if our discussion topics are focused on the topic so that everyone benefits for that topic. For example, this topic forum should be focused on $50+/share investments, investments that trade very little, and similar topics. Tim has posted a paragraph that defines each topic forum.

    When we start posting random thoughts, non topic ideas, etc, they need to be posted in the Sandbox section. I am reading posts from obsessive compulsive behaviors. I do understand that we all go through challenging things in our lives like divorce, etc, and things can be overwhelming and cause compulsive behaviors, stress, hate, fear, need of attention, and a full range of roller coaster reactions. That is what Dr’s. are for.

    I asked for this topic to be created, and I got it, and I feel that it is becoming cancerous. This site is for many interested parties, and not the needs of a 1 person to continue to post warnings about illiquids. I really don’t need to read 4 posts a day warning me about them. Let’s move along and get back to investment ideas please.

  5. Tim: I have been contacted my many investors on SA that apparently want me to post more on your board and continue great discussions on preferreds and common stocks. However, there is a very large concern about Pump and Dump issues going on here now, and I can certainly provide examples on the board. If time allows, I am respectfully requesting that a new topic of Pump and Dump thread be posted on your message board. It’s actually a very valid topic and may help to improve and clean up some of the issues on your valuable website. Thanks for your consideration.

    1. And just another note to investors that like illiquid securities: Generally speaking there are no issues with securities that don’t trade very often. They may be solid companies. Personally, I have a trade order on a security that trades about once a month and will sit back and be patient to see if my order will fill.

      However, it is something else to buy an issue, promote the thinly traded stock on four message boards, claim that I will “never sell” and then dump the issue on novice investors. And this is exactly what has happened here over the past couple of months. Wishing everyone here the best on their investments!

    2. Hi kaptain–just put a caution on the illiquids chat page–will consider the pump and dump page

  6. I’m not sure if anyone else here is following the PCG preferreds. Vlae Kershner has written some good articles about these on Seeking Alpha in the past. I messaged him to see if there were any announcements about the reinstatement of the preferred dividends. Here is his response:

    “There haven’t been any announcements. The next quarterly earnings report comes out Oct. 29 and the normal pay date would be Nov. 15, so I expect an announcement one way or the other at that time.”

    I happen to own a little PCG-D, which is redeemable for $26.75 (QOL has this wrong – see below). PCG-D has been trading around $25 as of late. I hope to hold at least through the date the dividends in arrears are paid.

    12. What are the call provisions for Pacific Gas and Electric Company preferred stock?
    There are eight issues of Pacific Gas and Electric Company preferred stock; three of the issues are non-redeemable (which means that they can never be called by the company), and five of the issues are redeemable. The redemption provisions of the five redeemable issues are shown below:

    Issue Description Redemption Provisions
    5% Redeemable First Preferred $26.75 after July 31, 1963
    5% Series A Redeemable First Preferred $26.75 after July 31, 1963
    4.80% Redeemable First Preferred $27.25 after January 31, 1965
    4.50% Redeemable First Preferred $26.00 after July 31, 1969
    4.36% Redeemable First Preferred $25.75 after October 31, 1975

    1. Dick, I will admit it, I am scared of them now. I noticed some news is saying they are already investigating PCG as being the cause of some of fires out there that is going on. I know there is a fire fund now, but fires and “CA Inverse Condemnation” scare my wallet.
      It may just be baseless fear on my part, but I think the preferreds are shaky B ratings already. I do trade them some, but I personally like to play them when CA is out of fire season.
      I wish they didnt have inverse condemnation and massive debt overhang wrapped around their necks. Because owning a 6% non callable basically at par from accrued dividends would be a gift from the heavens wouldnt it!

  7. I bought some shares of AILIM today for $103. That’s a yield of 4.56%. The redemption price is $103 so no call risk. According to QOL, this one IPO’d in 1952. Thanks Gridbird!

    1. Wow, Dick, 900 shares today traded. That is a big dump, for that issue. Yes I like that. Actually AILIM I dont think I have ever snagged that issue before. Any time I have made a play for it, it was dead with no interested seller. It is actually one of the smaller floats AI has in its preferred series. I was out golfing today and didnt get to follow market today.

      1. I thought you weren’t allowed to say anything about golfing anymore, Grid… Shame on you…. 😉 😉

        1. Oops, But I actually played well today, ha… I was doing some old research and you will enjoy this being an old bond guy. An advertisement in a 1920 newspaper telling readers to contact ANY Central Maine Power employee about buying the 7% par Central Maine preferred at a price at $107.50 for a 6.5% “net”. Look at the huge ad on page 8 of this link (the last newspaper page) its hilarious…Want some preferred stock from the local ute? Why just get ahold of the janitor in the building he will set you right up! Ah, the good old days…

          1. I wonder how much of that $7.50 premium the lucky Central Maineiac got? And I thought today’s going issuance cost of around 3% was not justifiable……….

