Investor Confusion? Everyone Has an Opinion

I should turn off CNBC–normally I do not have a TV on in the office–just a bunch of noise, but for whatever reason I have it on now. I guess the opinions on where equities are heading is pretty much split 50-50–markets are going higher to markets are going lower.

All I can say is I agree with Howard Marks, of Oaktree Capital, when he said (paraphrased) he is negative on equities–the SP500 estimates are off 15% for this year–does it seem like we are just 15% off of the norm?

It is getting even harder and harder to leave 35% of accounts in cash–you don’t want to miss further move highers, but on the other had you don’t want your portfolio to get vaporized. I am pretty much sitting tight today.

I have perused the preferred stock loss list and see some there that seem attractive–but will they be more attractive tomorrow or next week. Arbor Realty 7.75% is off $1.34–and seeming attractive with a 10.13% current yield–BUT it was as low as $8 a month ago and it could certainly go right back down there. With 20/20 hindsight one should have bought way lower—of course that would not be my nature being ultra conservative.

Looking at the Utility and Closed End Fund investment grade issues I find nothing attractive–I am loaded to the gills already with these issues (most bought at much lower prices). As I mentioned before I want some of the mid range quality issues–American Homes 4 Rent preferreds, some more VEREIT 6.70% preferred, some Customers Bancorp (CUBI) FF preferreds (or many of the mid tier banks).

Well one thing I know for sure–as we go through the year there will be many companies that either go bankrupt–or teeter on the edge, and there will be lots of opportunities every month to try to buy–whether we call it speculative buying or bargain buying–those times will come.

58 thoughts on “Investor Confusion? Everyone Has an Opinion”

  1. The S&P is masking underlying weakness in stocks due to its overweight of several large cap stocks. RSP, which is equal weight S&P 500 is down 23%. Russell 2000, broader group of small and midsize companies off almost 30%. Real estate, VNQ, off 24-25%, financial stocks off 30%. The 15% number is only due to some big tech winners.

  2. As for cnbc tim, I turned it off 15 years ago. I have Bloomberg on NO VOLUME. That way you can see the news items and if absolutely necessary turn up volume for very short window.

    The latest entry on my service is yahoo. And they are as bad as it gets as far as bias.

  3. Interesting: Southern Co. raised its common stock dividend 2 cents (per quarter) today. Stock is yielding 4.6%. Wouldn’t worry about their preferreds if the company is confident enough to raise the common dividend at this point.

  4. First time poster.., thanks, you’all have been a great “support group” especially during the initial panic phase.

    IMO. I believe that prices will go lower. The recent rally is mostly due to the fact that the depth and duration of covid 19 is much less than initially broadcasted, the fear is gone. And there is a path out.

    I do not believe that the market has factored in the upcoming recession, nor do forecasters agree on the depth, breath and duration of the recession. I believe that it will be nasty, but short. Nasty because of the breadth, and short because of the pent up demand along the enormous stimulus from the govt. The wild card is when do we get to phase 2 and 3 of the restart. Also, what will be the behaviors of the consumers. (Our house will be more conservative than normal, but I am sure are others are ready to have fun and spend.)

    The markets appear to be more “normal” – with efficient asset pricing -and thus the next leg down will not violent as the initial panic selling. The winners and losers are beginning to separate…

    Will the economy rebound and the market…for sure. However, the bigger question is “if or when” does the economy return to pre-covid conditions. I suspect it will be a long while, and the market will reflect so.

    My strategy: 50% in cash and waiting for the next bite of the apple. And lots of patience with my buy list in hand. Boring…..not nearly as exciting as the past month.

    Longer term…the biggest concern is the ballooning fed balance sheet, and the highest debt since WWII, when we had the capacity to pay off the debt

    Cheers! Windy

  5. Somebody just dumping SR-A today. I didnt even get a chance to miss my shares. Doubled down at $25.50s range last week, flipped them for over a buck higher Friday, and bought them all back right now, and still get the divi end this week. Crazy stuff. I cant say at this price in market uncertainty its even a good buy. But for me that is irrelevant as this is a core position for me, and I suspect the cost basis is around $8 already so I can buy freely as I can accept losses if they occur in a core hold. Wont be happy, but I would have a lot less money if SR-A had never came to market last year.

    1. I bought some. With all the insanity going on I haven’t been paying much attention to dividend captures. penny ante stuff. Not really why I bought SR-A but it helps.

