My old brain is tired–too much market activity this week I guess with interest rates decisions and market movements higher. So many capital gains in accounts (with a few dogs of course) as investors everywhere piling into preferreds and baby bonds and forcing one to decide if there are profits to be locked down. Some would say one just needs to sit back and enjoy the ride and in the end I think that is mainly what one should do–collect dividends and interest and not sweat the share price movement.
I did let go of 75% of the WR Berkley 5.70% baby bonds (WRB-E) and then 50% of my XAI Floating Rate 6.50% term preferred (XFLT-A). Both had good capital gains– I will re-enter the positions if we get share price setbacks to under $25. Additionally for those that noted my weightings in the portfolio both insurance and closed end funds (CEF) were high and this helps to get a bit more balance. Obviously this puts cash in the account which needs to be reinvested–dealing with ‘reinvestment risk’ now is a big problem. Does one move out the risk spectrum to garner yield?
The 10 year treasury is trading at 3.73% this morning–7-8 basis points higher than when the Fed funds rate cut occurred on Fed day. I find this very interesting and not helpful in some ways to the economy–mortgage rates are now just over 6% (for some borrowers anyway) and they are unlikely to move much lower if the 10 year treasury has plateaued. It is also interesting to note that 3 month SOFR has not moved even a basis point lower–we’ll see if this moves lower over the course of the next month. Lots of items to watch in the weeks/months ahead.
Well let’s get the day started and see if equity markets can maintain their record highs–no doubt fun times ahead.
TOP picks:
RC CORP 5.5 dec30 ’28 bond (YTM around 9%)
MPW CORP 5.25 aug01 ’26 bond (YTM around 8.5%)
MPW safer after the settlement agreement with bankrupt tenant Steward
Where are you finding these bonds? Do you have a CUSIP?
on IBKR you can find them. I don’t know the cusip.
JMHO – I am not a big fan of MPW’s mgmt. They have a history of outlandish spending and less-then-transparent mgmt (multiple corporate jets, etc.) Maybe they’ve cleaned up their act but I once owned the common at $22 and stopped out in the $19s a couple years ago just before things spiraled out of control (they dropped to $3 and I think hanging in the $5s now). The Steward settlement helps but I think they have a long way to go to get my trust back and they are still very far from financial equilibrium. One of my primary looks doing DD is how trustworthy is the mgmt – for MPW, they get an “F” grade in my book. Just fodder for the group here…
Yaz, I remember that from several years ago. How many Corporate jets does one company need? Look at GMRE as a better run medical REIT but even they are caught up in the Stewart bankruptcy. I still shy away from this sector of REIT land. Might be interested if things stabilize.
I keep on buying the NEWTH, it doesn’t make sense this yield in the current environment.
NEWTG currently 8.55% @ 25.14 for 6.5 months longer.
Holding cash at the moment is not so bad when funds like Vanguards cash fund VMFXX is paying over 5%, at least for now. Fidelity’s FZFXX is paying 4.87%
Vanguard $$ Markey fund is the best YIELD, runner up Schwab SWVXX As of 09/19/20247 day yield 5.09%
Surprised SWVXX yield has not fallen lower, maybe in a week or two I’d will be around 4.75%?
PCVXX and PCOXX are like 5.28
Just checked and it says 7-day yield is 4.94% as of 9/22.
Fidelity FRGXX is still 5.22%. This came over as a 401k rollover to IRA
Like you, I am worn a bit from this week’s market moves. The preferred market seems committed to eliminating current yields above 7% and drives JPM below 5%. But the week isn’t over: consider the announcement that Constellation Energy is reviving Three Mile Island based on a 20 year contract with Microsoft to power its data centers. Ute’s are the new high growth stocks (Vistra).
Ground zero for TMI is Pennsylvania where many think the election will be largely resolved. Imagine the coming protests on both sides.
Potter, If JPMs are below 5% with just the first rate cut and we have a long long ways to go, now I’m worried all the 4.75% bank preferreds are now at the risk of getting called. JPM-J call date is only this December. Reinvestment pain is real and I had to scoop up bank preferreds I rejected all month.
The macro environment seems to indicate a recession is more likely than not.
Yep
Or stagflation… just rolling along.
Cd rates and preferred rates are two different things and I would not expect to have any pfd with a 4 handle being called. I would be surprised if anything gets called that pays less than 6%.
Any opinions on CHSCM @ 25.89 and GAM-B @25.80 being called?
GAM-B was issued in 2003. It has endured thru very low interest rates. Call is not likely.
Thanks for that comment. I’d been avoiding due to call risk.
Thanks for the input. I saw that was the case on the historical chart. I’m more concerned about CHSCM with it callable on 9/30.
I think the only way to tackle CHS calling one of their preferred is based on the rate of each and the total value of each based on their cash on hand. Common sense dictates they would call the most expensive for them but size also matters. I am not sure if they would do a partial call or if the prospectus allows it for each. Speculating on anything else is impossible unless one has insider information?
I would also be curious, if they issued a new preferred, what would the rate be if cash on hand was not used. Based on how they trade it seems like they could easily issue at a yield lower then what they currently pay but how much lower?
Otherwise everything they do does not make a lot of sense to an outsider.
Thanks, your comments are very much appreciated. They have left all their issues in place well above this one.