          2. There is a ton of info in that newspaper. They went through 90+ days lockdown on withdrawals from banks, etc.

            I also like the Castoria and the L.F. Atwoods medicines ads. They cured everything in the world. Just take 1 dose per day. Even cured acne, get the kids a good nice rest, so the parents can sleep. The Atwoods medicine was largely alcohol which knocked the kids out. But sure… it cured your liver problems too.

            1. Mr. C, Wasnt the “good old days” hilarious then? Heck I remember cures for baldness from that time period too. They must have lost the recipe somehow.
              2WR, I doubt Central Maine got it all. Remember the janitor who sold you the preferreds gets a commission cut, also. 🙂

  8. Gridbird—I noticed you own SLMNP. I assume the parent company (A. Schulman) no longer exists by that name. Is this a busted convertible that has no possibility of a forced conversion (as noted in quantumonline)? I’m interested in it and would appreciate your answer?

    1. Randy that is also what several people have stated who have contacted company. There is some sort of “owner put” (not company) where you can tender them to company at something around $803. Obviously not anything one would do want to do now.
      I love the non call feature, QDI, and pricing is pretty stable. But, this is a small position for me personally. Its a cyclical chemical business sector. And although not near it now, LYB went bankrupt in 2008-09. And they said things are going to be down a while… Plus I am too dumb to figure out what responsibility LYB parent has in payment being this comes from the subsidiary. The stock tender would go to LYB so its possible this preferred must be paid in front of LYB common divi. But I have no idea when push comes to shove. It is certainly an interesting issue, but personally my neck is never going to be sticking out far here.

    2. I’m a big fan of SLMNP due to the ability to convert it to $800 in cash at anytime. In essence, only 20% of your investment is at-risk while you earn a yield on the full 100%. Another way to think about SLMNP is that it’s 80% a super senior secured perpetual bond and only 20% a preferred.

    3. Randy, I just noticed I didnt fully answer your question yesterday. A. Schulman was bought and folded into some of LYBs subsidiaries and has been consolidated into one subsidiary now. Its now called LyondellBasell Advanced Polymers, INC. I guess you have to give LYB credit for having enough energy to notify OTC of the name change earlier in the year. Ticker never changed but name of the preferred did though.

  9. This may be amateurish, but I’ve ranked them by 65-day average volume (from TDA) x market cap. Where does one find 90-day volume?

      1. Thanks. I think yearly volume is more appropriate and useful for illiquids. Edgar Online appears to have the data, but the retail sites that use it don’t report yearly volume. I found some code for Think Or Swim that can extract it, but I don’t currently use that platform. Yahoo gives historical daily volumes, and I will probably wind up tabulating that.

        1. Dogbite, you want some illiquid volume? There is one OTC issue that has traded less than 500 shares total in past 5 years combined. That is about as illiquid as one can get, ha!

  10. I want to thank Gridbird for all he has brought to this board. I am grateful for the amount he has taught us. I don’t trade the illiquids much, but a lot of what he says is applicable to more liquid issues.

  11. Who put the burr under Kaptain Lou’s saddle? I’ll point out that everyone talks their book. It’s suddenly an ethically challenged thing to do if the book is illiquid? Maybe we can come up with a safe space board where no one can post about anything they own. /s

    My contribution to the illiquid categorization discussion is to distinguish illiquid from thinly traded. The former may not trade for weeks. The latter trades regularly at low volume. But it’s a continuum obviously.

  12. My situation is quite different the company I work for pays for all my basic needs (clothing, food, shelter). Family seems to have a propensity to make bad decisions and die early.

    Main investment goal is to preserve capital meaning I’m just trying to keep up with inflation. To Kaptain Lou point you are all hucksters to me but I enjoy reading about the lobster dinners.

    Illiquid Securities – My first stop is mid west credit union GIC/CD. Government issued bonds including Euro especially the 50/100yr. Next provincial/state and municipal. Which requires you to understand demographics in the area you are investing.

    Once you guys get really excited and start bashing each other on the boards I know its a good time to start buying preferred. Btw right now is not the time. And gold/silver remain an illiquid fools errand unless you are my wife.

    1. I’m curious, micahc. I have no idea how old you are, but you are still working and I wonder how you are “trying to keep up with inflation.”

      Do you have some sort of dividend or income growth strategy or do you just plan to die early?

      1. My income growth strategy is owning farm land and crop sharing. 10-15% of my portfolio is within equities/preferred which automatically reinvests.

        Once I wind up business activities will roll money into more GIC/CD.

        Will start claiming social security at 67.

