Lousy economic data?? Pretty much an understatement as we now have more than 20 million unemployment claims in the last month. Housing starts tumbled fairly hard in March, before the Covid-19 related issues hit really hard–April will be pretty bad no doubt. The Philly Fed Index was smashed lower–to a negative 56.6.
The key of course is not what is happening today, but what will happen for the balance of the year–prices will move on future data more than current data–obviously (or it should be obvious) no one really has visibility, but it appears to me that markets are now starting to be realistic–no V shape recovery will occur.
I read today that United Airlines has cut the May schedule by 90%–for all practical purposes they are shut down–looks to me like the airlines will see some bankruptcies–regardless of the bail out money.
No doubt everyone has heard that the bail out money is running out for small businesses–more money will follow, but it doesn’t matter there will be lots of small businesses that will either never reopen–or more likely will reopen, but after a few months of struggling to garner customers will hang out the ‘out of business’ signs.
I am mostly on the sidelines today–maybe a nibble here or there–but mainly waiting at 65% invested. On some of the more speculative issues I would like to buy I want a little more visibility.
I see the lodging REIT preferreds are pretty red today. I want some of these issues–but I want more long term clarity.
mREIT preferreds are mixed, but leaning toward the red side of things.
No real bargains in the CEF and utility preferreds and baby bonds--these things have been rock solid since the initial market shock wore off–no doubt there are lots of safety seekers in this arena.
Not sure when I will see a ‘all clear’ time to get 10% of holdings in mREIT and lodging preferreds–remember I am ultra conservative and when the pandemic is over (or handled) I would like to have a portfolio yield of 7-8%–would be more than happy to lock that down.
I listened to gov murphy’s HORRIBLE 20 minute NJ state of the state today it was reprehensible. Demanded a fed bailout. (Like it’s everybody else’s fault NJ is going bankrupt due to political malfeasance)…Stated that covid 100X worse than the flu. Thru around statistics as if proving his lies and said MATH SCIENCE…..and guess what NJ can’t go back to work until he can quarantine !!!
And cover of barrons saying same BS. Also WS pundits started this up James Gorman Goldman sachs its..” Life will never be the Same “.. It’s the new dem talking points. CRUSH optimism.
Say good bye to summer at the jersey shore.
Thought about taking a small position in SDS end of day today but decided against it ‘cause you have to really stay on top of that kind of play not to get burned and I don’t normally have the time. GLTA and enjoy your weekend.
The market has already priced in bad news. 5M new unemployment claims was EXPECTED. There is no bad news left to shock the market down. Any good news will create a huge bounce…unlimited fed printing of money coupled with any good news will create at least a V recovery in the equities…whether that translates into actual economic recovery remains dependent on people actually producing goods and services again. With unemployment compensation in many cases exceeding wages earned, one wonders when this will happen. For me, as long as the printing presses at the fed are in overdrive, the money has to land in the markets. I will go along for the ride. I am about 60% invested …buying a bit more every day. Love this site, THANK YOU for this resource.
I would have to disagree with your statement that there is no bad news left to shock the market. The full effects of COVID-19 on the economy are not yet known, and therefore cannot possibly be baked into the stock market. My two cents.
Futures up 900. Doesn’t look like tomorrow will bring any bargains.
Markets moving up after hours.
The movement appears to be early reports (more anecdotal than scientific) on the Gilead drug Remdesivir showing good results treating Cornavirus.
Although anecdotal, there is some science behind this drug. Japan has a drug that has been recently approved for Cornavirus treatment in China based upon clinical trial results. So, although the Gilead results are still anecdotal, it is a very similar drug tracking to Chinese clinical trial results.
Here are the links.