      1. Pickle, I dumped that last month around that crazy sell off. There were other issues dropping a lot more so that was part of my sell everything I could at a loss to buy deeper losers for the bounce back, which fortunately worked out good. I only recently started paying attention to it, but since my hands are currently washed from all energy, I imagine I will stay that way for time being.

      1. So long as you guys know that Spire has multiple moving parts – some of which are exposed to the price of nat gas, which is in the toilet. They’ve got storage and pipelines, etc. I agree, it’s been a safe trade multiple times thus far, but that lucky ice is getting thinner to skate on IMO. Not trying to get anyone to stay away from it… Just encouraging some caution. I’ve owned it since the IPO, personally. Todays dumping could have been those black boxes hard at work, margin calls, who knows…

        1. A4I, Not as moving parts as one would think as the other stuff is peripherals as they state almost all their earnings are derived from their gas utilities segment. They dont even come close to nutty set ups like CNP and their pipeline stuff. An entire different enterprise than that.
          That being said, utilities face risks in this uncertain environment too.
          Residential wise this is a great time for bad economic cycle for regulated gas utilities as their profit season is already over. Quite often they normally can even lose money during the summer. Their seasonly high fiscal Q-1 and Q-2 books are about closed. Only thing left is the marginal and often money losing Q-3 and Q4. That is just how gas utes operate. The electrical vertically integrated utes face more exposure near term into summer months.

          1. True….I was just speaking to the big storage joint in Wyoming and all the pipeline they operate. That infrastructure must need one helluva enema as constipated as it is with demand being down so much. I also wonder how that “gas marketing” arm is doing…. They certainly are no Chesapeake Energy – that’s for sure. I owned CHK for years back when it was profitable and worthwhile.

            Their GAAP numbers are pretty darned admirable – I’ll give them that. This is why I’ve held them since the IPO of the pfd shares.

            1. A lot of the excess gas passed through to be used by other companies is “rebated” back to the rate paying household customer with them getting about 75% of the cut, and Spire around 25%. So that part of the system is of negligible profit for them. They also get 4 rate adjustment opportunities on any change in pricing of wholesale gas they buy for their customers.
              The gas marketing division service is 75% derived are other utilities or the utility affiliates.
              This preferred however is a holding company preferred not a subsidiary, that isnt my preference but it is what is….I will be honest and say I am nervous about this market. Didnt really plan on buying anything and certainly not this today after just selling a bunch of it Friday. Im gonna have to stare down my list and figure out what animals in the herd can be culled as I want my cash position up. But the hard part is the wagons are pretty much circled already, so I have little to sacrifice in terms of quality, if I want to raise a meaningful amount of cash.

    2. I have a standing order in at 25.5

      I haven’t looked, but knowing my luck it probably bottomed out just above that.

    3. anyone know how to look up United Technologies Preferred? I see its listed on the stock channel with a 7.50% rate and past call with redemption in 2022
      20mil original outstanding. Has it all been recalled or its private placement only ?

  6. As I was saying last week the new talking point for the LSM and that 1 party…was doom and gloom. Spit on all thoughts of recovery. Sacrifice everything and hold you know who to blame. GS/MS et all took to the field and shouted from the roof tops. Did you see oil drop 70% IN A DAY?

    1. LOL maybe I got it wrong? Here’s the header…… The May contract for West Texas Intermediate, which expires on Tuesday, plunged more than 300% to -$40.08 per barrel on weak demand outlook and storage capacity issues.

      1. Anyone want to venture a guess about how today’s oil debacle might impact CHS, Inc.? Preferreds and BBs have held. Way too much of their business has morphed into refining and petro storage from ag. Once a sock drawer holding. Now???

        1. RB,
          If the gov is continuing to supplement farmers with these multi billion dollar aid packages and oil/refining companies are not doing well, I see no reason why CHS will not continue to face challenges. Personally, as I’ve posted or mentioned, am getting out of my CHS holdings. That’s just my personal choice. They are just way too highly levered to the industry that has still not recovered from the 2015-2016 crash. Just look at KMI, EPD, XOM, SLB, any of the drillers, or many other ticker symbols. Paints a pretty clear picture to me of a dim future, at least in the relative ‘short’ term.

            1. When there is a seller there has to be a buyer. Picked up CORR-A today at 12.99. I was away from the computer so missed a nice flip when it went to 14.30. Ended at 13.30.

