Well we get the producer price index (PPI) in a minute or two and of course it is critical–not as critical as the CPI tomorrow, but markets will move with both of these numbers. In the lead up to potential Fed funds rate cut in September every data point counts.
Yesterday, as everyone knows, B Riley (RILY) was the big loser on the announcement of probable huge losses for Q2 and of a SEC investigation. As one of the folks mentioned in ‘comments’ with this loss there is no equity left in the business. Obviously given how negative I have been on RILY over the years I have no dog in this fight. I have written many times of the ‘land mines’ out there with the pure junk investments they were making this was a very dangerous company. If I was a holder of any B Riley security I likely would simply let it ride at this point–so much money up in smoke yesterday.
I am looking to be a buyer today of a new position–could be a REIT preferred or even a shipping preferred–something out of my comfort zone–maybe 2 new positions with just a nibble of each. With CD rates under 5% they have lost some of their luster for me, although I have to continue to roll some money at lower rates or I will be forced into too many preferreds and baby bonds.
Tim
A couple of suggestions for positions to consider in the shipping and REIT
buckets of your portfolio.
I am happy with my position in ATCOL (a BB from the old Seaspan). It’s a secure 7%+ with a maturity in 2027.
With the REITs, I am happy with my positions in BFS-D, CTO-A and VNO-O. Yields are higher than 7% and the businesses seem to be doing well.
DYODD
It seems like yesterday actually 2 or 3 months ago we were expecting to buy lower risk preferred and BB’s 7 to 8% now seems like less risky investment choices are in the range of 5 to 6% and other end of the scale are high risk 9% and the mid range choices we now have less choices unless you take added risk of call and pay over par.
Case study how a balance sheet can go bust in a short period of time. Baby Bonds are risky as they are micro-capitalized. RILY $245M capitalization is a featherweight.
Red flag no. 1 Debt to Assets 94% …., Interest coverage -0.4%!! Yikes! Some negatives on the equity side short interest 77%!! Sharks are swimming around this turd…but institutional and inside ownership investors over 90%?
I own a very small position and wondering why I ever bought it! RILYM matures in 6 months, hopefully it makes it across the finish line. Holding by breath.
I’d also like to thank the previous commenters on Riley, I sold my position several months ago with a modest loss on price but an OK profit with interest payments.
MS-Q pricing?
Johnny; As I type this its priced at $26.49. Lots better values out there.
I knew riley was a problem but no idea how bad: small position but now down 65%. thanks so much for this website and have purchased many of the positions in your portfolio. in this type of circumstance could they merge with someone and does anyone here think they will just fail
You’re welcome Lee. I would be surprised if anyone wanted to merge with them very badly–too many skeletons in the closet at least for now. Maybe someone would have an interest when/if they get by there current problems.
Wondering about RILY-M. They are required by covenants with their revolving lender to redeem 80% of these 91 days early, which is November. Meaning that this comes due in three months. I don’t think they go bankrupt before then, I wonder if they can find the cash to pay it.
It probably makes more sense to be wondering whether or not they are already violating the covenants on the revolver……