  13. Good evening:

    Great comments here from everyone involved with this thread. Thank you so much. If time allows, I’ll post a Pump and Dump 201 article in the next couple of days. This is an advanced class. Interesting to see that my post may have been controversial for many posters, but no one will oppose the facts in my article that many OTC and illiquid issues are being sold/promoted to produce additional returns for their own personal portfolio. These are facts.

    For the newbies here that did not read Pump and Dump 101, we will go on to the second session. This will talk about Deflection, Avoid the Issue, and My Preferred Cannot be Called – all of which are great topics. Also, it may discuss “Bury the Issue” which is done when no one wants to really discuss the fair topic of Pump and Dump. And by the way Pump and Dump sounds really “yucky” but really not as bad as it sounds.

  14. Captain Lou,
    You have stated several times that you are leaving this website because you are dissatisfied. You have stated that you are going to inform the SEC about what you claim is happening on this website. Yet you stick around, making accusations. What is the basis of your anger and why do you think sticking around is helping yourself?

    Wishing you peace and calm,

  15. Pump and Dump – Class 101

    Good evening investors: as we have a new thread here, it may be helpful to some of these posters to talk about the classic Pump and Dump I have seen a number of times on message boards. So let’s begin:

    1) What you want to find is an illiquid security that trades rarely. Buy all shares possible. Tell your online friends about this one, but buy them first.
    2) Once the shares have been purchased – it is now time to take action!
    3) Post on various message boards, including, but not limited to Yahoo, SA, III, Silicon Investor, Morningstar, etc. Add other boards if possible. The more boards, the better. This will work!
    4) Work with your other “team members” to see if they will post as well and recommend the security. It will help your credibility!
    5) Deflect at all times that a “past due security” will be called. It is just not possible. This is critical to the operation.
    6) When questioned about #5, you really need to post that you “called Investor Relations” and the issue will not be called. It’s just not possible the issue will be called. This is also an important step in the process.
    7) It is also very important to remember that any type of Ethics and Fairness to novice investors should be ignored. They are on their own and should know the risks involved.
    8) Find your next target and then just repeat Steps 1 – 7.

    1. Great points as everyone should do due diligence on what investment is appropriate at the safety level one requires. But that goes with liquid ones also as many more of them have been pummeled through poor financial structures.
      There appears to be some clarifications needing to be made here though. Points 5 and 6 are being directly made about some past CLP comments.
      Lets let the facts guide us here..
      The preferred stock rate is purely a historical rate reflecting the Company’s cost to carry the preferred stock issuances made over 1949 to 1968. Preferred stock has not been issued since 1968, but this asset class is perpetual and will remain outstanding until the Company chooses to call it in. The Company’s explanation for leaving the preferred stock outstanding is that the credit rating agencies give up to a 50% credit for preferred stock to their credit rating matrix, thus up to 50% of the outstanding preferred stock may be treated as common equity for credit rating purposes with the remainder treated as long-term debt. This treatment has the effect of increasing the Company’s common equity portion for credit rating purposes. Additionally, the cost of preferred stock is much cheaper than the cost of common equity and only slightly more costly than long-term debt; thus, it is more cost effective for the Company and the customers to keep the preferred stock rather than refinancing it with common equity. Response to Interrogatory FI-94; Tr. 2/8/18, pp. 167-169. The Authority finds the proposal reasonable and approves the cost of preferred stock of 4.75% in each of the three rate years.
      The Public Utilities Regulatory Agency of Connecticut would appear to me anyways to be a more reliable source of info to support such a wild supposition. (Page 17)
      I personally have never stated to have called IR, but this guy did in an SA article. Maybe you should seek confirmation from him? He wrote this article and seems like a nice guy to me, as I enjoyed the article (he referenced me in article so I must have influenced him in some manner I guess) but you can decide that for yourself.
      Non-Correlating Stock Ideas
      Comments413 | + Follow
      Author’s reply » Truth be told, I was originally only going to write about the CL&P issues, but decided to expand it a bit just so people would consider the reasons why I find them attractive and how that can be applied to other potential securities. Just as a side note, I actually talked with ES about the CL&P preferreds before writing the article, and asked anyway if there was any reason why they wouldn’t call them in or anything I was possibly missing. The quick response I was given was no and essentially they said they’ve been around for 50+ years and they don’t expect any reason for that to change. That doesn’t mean I’d recommend paying the offer on the highest coupon. You can see the trading range history. Use patience and take advantage and pick them off if interested. CNTHO is a good example. You give up the highest yield, but you gain the added security of par. Also note a bunch of these old issues have a slightly higher call price than issue price for par.

