Investors Dumping Stocks Today

We are closely watching the equity markets as they tumble and while there isn’t a singular smoking gun in the sell off, there certainly are lots of individual items weighing heavily on investors.   It would be a good time to head down 800 Dow points and wash out the weak hands.

Energy prices have tumbled pretty hard the last number of weeks with crude being down $15/barrel over the course of the last 5 weeks and while some like to make the case that “it is like a tax cut for energy users” this has always been a baloney saying and it is this time as well–most certainly if supply is too high we are going to have cutbacks in drilling and exploration which will serve to hurt the industry in such a way as to far outweigh the so called ‘tax cut’ benefits.

We have wild fires in California that this time are meaningfully destructive–and it is speculated that the utilities may be to blame for some fires and while it may or may not be the cases the preferred shares of these companies are getting absolutely hammered lower.  Pacific Gas and Electric (NYSE:PCG) has a number of preferred shares outstanding and they are all down $2-$3/share and mostly trading in the high teens.

Insurance company Maiden Holdings (NASDAQ:MHLD) announced earnings last Friday that were horrendous–we started to go through them, but gave up as there are all kinds of creative accounting items seemingly going on with their numbers and with their sister company AmTrust Financial (NYSE:AFSI).  MHLD common shares are down to $2.51 down from a 52 week high of over $9–the preferred series are all down in the $13-16 area.  This mess is not California fire related–but is management caused I believe.

Southern California Edison (NTSE:SCE) has preferred shares now trading in the $19-$20 area with current yields around 5-5.5%–way too low to be worthy of even a speculation.

Goldman Sachs (NYSE:GS) is off a bunch today as it appears that Malaysia is demanding refunds on a crooked deal back in 2012-2013–this doesn’t surprise us–for no particular reason we have never had a high level of trust with Goldman.

Even with all the equity market issues interest rates are only moving a tiny bit lower–again, and for about the 20th time this year interest rates and stock prices are moving in a fashion that is confusing.  The 10 year treasury is at 3.19% which is barely perceptible movement.  You would think that interest rates would be much lower–BUT maybe the marketplace is getting tired of funding huge deficits in the U.S.

Conservative investors and those without adequate retirement funding should stay away from the preferred issues with huge drops today–it would be hard to make a case that there are ‘bargains’, because there are plenty of opportunities ahead to see the issues mentioned above move much lower yet.

Most preferred stocks are holding up well today and we would suggest that investors are best sitting back and watching further unfolding of the sick equity market.  Will it bleed over to the preferreds and baby bonds?

To see the decimation in many preferred shares you can observe the damage here.

 

12 thoughts on “Investors Dumping Stocks Today”

  1. Good news for SPKEP in this market though…up 250 basis points in less than a month.

    1. Hi Citadel–yes it has certainly been a bright spot in the last 10 days. Wish I would have added more (with the benefit of 20/20 hindsight of course).

  2. Tim, I have done some deep digging as I am transitioning into a retirement portfolio and have ammo to do this. My ammo is going to be allocated judiciously over time. I seek safety. I have encountered a riddle that perhaps you and your experience can help:
    I understand in depth the details of pref, cef and bond investing with one exception.
    There seems to be a certain “swagger” regarding a large diversification by number of issues held by someone and not much real emphasis on credit ratings of a company individually.
    Why isn’t credit rating mentioned in EVERY comment on EVERY company? It’s actually a mysterious void. Most of the time it has to be guessed at by the real ask rate. No one seems to include it as a mandatory Excel column check point.
    Seems that this is the most important SINGLE factor and that every comment would include right up front. Also, historical changes in credit ratings that would allow for a judgement of the effectiveness, or ineffectiveness, of a Board’s actions. As we know, Boards can succumb to Balance Sheet cramming and degradation of the less senior.
    Thanks, JA

    1. Hi Joel–you have a good point–I will try to do a better job of pointing out acredit ratings etc–sometimes us that have been investing in these for many, many years make the incorrect assumption that folks know the rating or quality of a given company (or issue. I have historically carried lists of ‘investment grade’ issues etc. and will do so again in the not too distant future.

      I will look at adding a column to some of the various lists we have on the site.

      1. Thanks Tim on the singular and voluntary action. That deserves a subscription and I have not looked around to see your subscription page!
        I have developed an extensive personal ‘database’ and if I add comments to a specific issue I will endeavour to follow my own request and give the credit ratings I have found. I am sometimes wondering about the rating date. My friend just left a position where he had access to Reuters and I think my list-requests was part of the reason why he left!

        1. Hi Joel–always looking for constructive comments. No subscription page for this site–no subscription necessary.

    2. The sad fact is, Joel, that some credit ratings can be bought to reflect what you want them to . Just take a look at what Egan Jones does. Nearly everything has an A rating. Certainly S&P and Moody’s are a tougher nut to crack, but many of the smaller guys just cannot or don’t feel they need to, pay the high fees of being rated.

      I agree with your thought process though. Quality should always trump price action, but that’s just not the case when there’s a dollar to be made on a quick flip for a profit.

    3. Joel, I believe in general ratings matter…If you look at S&P data bases of bankruptcy chances, it is always linear in progression from triple A to triple C minus. However, of course liquidity and sloshing of money chasing yield at times can forstall such actions. Thatis why I lean more involvement in regulated utility issues do to the extra layer of assistance (ooops we screwed up, we need to extract more money from the customers). Look at MH-A… Getting crushed again…Yet the signs (and who they werein ned with) were evident well over a year ago before it cratered

  3. I’m so glad I spoke out against PCG so many times. Whether they are truly at fault or not, they are a scapegoat for that broken down so called State. They will be made to pay and redistribute their wealth to the little people one way or another.

    1. G, I applaud you and your 2 amazing posts above. I definitely couldn’t agree more with you thoughts. I wouldn’t trust Egan Jones to rate anything of value as their “real A” ratings have no value or clarity to any real honest research being done. California is a complete mess and it would be best to avoid any utility that has a link to the state and their deceptive decision making abilities. Wishing you profitable investing, Nomad

      1. I played in PCG preferreds a bit and made some money to cover some rounds off golf. But inverse condemnation laws and this latest Camp Fire, has made that game null and void for me now. The potential liability on top of the already $15 billion guesstimate is just crazy risk for an investor.

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