Market Downdraft Does No Harm to Us

If you are holding preferred stocks or baby bonds today you have likely already noted that you are not being harmed by the common share downdraft.

With the S&P500 off by over 2% income issues are barely moving–a few cents here and there.

Interest rates have moved lower by just a bit and there is no expectation of harm to preferreds and baby bonds in a common downdraft unless interest rates are moving inversely (stocks down and interest rates up).

At some point we will get the big common share drop which will be coupled with a spike higher in interest rates–then I will worry–but that time is not now.

16 thoughts on “Market Downdraft Does No Harm to Us”

  1. Tim, do you consider today’s ~85 basis point increase in the 10yr a ‘spike’ or only a thumbtack?

    1. mikeo–it is up 9 basis points at this moment–I have usually used 1/8% as kind of a cut off. This is kind of confusing with the S&P up 1/2%—I would not have expected this rally in stocks with interest rates moving this much higher. Just goes to show that new things are happening everyday–I am watching the average baby bond price right now to see where we go mid-day.

      1. Thanks Tim. I think we must be looking at different indicators, I’m using the Treasury Yield Index – 10 year Notes, $TNX on Schwab, what to do use as your gauge?

  2. The median preferred was down -.53% and the median baby bond was down -.12%. Equity REITS were trashed at -3.14%, so not a good day for commons. Conversely precious metals were UP ~ +6.0%. 173 $25 preferreds/babys were down 1.0% or more, 44 were down 2% or more so there was some pain. I did see a hint of what I suspect was forced liquidations in some other markets, very similar to what occurred at the start of the Covid meltdown back in March. Not saying it is the start of something bigger, but will be watching closely with an itchy sell finger. . .

    1. I hate to see carnage in the market but if you are ready for it, it can do wonders. I bought baby bonds from several companies between $10-$15 and sold most of them above $26, while collecting 2 or 3 ginormous interest payments while waiting. I’m sure many of you did better than me in similar trades. So I’m hoping for a little forced selling soon. We don’t need March 2020 levels but maybe some Christmas Eve 2018 panic would give us some trading opportunities.

  3. PFF is down over 1%. …Most my issues are not having a good day either. I see the prediction of inflation pushing things today. And I suspect many held off on sales until today because 2020 saw +++ realized gains for av investor.

  4. Looks like almost all of my preferreds are down today…along with every REIT common that I own. The fire sale continues into year #2.

  5. REIT preferreds are down, some more than 1%. Trading opportunity or wairfor more carnage?

  6. Not seeing quite that rosy of a day, but not terrible. But then, I don’t what Grid owns 😉

    1. Gary–rosy is in the eye of the beholder–for me a nickel, dime or quarter moves don’t even register—now dollars that is another story.

      For Grid his issues haven’t even traded yet this year.

      1. Some of Grid’s have….. I bought a massive 5 shares of DMRRP several months ago with cost basis of about $109. I noticed the other day there was an ask of $175, so just for fun, I decided to put my 5 shares on the block. They got taken this morning for $175. Nice little haul, but now I have a hole in my obscure / illiquid type stuff.

        1. Mark, I have been out awhile there. I bought last time at $90 and sold at 105 a while later. In the good old days I would buy frequently at 68-70 and sell at 78-80… Never thought 100 plus would ever be the going rate now, lol.

      2. Tim, I thank you for bring me the name of Brookfield. Today, BPYU (Brookfield eREIT inc.) and its sister BPY (Brookfield eREIT partnership common units) both gapped up around 18%. These are Mall stocks. Apparently Brookfield has clout similar to SPG (Simons Property). Actually many of the Mall stocks did fine, not EPR (ski resorts, cinemas), hotel etc. experienced sizable drawdown. I noticed that Schwab posted some special dividend and return of capital plus interest and dividend from BEP (Brookfield Renewable). This dividend info was not revealed in Dividend Channel.com. I sold some BEPC (the renewable purchased by Brookfield) and plowed the proceeds to buy BIP common. That was in hindsight a stupid move. BEPC is still solid. At 2 SA articles try to claim Brookfield property eREIT is not sustainable and be ready to face dividend cut. Best to ignore SA articles. Obviously they are all try to sell their membership. Like Gridbird said, I do not do common stock buy and sell well. Bought just 1 share of AMZN. Sold it 3 or 4 months later to get 1.0 or 1.5% profit. It gapped up right after I sold up 5%. Today, down more than 2%, earlier more than 3%. As he said, best to stay with income names.

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