Looking Forward to a Weekend

Yesterdays close in equity markets was really poor as selling continued right into the last minute–that pretty much wrote the story for today’s opening.

Yesterday was the biggest drop in preferreds and baby bonds this week–and likely moved our personal accounts back to break even for the year (with a 30% cash position)–or maybe even a little red overall. The baby is going out with the bath water so we will see if that continues today.

For today we will review accounts–and again, likely do nothing–while we see lots of securities we would like to own it seems likely that we are going to keep powder dry until we get to Monday–and then re-evaluate.

The CEF preferreds have remained fairly strong–being down just 20 cents from their all time high–no doubt folks their are feeling good about their holdings and the safety of the required 200% asset coverage ratio. I would love to have a bunch more of these–but they are not cheap and it is hard to justify purchases right now to capture a 5% current yield. I will be watching these closely–I wouldn’t mind a tumble in them, but I doubt we will see it happen.

So buckle up–let’s see if we can get some stability after what is likely to be a 600 point DJIA drop.

28 thoughts on “Looking Forward to a Weekend”

  1. Wow! What a day and week. Can’t say it was fun but the buying has begun and cash is being put back to work. Mostly IG with over 5.5% YTC.

    1. Hang on Mick! Actually for preferred land this is a nothing burger (so far) compared to last Dec. 2018 when treasuries collapsed and preferreds dropped hard. Take IPLDP for example. I was buying this in the $22 range last December on a phone in SD on vacation. It has basically not moved allowing for it going exD yesterday.

        1. 730, Credit spreads blew out last December all while commons dropped also. And as you know treasuries nose dived at same time. But this isnt uniform and consistent. In 2013 taper tantrum treasuries rose in yield, high quality low yielding preferreds blew out while the high yield preferreds were relatively unaffected. In 2016 the reverse happened with preferreds.
          So in other words anything can happen, and usually hard to predict so one most invest accordingly or take their chances.

  2. Nippling just a little on Investment grades. Yesterday brought BEP/PRA for a 25% starter position (BBB- at 5.25%).

    Today opened a 6% starter position in DTQ under PAR (BAA2 or BBB-) 5.25%

    Also opened a 8% starter position in ELJ 5.25% above $25 but below the accured dividend (ex-Div is 3-30). A2 or A credit ratings.

    Moving very very slow. Investment grade Utilities and Infrastructure are my interest areas with minimum coupons of 5.25%

    1. I know what you mean about moving slow. This morning as I was bracing for another day of losses, I almost thought I should stop buying today or just do 1%.

      I wondered if the the week long onslaught has turned the emotional calculus of investors to trigger a more prolonged bear market. This type of steep drop will make retirees paranoid about about wading back in and hoping for a quick recovery.

    2. Steve- I was on the fence over DTQ over NEE-I, chose NEE for the ESG potential. But only one serving, waiting for more shake outs.

  3. Frustrating how the media is flaming the Corona-19 virus problem and adding to the stock market drop. The Corona-19 virus is a serous problem but so are all the other viruses that haven’t spooked the stock market. Last year’s flu season, in the US along, the CDC estimated that 34,000 deaths where flu virus related. Where was that panic in the business world then?
    Looking forward to Corona-19 subsiding with or without a vaccine and the economy returning to normal. In the mean time buying and selling investments can result in big gains or losses in irrational weeks like this. After a few buys I’m now going to do nothing until things calm down. And thanks to Tim and other’s here my losses are not as great as they would have been a year ago.

  4. Finally got the pull back i wanted. Probably some thanks to the few thousand newcomers to fixed investing? If you dont know what you are doing you simply sell and panic. This is what makes a market. I am all in, and no more cash. Too many buys in my range.

  5. Another day of blood letting in the market. I have a high level of cash and bonds in both the retirement and trading accounts so the damage has been fairly limited but it still hurts to see gains that took months to accumulate evaporate in one week. Disposed of some CEQP and trying to sell a couple of other small positions for a small loss but nothing much that I want to do with the remaining positions (Common and preferreds). Holding for now as they all pay nice dividends and are financially solid. Not planning to start buying until I can get a handle on how the coronavirus situation is resolved.
    Coronavirus has reserved its place in history with its global impact but by this time next year we’ll have a vaccine for this thing and Coronavirus will be just another disease of limited threat and will join the ranks of SARS, MERS, etc. Where stocks will be at that time, I have no clue lol.