      And yes they could be called anytime…Maybe tomorrow even..wait, maybe not tomorrow as they already declared the next round of dividends for next cycle… Maybe next time, but not this time anyways…

      People like to discuss yield, but most dont discuss coverage ratios and protections.. The devil is always in the details.. As a few commenters mentioned in another thread about coverage light issues. These dont matter until they do… Did you know Ameren and CLP (and many more illiquid utes) have mandatory minimum coverage ratios.. For example Ameren requires a minimum of 2.0 interest coverage ratio (its actually presently way above that) and preferred dividend coverage of at least 2.5 (its presently well over a 100) to protect the preferreds… How does that compare to say MNR-C? (Which I own, btw). Dig deep and research…And you will find nothing I am reasonably sure… By the way with frequent mention of MNR-C on the forum we should be thoughtful and cognizant of fact the issue runs an ATM. Its issuance size has grown almost 2 million shares alone this year already (used for acquisitions which I am fine with me as much as that matters, which it shouldnt). And these illiquid utes dont tend to own a portfolio of money losing reits that have dinged the balance sheet like MNR has. But as I said I own it myself so it is what it is. And I also own a couple others where the preferreds take over the board if 4 payments are missed.. No wonder companies buy them off the market. There just arent too many new issuances I am aware of that provide that protection. Maybe you know of some?
      Some people value safety (everyone has their own risk tolerances). Just yesterday a kind man thanked me for my posts the past few years to provide safe income for his 89 year old father. He said he also does his separate due diligence (which all should do) but appreciated the ideas to research and act on. I get these frequently and they do warm the heart.
      We all have our comfort zone, but in the end most of the time our destiny is out of our hands. Diversity, proper allocation, and due diligence should be applied. Index funds and various professionally managed funds can be also utilized to accomplish this also.
      And above all if one buys perpetual preferreds or funds that do, one needs to understand the inherent capital losses one could be exposed to on higher long end of the yield curve movement. That day will almost invariably come. Be it this year or 10 years from now, I have no idea.. Jeff Gundlach was calling for 5%-6% 10 year a couple years ago, and that never materialized and that prediction fizzled out long before Covid. Anyones guess is as good as another’s there. The current budget deficits and total debt are indeed staggering….

      1. @Gridbird
        I wanted to take this opportunity to thank you, profusely, for your help in uncovering safe, QDI preferred issues I would have never known about. I have purchased several and hold them in my cash account and am very grateful to have them. My bank is paying almost nothing, and I view these holdings paying me 3-4% as a very conservative and excellent yield for this environment.
        I also appreciate your “teachings” and guidance on these issues.

        1. Malka and Jay, that black masked red breasted creature has shown me time after time that he is a selfless individual. People have coined him a few names since he is a “preferred” encyclopedia. I am not “lucky” to have the rights but to me he is not just Gridbird but the genuine Prefersor.
          Best regards, No. 12

    2. I think you may have posted this in the wrong section, kaptain. What you’ve described seems to relate more to worthless penny stocks with millions of shares pumped out of bucket shops and boiler rooms.

      It would be hard to corral enough shares of most illiquids and then pump and dump them to maintain much of a high lifestyle, don’t you think?

      Besides, the illiquids discussed here are not worthless. Whoever bought those few shares of WELPM @ 172 or FIISO @ 212 still gets 4% or better, as regular as clockwork. Compare that with CD rates anywhere these days. lol

      Call risk? Sure. I once owned enough AILLL to have a 5-figure call risk. That was my choice, made wearing my big boy pants.

      At times I’ve had almost half of my portfolio in illiquids and I still have almost 40% in that sector. I’ve made a significant amount trading them this year, simply by watching a list of favorites on think or swim. So I love illiquids. I love to read and learn more about them. Some of the most knowledgeable illiquid investors I know post here on III and they are pretty much the only posts I read.

      It’s easy to filter out what I’m not interested in, e.g., REITs. Anyone not interested in illiquids can easily filter them out, too, especially now, thanks to Tim trying to satisfy everyone on this great site.

      Anyway, this section for illiquids was set up primarily to satisfy your gripes about having to read about them elsewhere. Yet here you are posting something that relates more, in my view, to penny stocks.


      1. As we go along this evening, we will work along with class two of the great Pump and Dump scheme. I’ll call this one Pump and Dump 201:

        1) When investors have been informed of a classic Pump and Dump scheme, the first thing you want to do is Ignore the facts. This is prudent when you are running the classic Pump and Dump. Do Not Ever At Any Time Admit You Were Posting On Multiple Message Boards to Sell your Illiquids.
        2) The other basic rule is to “Change the Information.” It does not matter if a security has been callable for 20 years. You just have to change the “facts” in your favor. This is the best option for you.
        3) Deny, deny, deny and ignore any comments that you have posted on multiple message boards regarding your illiquid securities. This will only validate the credible comments made by valid posters. At all costs, deny and deflect all of these comments. Once again, this is extremely important.