              1. danzeb, i sold at corr-a 14.10. i hope it does better for you. Unfortunately i bought around 24 😕. This is one of the few that did not recover for me.

                1. Loss of income from a major customer and dividend cut caused major drop in price. There is plenty of risk. I’m betting it will survive so I made a small buy at what I hope is a good price.

                  1. The dividend wasn’t cut. They’re planning to recommend one but it hasn’t happened yet that I could find mention of.

                    1. Correct, no cut yet. Quote from CEO ” we expect to recommend to the board a reduction in the next quarterly common stock dividend to $0.05.” We should know soon the action they will take.

    1. SteveA, your not alone, i am at 72% cash. Personally i am not interested in capital gains so i am not buying for that reason. I just want a steady price and a dividend. I don’t think we are anywhere near a steady market yet. Fortunately i am still working so i can watch from the sidelines as i am not yet dependent on dividends.

  7. I doubt we see those rock bottom prices again, because it seems as my no nothing guess to have been predicated by unwinding leverage and all the havoc it caused. But, we know 2008-09 showed way lower prices than now. Plus we may start seeing bifurcation. The companies clearly hurting or no recovery in sight versus ones on more solid footing. Now the former could very well retest those and maybe go lower.
    Doesnt leave me a very large sandbox to play in, but I never had a big one to begin with so it largely doesn’t matter anyways.

  8. Oil Was at low of $4.04 a barrel today if I read notice correctly. Wow!

    That is 4 liters of Coke and a price not seen since when? The sixties?

    1. Scott; WTI just closed down a -$35.20 per barrel for May delivery. Brian Sullivan on CNBC even said he is befuddled and he thinks there is something terribly wrong as it makes no sense even to him. The seller would have to pay the buyer $35.20 a barrel to take it off his hands. Iam starting to wonder about bankruptcies in the oil patch. Makes little sense right now. Interesting how “demand destruction” works isn’t it.

      1. Guys,
        People holding the expiring contract HAVE TO SELL or take delivery of the oil with literally nowhere feasible to store it or any idea when they can sell it. Please ignore this noise. It means literally nothing at all. It’s like a short squeeze when the shorts get caught in their underpants and have to liquidate for whatever they can get to mitigate further losses. Please see the link I posted. It’s being updated.

        I’m not at all saying this doesn’t portend good things for the energy patch, but the headlines are raking in the dollars with these Seeking Alpha style clickbait headlines.

        1. A4I, I just bought 2000 barrels of oil for negative $35 a barrel. The truck is heading my way, any chance I could park some of it in your back yard? 🙂

          1. Grid, I just drained my swimming pool in order to store your oil. Give you a much better deal than any of the major storage companies.

            1. Franklin, I think a 50/50 split of the negative $35 received plus equal split of any future sell gains sounds reasonable doesnt it? 🙂

            2. first a Victory garden, now a black gold pond…
              I wonder how much spare capacity is sitting in homes heated with oil heat in their empty oil tanks.

        2. To Affinity4Investing; Thank You for being a “Voice of Reason”. Iam hoping my large number of shares of EPD can survive all of this. It has held up actually pretty well thru all of this chaos. Thanks for posting. Are you retired Affinity???

          1. Hi Chuck,
            You’re very welcome. Happy to return the favor for the interesting posts you offer up to us. I also hold EPD and don’t worry for a second about them. Don’t think I’ll ever live long enough to get back to par with my units, but then again, I bought it for the divvy – not cap appreciation – so I knew the deal. I’ve sold some and bought some thru the last 7 years or so but haven’t bought any in the past few years and don’t plan to. I’d recommend just buckling up and holding on. They are best of breed but I understand that each person has to SWAN holding what they hold.

            No, I’m not retired. I run several businesses and have steadily been cutting back my workload for a few years as I work my way towards the big 50 in age. I planned on retiring then – but we’ll see. Running multiple portfolio’s the way I do, could have always been considered a full time job and still is. I have a never ending desire to learn as much as I can and figure out how to use that to a benefit.

            The game has always been rigged against the little guys like us, so I’m trying to fight the good fight.