https://www.hospimedica.com/covid-19/articles/294781247/fujifilms-antiviral-becomes-first-approved-drug-to-treat-coronavirus-in-china.html
https://www.wbur.org/commonhealth/2020/04/09/coronavirus-antiviral-treatment-trial-fujifilm-avigan
https://www.cnbc.com/2020/04/16/sp-500-etf-jumps-2percent-after-hours-on-report-gilead-drug-showing-effectiveness-treating-coronavirus.html
As I said a few days back the real bargains “are completely gone”. What a few weeks ago was $22 to $24 are now trading north of $26 and even $27 now. Now on the “Other Hand” today I added to an already sizeable position–I purchased (be it right or be it wrong) another 500 shares of “MS+K”. I really like this high quality company for several good reasons. The coupon is a 5.85% and the call feature is 4/15/2027. Iam not a trader like many of you guys I buy it and put it in the “sock drawer” like Tim talks about. So with a little luck I will have this issue for another 7 years. In my “Crystal Ball” I look out another year and here’s what I see: Extremely Low Interest Rates, all the good quality with a decent coupon companies trading at $26+ all the way to $28. When a new issue does come out we will be back to the BS before this virus. In other words a decent company and they come out with a coupon of say 4.25% to maybe 4.75%. So in all of this “Total Chaos” that is why I sold all my weak kneed sisters and bought alot of the Mega Banks and a few other items. These are all companies I plan on keeping thru “Thick & Thin”. I have “real mixed emotions” as to if we are going to get one more crack at this speculation of the S&P returning to the March Lows. Not convinced thats going to happen now that the Fed is shooting the Howitzer Cannons at everything that has a pulse. Oh by the way I bought the MS+K at $25.44 which I still think is a good deal considering the 7 years of “call protection”. Hope everybody is safe, sound, and healthy.
Chuck I agree with your take. Thank you for sharing your strategy – it strikes home for me as a “buy and hold” preferred investor.
Grid,
How do you compare MS-A vs MS-K, and how would you choose one over the other?
Hey Chuck…I took a flyer on one of your recommended mega-banks today and was able to snag a starter position in CFG-D near par value. For some reason Fidelity doesn’t like that ticker, so I bought it from another broker. I remain skeptical of the mega-bank moat in this market, but am willing to leg into this one. Cheers!
CW – Fidelity thinks all its clients are too dumb to know what they’re buying if they’re attempting to buy an issue that’s F/F hence they didn’t let you buy CFG-D without calling in. If you listen to most of the Fidelity reps, it’s amazing how many people have called to complain about this policy (with rep’s support for changing it), yet the policy remains in place. I know I’ve moved some money out of Fidelity just because of this policy and again, based on what the reps say, I’m apparently far from alone.
Same here 2WR…having a second (or third) broker seems to be necessary to do the type of investing discussed on this forum. Fido does a pretty good job in other areas so I won’t abandon them, and frankly I forgot CFG-D was a fixed to floating preferred issue.
I agree, CW…. There are areas of Fidelity that I find very good, but the nanny state approach to F/F is a strike against them and their reps know it as do we.. They’re a worthwhile broker with their own individualized flaws just like the others… Fortunately, I, personally have none…..
Took the words right out of my mouth.
Bob, If you like to see artificial low balances in your account sign up for Ally brokerage. I have a number of illiquids and when they dont trade for a month or so, they turn the worth of them into $0.00. I got a couple of decent quality issues I own now worth nothing again, ha. But unlike Pendragons issues, my issues do have actual value, just no sellers.
Anyone else go crazy and raise cash today? I got to 25% cash a while back and couldnt keep my finger off the buy button and it shrunk to 10%. Made some more quick money and decided to get back to 25% today and see what next week brings us.
Grid, I sold some PPWLM today at $155. Today was XD day, so that was a good benefit there.
Pretty confident that I can buy them back a little cheaper within the next 3 months.
I did more selling when the prices got too high for the systemic risk. Of course I’ll buy some back on the next drop. Now at 50% in cash metals and a bear fund.
Good Saturday morning Citadel West; If you get a chance over on S.A. you can read the 16 page transcript from CFG+D on their most recent quarterly report to their analysts. They use alot of banking abbreviations and Iam not a banker but you will still get the gist of the whole quarter. The CEO and CFO were in on the call. I found it interesting but by no means claim to be a banking expert. But they are the 13th largest bank in the country with over $165 Billion in assets, $125 Billion in deposits, 1,100 branch offices in 11 states. They were also nominated by Forbes as one of the best employers in 2019. Anyway, just thought I would share this with you. I know alot of folks on this site love to poke fun at S.A. but I like the site just for things like this. They almost always will publish the transcripts of companies financial reporting results. That alone makes it worth it to me. Iam comfortable owning their preferred. Oh and by the way they have been in business since 1828.
Thanks Chuck…I’m a long time SA reader also.
As of 4/15/20, CNG had ~$5 billion (and rapidly rising) in forbearance requests across sectors; commercial, mortgage, education, auto, etc. (WFC, JPM have similar results). The banks are just beginning to see impact now, so IMHO it is speculative whether or not there will be dividend or debt payment suspensions sector wide. At the very least I expect some kind of retest of price in economically sensitive sectors *UNTIL* widespread testing allows economic restart.