        4) Confuse new investors with information. This is also very important to the cause. The newbies will not be able to absorb this – so it really helps when you are trying to Pump a security that is trading way above fair market value. Please let me give you an example here:

        The preferred stock rate is purely a historical rate reflecting the Company’s cost to carry the preferred stock issuances made over 1949 to 1968. Preferred stock has not been issued since 1968, but this asset class is perpetual and will remain outstanding until the Company chooses to call it in. The Company’s explanation for leaving the preferred stock outstanding is that the credit rating agencies give up to a 50% credit for preferred stock to their credit rating matrix, thus up to 50% of the outstanding preferred stock may be treated as common equity for credit rating purposes with the remainder treated as long-term debt. This treatment has the effect of increasing the Company’s common equity portion for credit rating purposes. Additionally, the cost of preferred stock is much cheaper than the cost of common equity and only slightly more costly than long-term debt; thus, it is more cost effective for the Company and the customers to keep the preferred stock rather than refinancing it with common equity. Response to Interrogatory FI-94; Tr. 2/8/18, pp. 167-169. The Authority finds the proposal reasonable and approves the cost of preferred stock of 4.75% in each of the three rate years.

        Do new investors know what this mean? Of course not! But this is the way that Pump and Dump works! This is why we are working with class two of Pump and Dump.

        5) When doing advanced Pump and Dump, you really have to work with some other posters to get this done. We will work through this issue in Article 3 of my series.

        1. kaptain, your efforts to warn and protect us unsophisticated neophytes here in this minor venue are certainly notable.

          If I may ask, when do you expect to present your findings to the SEC? Soon, I hope, because the wheels of justice often turn slowly and time is of the essence for, as you well know, there are charlatans all around us.

          Please keep us informed as you progress through the labyrinth of the government agency sworn to protect us little guys. We will certainly want to follow along.

          Thanks again for your tireless efforts on our behalf.


        2. Grid, is Kaptain Lou directing this at you (in part)? The language he’s quoting is from one of your posts. Feel like I’ve come in the middle of a movie, what in the world is going on here? I notice you have referenced hm so understand if you don’t want to, but we all do our own research here and if you don’t understand something don’t buy it! I see that advice here over and over. and it’s good advice.

            1. I do miss comments from Nomadicist. I haven’t seen any here in a long time. Here is one of his that I like regarding currently owned stocks: “If I didn’t own this stock today, would I still buy it now?”

        3. K LOU-
          PLEASE spare us number 3. I think you have crusade for some reason that is not fact based (as it might relate to commenters here), except perhaps for penny stocks, as others have noted. Enough rant.
          If only there were an ignore button.

    3. Kaptain – Was that directed towards me? Let me start by saying that I opened up accounts with Duke and Dominion for the premier notes after your article on Seeking Alpha. It was an administrative nightmare to get the accounts open. Transferring money didn’t work correctly either. I wasted a lot of time making phone calls to Northern Trust (the administrator of the notes). That stuff wasn’t mentioned in your article. It would’ve been nice if you tested the notes yourself before writing the article. Perhaps an updated article would be appropriate to point that out. Also, I’d be way more worried about U-Haul investors club than CLP. Last week, I got 100 shares of WELPM for $136.55 (4.4% yield that’s noncallable and Baa1 rated). I’m getting QDI from WELPM vs. the interest income taxed at ordinary rates from U-Haul. Is it harder to acquire WELPM shares than buy a liquid preferred? Yes, but good things in life typically require more effort. However, I spent way less time buying the WELPM shares than jerking around with the Duke/Dominion premier notes accounts.

      I mostly hold CNTHO at a cost pretty close to par. I sprinkle in CNLPL and CNTHP on occasion when I see an attractive price. I do it because I can more absorb the call risk and I like my odds. Check out the chart on CNLPL and tell me that $58-59 doesn’t look like the recent floor.

      If this stuff isn’t for you, that’s fine but it doesn’t mean it isn’t right for others. I appreciate knowing what is out there so I can decide for myself. For example, I don’t think U-Haul is a good investment, but I never posted about how that was a bad idea because maybe someone wants to lock up money for 3 years at 2.75% that’s backed by used furniture dollys which I’m sure will bring in a lot of money if things go south. I also missed the part of your article that covered Amerco’s bankruptcy.

      I appreciate all the info Gridbird and others have provided about these illiquid issues. It’s been a huge help to me and I hope they continue to post.

      1. Mr. Whitman. If we were on the new site, i would give your post a few likes. Well said. “If this stuff isn’t for you, that’s fine but it doesn’t mean it isn’t right for others.” Let me decide for myself as noone else should. If you don’t agree with someone, it doesn’t mean they are wrong. And.. if you start thinking that you are the smartest person in the room, then you aren’t looking for the train that’s coming up behind you. We need to value diversity, and other’s opinions. We all need investment ideas, and the more diversity we have, the greater the choices are.