            1. THANK YOU Affinity for your very nice and thoughtful reply. We all need to take a lesson from you. Yes, I freely admit owning a lot of EPD and Iam under water by around $5 a share. You can’t win them all even though we would all like too–LOL. I fully agree with you regarding EPD for several pretty strong reasons. Iam sure you know that the insiders have bought well over $40 million of the stock over the last 3 months. Then throw in the fact that people do regard them as the 800 pound gorilla of the industry with over 50,000 miles of pipelines and I just feel they will be a survivor. Even if they cut the divie by 30 or 40 cents it wouldn’t be the end of the world. But that Huge Insider Buying just makes me feel pretty good about owning it. Thank You again.

              1. Chuck,
                It’s very hard, I know, to see an entire decade worth of gains gone from EPD. It literally is trading today, back where it was in January of 2010. Shew! But they’ve never failed to pay a dividend since that time, despite the numerous crises we’ve gone thru since then. No way they go to zero.

                You know how to tell that those “end of the world” oil is crashing and selling for -$37 headlines are garbage? Just look at the price of EPD. Down 4% on the day. Oh wait, and it’s still trading $2.60 higher per unit than it was on the Covid-19 low on 3/23/20. Oil was much higher then…

                800 pounds? Nah, I’m thinking at least 1K pounds since they’ve been couped up and eating snacks without exercise like the rest of us.

                I just looked at S&P again and they have taken no action that I could find on EPD, so if they aren’t worried yet, I’m fine with EPD also. I agree, if this mess keeps up they will have to continue evaluating that dividend – but I am laying my chips on them pulling thru this just fine and not having to do anything drastic. Both EPD and MMP are too big to fail and as we slowly reopen, the biggest damage to EPD will be to their unit price only – at least as far as I see it going today. Once this May oil contract expires tomorrow, people will chill out on the clickbait headlines and we’ll see a rebound.

                All of this is just my opinion. Have a good one!

                1. I own both MMP and EPD and don’t even think about the unit price. Its a sock drawer holding and enjoying the dividend.

                  I’m retired so enjoy the income.

                  I also own PAGP (in much smaller quantities) and that’s been a fun ride – also with a lot of insiders buying though. Bought a tad more when it got to $5.

  9. I don’t know if they’re going back down or not. I do know the downside is a lot bigger than the upside. Playing the numbers and putting a lot in cash.

    1. If I had a 10,000 gallon tank in my back yard, I would be taking me some physical delivery of oil at a buck a barrel today!

      1. I saw that some May delivery contracts at negative prices before the market closed. So, you wouldn’t have had to pay a buck, you could have been paid over $3 a barrel to take delivery, if you had a place to put it…

    2. Where do we park cash at times like this — somewhere where it is safe?
      Transfer to an online bank savings acct and get ~1.6%?
      I thought about one of those ultra-short bond funds (GSY, JPST, PULS), but those all took a hit last month, and some haven’t yet fully recovered.

  10. LOL – Howard Marks also said this Tim:

    https://www.oaktreecapital.com/docs/default-source/memos/calibrating.pdf?sfvrsn=6

    It is a very good read – and too many good points to highlight all of them – but here are a few:

    Cautious positioning in recent years has served its purpose. Investors who favored defense over offense have experienced smaller losses this year,
    have the satisfaction that comes from relative outperformance,
    and are able to spend more of their time looking for bargains than
    dealing with legacy problems. Thus, I feel it’s a time when previously cautious investors can reduce their overemphasis on defense and begin to move toward a more neutral position or even toward offense
    (depending on how sure they want to be of grasping early opportunities). I’m not saying the outlook is positive. I’m saying conditions have changed such that caution is no longer as imperative. With part of the crisis
    -related losses having already taken place, I’m somewhat less worried about losing money and somewhat more interested in making sure our clients
    participate in gains. . . . .

    Before I close, just a word on market bottoms. Some of the most interesting questions in investing are especially appropriate today: “Since you expect more bad news and feel the markets may fall further, isn’t it premature to
    do any buying? Shouldn’t you wait for the bottom? ” To me, the answer clearly is “no.” As mentioned earlier, we never know when we’re at the bottom. A bottom can only be recognized in retrospect: it was the day before the market started to go up. By definition,we can’t know today whether it’s been reached, since that’s a function of what will
    happen tomorrow. Thus, “I’m going to wait for the bottom” is an
    irrational statement . . . .

      1. Tim – I think you missed what I was getting at. Howard Marks has spoken out of both sides of his mouth. One statement he makes is bearish, another is not.

        In that piece I posted he had a bullish tilt when he said “Thus, I feel it’s a time when previously cautious investors can reduce their overemphasis on defense and begin to move toward a more neutral position or even toward offense”

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