Hello “Qniform”; THANK YOU for the input. I for one do appreciate it and appreciate anyones constructive input. On the same conference call the CEO Bruce Van Saun did say they will be discontinuing any further stock repurchases. BUT, on the other hand he also went on to say they did declare a 2nd Quarter dividend on the common of .39 cents per share which is 22% higher than last years 2nd quarter. Go figure??? The way I atleast somewhat look at it is they would cut the common way ahead of the preferred. But of course thats just my humble opinion. He said the .39 cent dividend is payable on May 13th referring to the common. Both Citadel West and myself own the CFG+D. In these “extremely troubled times” I fully realize nothing is guaranteed. Just have to hope the country can get thru this without too many business’s going under.
Chuck – Isn’t it a whole lot more than just your humble opinion that they would cut the common way ahead of the preferred? P S-23 of prospectus says, “So long as any share of Series D Preferred Stock remains outstanding, unless dividends on all outstanding shares of Series D Preferred Stock for the most recently completed dividend period have been paid in full or declared and a sum sufficient for the payment thereof has been set aside for payment, (i) no dividend may be declared or paid or set aside for payment, and no distribution may be made, on any junior stock, (ii) no monies may be paid or made available for a sinking fund for the redemption or retirement of junior stock (a “junior stock sinking fund payment”), and (iii) no shares of junior stock shall be purchased, redeemed or otherwise acquired for consideration by us, directly or indirectly, other than: …” and P S-20, “With respect to the payment of dividends and distributions of assets upon any liquidation, dissolution or winding up of the Company, the Series D Preferred Stock will rank:
“senior to our common stock and any other class or series of our stock that ranks junior to the Series D Preferred Stock in the payment of dividends or in the distribution of assets upon the liquidation, dissolution or winding up of the Company (collectively, “junior stock”);…”
Chuck & 2WR, it would require a pretty big deal to suspend the common and deferrable dividends of this sector BUT the current pandemic could very well provide the reason (or excuse) in several ways, e.g. as a requirement for receiving relief, as PR due to “shaming” by SJWs, as an FDIC ratio requirement, etc. I also own securities exposed to the risk – I’m just giving an opinion about substantially heightened risk.
Fauci and Birx explained why the infection testing we have now is adequate, and why you are not going to see widespread anti-body testing anywhere in the world that has any accuracy coming online any time soon. Our press won’t report on what is said at the news conferences so people don’t understand all of this. And to be fair, it is highly technical so I can only relay the gist of it even after they dumb it down for me.
In short, if you are waiting for a vaccine or anti-body testing on a wide scale before you let people out there will be nothing to go back to. It simply isn’t going to happen. But they have plenty of infection testing when used properly and will use the county based tracking systems that are already in place for the flu to gather the numbers. They even had a person give a presentation on what the projected number of active infection tests they would need would be for what they plan to do and we have excess capacity now that the backlog is cleared up. It made sense to me when he ran through the numbers.
I disagree with you a lot on this statement “As I said a few days back the real bargains “are completely gone”. ”
It all depends on ones focus, timeframe, risk tolerance, etc. If all you are focused on is a narrow swath of bank or utility preferreds, then perhaps you are correct. But there is a huge universe of stocks out there and bargains can be found, especially for people with a longer time horizon.
I suggest one consider common stocks. I have added a number myself at various times over the last 4 weeks. For example, here are two of the big 5 Canadian banks yielding over 6.5% and 7.5% respectively that I added more shares today – Bank of Montreal – BMO and Canadian Imperial Bank of Commerce (CM). Both have very reasonable payout ratios and strong histories. BMO has not missed a dividend payment since 1829, paying dividends consistently through major world crises such as World War I, the Great Depression, World War II, and the 2008 financial crisis. CIBC hasn’t missed a regular dividend since its first dividend payment in 1868 (and never cut it in the last two financial crisis) and has said recently no dividend cuts are planned:
https://www.bnnbloomberg.ca/no-dividend-cuts-as-reliable-income-incredibly-important-amid-pandemic-cibc-ceo-1.1415206
Just two examples – lots of other dividend paying common stocks at good prices are available – and not just for dividend growth but capital appreciation as well. Then in the preferred world, while I know many here shy away from mReits – there are some excellent values out there.
So bargains do exist. Just depends on ones focus, timeframe, risk tolerance, etc.
Maverick61, Haven’t had time to read the headlines so continuing to initiate, add-to and swap positions every day.