        In my situation, I have been reading Grid’s, Camroc, and other’s ideas for a few years, and it has worked out really well. Why? when the market panics, the illiquid, pinned to par, and non callable issues don’t move a lot. The ol’ geezers holding onto them have a tight claw, and have them in a triple locked sock drawer. The owners do no panic like the other investors.
        Why would I sell my illiquid for a loss of 10, 20, 30%? In late 2018, I sold a # of illiquids because they didn’t show large losses, and used the funds from the sales to buy discounts on many stocks when investors dumped many fixed investments. Then in March and April of this year, I did the same thing. In times of volatility they have their place.

        Thank you Gridbird and others for your advice, stock talk, and history lessons.

        1. Mr. C, G&G, Malka, Dick, Jay, and begrudgingly Camroc, thanks for the kind words. An open market provides various strategies. Everyone has to do what works for them. Mr. C your purpose for holding illiquids mirrors mine, along with tremendous coverage ratios off the charts that liquids dont have. And the beauty of them is you can trade around inside the bubble if one prefers to juice a bit. As when its said and done there is negligible difference between owning CLP, AEE, Alabama Power, PacifiCorp etc etc preferreds. You try to buy on the lower end of current trading range and sell on the upper if one desires.. But I wish they would issue more liquid ones.. Or you just hold for secure income. Its pretty obvious they arent growth stocks, lol.
          … But now all of this has given me an investment idea. I need to research and see if Eli Lilly has any preferred stock to invest in……😀

          1. GRID
            if you want to consider lily then might as well do BMY as well as seveeral of the others. Most of the larger pharma have rich pipelines. The issue with them is what if anything might be the impact of increasingly high healthcare costs and the desire to control the price of pharmaceuticals. In all events, will be interested in the results of your study.
            p.s. consider abbv as well. sc

          2. If you want to know who those guys that hold onto the illiquids, I’ll try to describe them. Too bad I cant attach an emoji or gif.

            Picture an older gentleman. His face is worn and weathered over the years. He has plodded and trudged through countless battles. Years ago it was the wars, and now the battles are with his wife and the damn hipsters that constantly want to buy his stocks. He has aged now, and harder for him to get around nowadays. He still has a glimmer of his old self and from a distance he still looks thin and wiry.

            He has taken a liking to his grandson, that helps him much on the weekends. He is coming over this weekend, so he has put on his best pair of overhauls and a new flannel shirt (red and black plaid striped) he just ordered from Fleetfarm.

            Today his grandson will help him check the prices of his stocks, and will continue the coveted lessons on how to use the computer. He finds much content and satisfaction in seeing the stocks he purchased in the 60’s and 70’s. As he was waiting for his grandson… he drifted off into a slumber. He began to dream, and was picturing himself printing off the stock certificates and burying them deep into his backyard. He continued to snore and dream…
            No-one will every find these and force him to sell….

            1. Mr. C, And when his oldest son called in March asking him if he is worried about the market collapsing, he says… “Me worry? These things have survived, Vietnam, OPEC, Watergate, Y2K, 08-09 Crisis, Taper Tantrum… Heck son I also own a couple preferreds that breezed through the Spanish Flu, WWI and WW2. also. The only thing I need to worry about is where the hell did I hide those damned old stock certificates at. I cant seem to remember….

              1. Nicely done Grid. Reminds me of a writing game I think i did when I was in middle school. Teacher comes up with a topic. Then she writes a sentence on the chalk board (lol, i dont think there is any chalk boards nowadays). Then we write that sentence on our papers and continue writing. Then every 5 minutes we pass the paper to the next person. So you end up reading what was written, which takes a minute or so, and then you write and add to what they have. Then at the end, students can read them aloud to the class. Brings back memories… lol. nicely done.

                The lesson here is that everyone should have a % of a solid foundation to fall back on, wherever you are in your journey. It could be cash. It could be a little more than cash. If you are thinking really conservative, follow and read His alias is Regarded Solutions. He and his followers have lots of ideas around the 1-3% targeted area with a focus on capital preservation. Regardless, do whatever works for you and that allows you to sleep at night with whatever choices and decisions you have made for the path you are walking on.

                  1. On that note… you cant go wrong reading any of these guys on SA:
                    Dividend Growth Investor. He took over David Fish’s champion lists.
                    David Van Knapp
                    Chowder with his rules
                    Mike Nadel
                    Dividend Sleuth

                    You can learn a lot from the above gentleman, their philosophy, their articles, and comments.

          3. Grid, I would forget the drug idea, it won’t work. For instance, Ely Lilly helps people with the use of Prozac to mitigate obsessive compulsive disorders. Just being an investor, it does not get rid of obsessive compulsive behaviors of other investors knocking on and down your front door. 🙂

  16. For those inclined, there is an ask out there for a couple hundred shares of CNLPL at $59. I’m at my limit for these.