  6. This selling is starting to feel “panicky” to me … at this clip of 900 to 1000 Dow points a day, the average will be at zero by the end of March! Gotta believe some of this is “end of the month” selling by hedge funds. The red in my accounts hurts nevertheless. I was up nicely thru mid-Feb and now I’m down for the year. I suspect that’s true for many on this site. Oh well.

    I am not sure an emergency Fed cut would do all that much from an economic standpoint, but it would reassure, and possibly stabilize, the markets for a while anyway. When people look at their 401k accounts over the weekend, they’ll need some reassurance!

    If memory serves, after a bad week like this, the selling will continue on Monday after people review their accounts over the weekend and decide to get out … and that finally clears out all the sellers for a rebound on Tuesday. We are reaching extreme oversold conditions for sure!

  7. Most people where expecting an eventual pullback in the market. But this takes my breath away….

    1. Leslie—we all said we would welcome a pullback–guess we got it–bargains are there, when the time is right which is likely not this week.

  8. RILYH is below par right out of the gates, seems fishy since other RILY issues are over par.

  9. At least with what’s happening with Treasuries, the widening of yield spreads is happening in the last painful way…. This is extraordinary.

    1. 2WR, You love good music. I think today you need to dial up Robert Cray’s “The Forecast Calls for Pain” and enjoy the tune. Its just that kinda day today. 🙂

      1. Good one, Grid… didn’t know that one but have seen R Cray live…. More from Holmes Bros “Edge of The Ledge” –
        I had some stocks, I had some bonds
        Seemed all I had to do was wave a magic wand
        I was saving up for a rainy day
        Now it’s all gone from my 401K

        Gallows humor???

  10. On the other hand, Randa bought 200,000 EPD yesterday, up from her recent normal of 50K per day. An 8% tax-deferred yield on EPD? My oh my…


    1. Im still looking at it Camroc…I promise…Meanwhile one can still make some money..Last week I bought CMS-B at at 108.80 and just sold 102 at 109.90 and captured the divi today. :). Time to plow money into losers dropping. 🙂

      1. A caveat, Grid. Do NOT buy EPD (or any MLP) with a view to flipping out of it when it gets back near 30. You will pay ordinary income tax on the recapture. The longer you hold it, the more your basis will decline and the more ordinary income tax you will pay on the sale. Even if there’s no real gain for you. (All that deferral, you know?)

        The IRS has gotten serious about this and K-1s were revised this year to show the recapture amount for the first time. Trading these things in an IRA won’t work either. The recapture becomes UBTI. Ouch!

        Bottom line is that these sweet income vehicles are just that. Income, not trading vehicles. To be enjoyed tax-deferred for your lifetime so that when you die, your heirs can make your large deferred tax liability go poof with their step-up basis.

        JMO. I am not a practicing tax attorney or accountant. But I am a long-time MLP holder.

        1. Camroc, that is what I am trying to decide as it is what you say. MLPs are just so hated now. But clearly from what I have been reading this company has its act together. And the bond market certainly respects them to when they issue debt.

        2. Avoiding the K-1s and gaining exposure to MLPs through an ETF seems like a better way to go, although the one I use (FEI) is getting slaughtered like everyone else.

    2. Camroc; I bought EPD a dollar higher than where its at now but she has bought over the last few months something like 1,560,000 shares of EPD. I’m sure you know she sits on the board and is actually part of the founding fathers family of this company. I have read she’s worth $4.5 BILLION dollars. I also called the I R Mgr before I bought my shares and she told me that EPD has never cut their dividend in the company’s history. I’m not sure if that is actually true or not. Trying to verify these things sometimes is not easy. I remember back when KMI cut their divie from $2.00 to .50 cents and wow did it crater big time. I spend over 4 hours a day reading research reports on all my holdings. From what I have read EPD with its 51,000 miles of pipelines is one the very biggest pipeline companies in the country. And with Ranna continuing to buy with both hands I feel good about owning it and maybe even adding to the position. Hard to get an 8% return with a solid company in this terrible environment.

      1. What do their revenues look like when demand falls for petroleum products?
        In recessions, the amount of oil consumed can drop 10-15%.
        did they cut the distribution in the last recession?
        It just seems to be me that any yield in this tail end of an economic expansion could be prone for a distribution cut in the next year or so.

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