      1. Are you at all concerned that it’s callable at any time for $51.84 and it’s selling for $58 and change?

        1. Gumfighter, it is a valid point. In fact, it is one of kaptain’s points. If my memory serves me, some of the seasoned illiquid posters here have expressed they bought or would only buy at lower entry points. I speculate that seasoned illiquid investors would only buy a limited number of shares at such high price (if any) while capturing the dividend, and would then flip them when possible.
          IMO the concern is not just that they could be called but that share price could drop a bit. While there may be reasons that suggest they would not likely be called, nothing is a 100% certain.
          FWIW: I do not considered myself a seasoned illiquid investor and would and will NOT buy at these high prices; IMO the reward for the risk is just not there. And I am not in it to flip.
          Best regards, No. 12

          1. Rodgers/Favre/Holmgren/Lombardi, Those are always great points to be reminded of. Personally I think one needs to be cognizant of entry and exit points when owning issues well above par. They tend to trade in ranges and if you can snag the dividend on price movement, you take it, and reenter later. If you buy and hold one way above redemption price and it gets redeemed even in 2 years, one really hasnt done more than maybe break even if lucky. That doesnt accomplish much.
            As an unrelated note I stumbled onto something most dont have any pricing experience with. That being perpetuals during high interest rates. Hopefully that wont be a problem because lets just say it isnt pretty. A 7% ute preferred of mine in late 1979 with 10%, Ten year Treasury was trading at $53($100 par) and its 4% sister preferred was trading at $30 ($100 par). How is that for some cap losses?

            1. Grid,
              You remind me of the days there was a AMEX and when I first started trading SDGE preferred on it.
              One thing we all need to remember is when higher rates come it will not be around for as long as lower rates if my short memory serves me.
              Also talking of the Pharma, I own PFE and GSK and been looking at BMY, ABBV, RHHBY, NVS, NVO, MRK
              and I am probably missing a couple letters of the alphabet here
              My hoped for price range is when they fall to a range they pay a 3% dividend
              and yes I know some of these are affected by currency exchange.

              1. Hey Charles, I havent heard AMEX in a while, lol.. When I have researched old ute preferreds many were on like local exchanges such as Chicago or Boston. Heck even Hawaii had their own exchange back in the day.
                I saw an ad in a newspaper advertising a 8% $100 par Connecticut Light and Power preferred, with $120 redemption price. But unfortunately the ad was from the 1930s if memory serves, and of course the issue has been redeemed long ago.

  17. There are plenty of preferreds/baby’s to choose from in the illiquidity pool. Of the issues I track, 409/925 = 44.2% traded on <=29 days out of the last 30.
    164/925= 17.7% traded on <=20 days out of the last 30.

    If you look at the average daily volume over 3 months, about 197/925= 21.3% average less than 2,500 shares/day.

    It is fine if invest in these if you understand the risks. I suggest using extreme caution if you are not used to dealing in illiquid issues like these.

    1. I wonder for the sake of this topic whether or not a definition of what qualifies as “illiquid” vs what is just low volume might be a good idea. Where does the line get drawn? How did you decide, Tex? What’s the most highly traded by volume of the 925 you have in your illiquidity pool? To me, low volume is interesting… Illiquid not so much..

      1. I would guess/assume that most people would say that illiquid = low volume. Why? Many investment advisers want the avg investor to buy liquid issues with investment time horizons < 5 years. What they mean is that they want the investor to easily buy/sell anything. If the investment vehicle is liquid, that means the avg trade volume is at a level where you can do that. I would guess that illiquid issues are the lowest 1% of the issues ranked according to avg daily trading volume in that investment vehicle (bonds, preferreds, equities, …)

        Am i washed out?

        1. Mr. Conservative, so where would you place that preferred in terms of liquidity I just bought yesterday that I messaged you yesterday about? 😂

          1. Grid, if I was doing a yearly liquidity measurement and ranking… I am guessing it is #1 on the list. hahaha. I didnt think about this, until i wrote a response about Arbitrage Trader… since i have margin on 1 of my accounts, i could list some buys out there, that might not hit for a few years like yours. Then i can always cover the margin later. 🙂

            I am going kayak fishing on the Mississippi in northern MN this weekend. I wont be doing bobber fishing, but I liken a buy listing to fishing with a bobber. If you don’t like that analogy, I am finishing up staining my deck over the next 2 days, and it would be like watching stain dry? 🙂

      2. 2WR, my apologies for not being clearer. The 925 issues I track include really liquid all the way to really illiquid. Stated differently 516 issues traded all 30 days, which I would suggest as a starting point to pass a “liquidity test.”

        As for the highest volume issues, I excluded any issue that IPO’ed since June 1 because they have a lot of initial trades in the rollout period. 29 issues trade >= 100k shares per day. And you will be shocked to know the two highest issues. Personally I would never have guessed, but they are both Fannie Mae issues that have not paid a dividend since 2008, FMCKJ and FNMAS. They average >500k shares/ day. IIRC, there are several hedge funds/distressed debt funds that have been fighting a legal battle to force Fannie to reinstate the dividends. Obviously these are at the extreme end of the risk curve, so I would NOT recommend any III reader to speculate with them.

        1. Thanks for the clarification, Tex… that helps.. good parameter I suppose for a break point – those that do or do not trade every day for 30 days = liquid or illiquid… Those Fannie Mae issues = the ones Berkowitz/Fairholme has been fighting for forever?

        2. Tex, you got me curious as I have never really tracked 90 day average volume liquidity. As I wait as long as it takes, as the last one bought yesterday took 7 years to buy. I generally run 20-30 preferreds at any given time and presently have 26.
          Here are my breakdowns.
          10 or less – Five
          11-100- Four
          101-1000- Two
          1001-4000- Eight
          10,000 plus- Seven

          1. Grid, I’m curious, can you list the symbols for each of these categories you mentioned?

            I suspect I have several of these, but likely not the most exotic ones.

            1. Inspy you have or at least had a few of these I am certain. Some of these I should consider selling and locking gains, but havent done a lot past couple weeks. And of course there is zero correlation in shares or dollar amounts owned per issue. Think these are it.
              10 or less, PPWLO, SLMNP, AWRY, BANGN, AILLN
              11-100, IPWLK, PNMXO, AILLM, SBNCM
              101-1000 UEPEM, CTGSP
              1001-4000, LXP-C, NYCB-U, GJH, EP-C, PFX (guesstimate), GOODN, KTBA, GLIBP
              10K and up, RILYZ, WCC-A, QRTEP (has not traded 90 days but its running 500,000 early on,), MNR-C, SJIJ, NGHCO, NGHCP (actually this one should be on previous line, I just assumed it had similar volume as sister NGHCO but it doesnt).

              1. Grid, if I’m tracking, those categories are 90-day average of daily volume, correct?

                Seven years?! Do you place a GTC limit order and renew whenever it’s about to expire, or…?

                1. Ha, Bur, No not that way. I just have a list and casually look. I never had a seen a 100 share ask before and didnt know why. But I always watched and knew one 100 share block traded in 2018. The ask came out, I tried getting them to drop for couple hours but it wouldnt budge. So I just paid up as I might not get another chance. As I recently had came across a filing to regulators stating 99% ownership of the preferreds. I usually leave an active bid or two out a day but not many usually.

              2. Thanks, and yes, I do own several of those names. Hopefully they will remain outstanding for a long time.

        3. Reading the lower court opinion(if it upheld), those things should be trading at $.80, not $8.00 a share.
          Talk about a lottery ticket. The Supreme court could either make them worth 30-35 a share with the 10 years of missing dividends, or make them worthless if they uphold the Treasury’s Third agreement.
          IMHO, worthless is probably the way it will end up, but shorting them is ridiculously risky, as there is no telling when the decision would come down.

          1. Justin, could you be so kind as to specify which particular issue you are posting about?

            I tried scrolling up the thread to find out, but was not able to.

              1. Thanks! I have not looked at Fannie Mae for many years now, and at this time prefer to direct investment resources toward illiquids of the Grid universe.

          2. Yes, I agree this is just lotto gambling as the evidence Justin just mentioned seems to not be positive. There is an entire subset of speculators playing these various issues all the time and posting thoughts on SA. Remember these or most anyways (havent checked) are non cum so there are no accrued dividends. Of course the stock would pop big time if they were reinstated though. These are out of my investing relm.

            1. Yes. both say non-cumulative in their description, so no back dividends, so yes, probably 20-25 a share. (they are fixed to float)
              I should dig up a prospectus and see if there are any other surprises.

      3. I’d define illiquid as pretty much anything that is OTC plus anything more than 30 years old.

    2. Tex, I can only give you historical personal reference to that term Camroc, Inspy, and I have used for years on end. And its not proper, but historically we simply used it for the old delisted utility preferreds so we wouldnt have to list all the alphabet tickers. Age of issue, how much its been institutionalized, size of issue, issuance price amount of share all factor into an issues liquidity.
      And of course another variable too is some people wont invest in ANY preferred because the entire sector as a whole is viewed as illiquid in nature.
      A perfect example of how things converge is say EP-C. Its about a $400 million issuance which is fairly hefty. But some days it never trades and many days a 1000 or so. The reasons are 1) Its institutionalized as some funds own it in chunks and hold it 2) Its a $50 par, not $25 which halves the share count 3) And its 20 years old which tends to bring about less trading.
      Liquidity I suspect is like beauty, its all in the eye of the beholder ultimately I guess.

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