Would add RY to you CN bank options: PE5%, AA-
Among many others, another CN to consider is ute-preferred CNUTF: Pfd-2h, 4.50% coupon, 5.71% YLD, QDI, call-protected to Q3 2022.
RY: PE under 10, YLD over 5%, AA-
Indeed Alpha – RY is another solid Canadian bank – and another example of where bargains can be found depending on one’s time frame and risk tolerance
To Maverick61; I have to “respectively” disagree with you. Many of us here are not wild about buying the “Common stock” of anything. OK, lets take your “CM” as a “Text Book Example”. If you had been the unfortunate soul to have bought CM on Dec. 31st, 2017 you would have paid somewhere between $97.67 and $100.00 a share. TODAY its trading at $57.50. So please “explain” to us how thats a “bargain”??? For that reason I don’t buy any “Common Stocks” for an “Income Stream”. I own a ton of the MEGA BANKS but NONE of their common. Take a look at the chart of WFC. While you would have lost your ass on the common their preferreds have held up quite nicely even in this incredible CHAOS.
Cherry picking a date doesn’t prove your point. valuation is dynamic, what wasn’t a bargain at $100 may be so at $50.
To MCG; Another person that has missed the point completely. Many of us guys buy these preferreds in hopes of not only getting a nice coupon payment on a quarterly basis BUT also hope someday to get our “Principal Back” TOO. So the guy that bought it at $100.00 a share just possibly will “NEVER EVEN BREAK EVEN”. Don’t know about you buy I don’t invest my money in hopes of maybe at best breaking even. So maybe you should think before you speak.
@mcg I have learned a lot from your posts. You offer a very intelligent and objective insight into investing. Please keep posting, your comments are very helpful.
Oh ok you know it all Chuck. Give me a freaking break. “Respectively” (sic) of course
Your example is BS. You cherrypicked a date. I am not talking about what CM was selling for 3 plus years ago. I didn’t own it then nor would I have bought it then. I am talking about what it is selling for TODAY. At it’s current price, yield, earnings, etc – it is a bargain.
Look, if you don’t want to buy common stocks that is your choice. But quit making blanket statements about no more bargains existing and especially quit putting out bogus analysis like you just did with CM.
There are others on this forum that do buy more than just preferreds. There are various common stocks one can buy for good income streams along with some capital gains. Everyone’s universe of options is not limited to a very small universe of mega bank preferreds that results in no portfolio diversity.
Sounds like the KING has spoken. But you do forget something. Iam not saying to not buy common stocks. I have a handful myself. Just don’t compare them to preferreds and make sure you realize they also are subject to much “Bigger Price Fluctuations”. So to continue my point Iam sure the guy that bought CM at $90, $80, $70, even $65 said to himself “it sure has a nice dividend”. Well as my old partner use to say “Well that and a nickel will get you a cup of coffee”. Most investors don’t want huge fluctuations in their portfolio was my point but it flew right over your head. No reason to continue this discussion with you.
Chuck P, “common stocks…are subject to much “Bigger Price Fluctuations”. I have to 100% agree. And what lunatic would buy a retail clothing store common stock in the middle of this chaos?
It’s about valuations. Recently bought ROST at $65, sold 2 days later at $85 and VPU at $99 and sold 1 day later at $124. There were others. But also got my bacon cooked on too-early DAL and XOM, but they’ve been averaged down to near current prices. Valuations and allocations.
Mav61 is suggesting values in some are compelling but as you point out it’s maybe not for everyone. Important to keep in mind though, even with a mix of preferreds anyone’s portfolio could suffer a $1M drop in face-value at any given time. 🙂
To Alpha8; THANK YOU. We all have our own philosophies as to what constitutes a wise investment. Maybe CM is a great investment, who knows for sure in this crazy environment. I just don’t appreciate being attacked and I do think one should be careful and prudent when saying the dividend on a common stock is a good investment. Iam sure the people that have bought XOM, CVX, M, JWN, CCL, and MAR all thought the same thing. And by the way I don’t just own the Mega Banks–far from it. I have a very diversified portfolio of preferreds, Corp. Bonds, Nebr. Munis, and even 5 common stocks. So its really ridiculous how some of these guys try to put you into a box for their convenience and then try to tell you how they are so smart. I have listed the last few weeks many many good quality companies and have tried very hard to help everyone on this site. But as true in life there’s always going to be a few —— on any site.
Well, to be fair Chuck, Mav61 had a fairly lengthy disclaimer in his original post about it not being for everyone. And I’m sure you’d agree his or anyone else’s disagreement is valuable in adding perspective.
Like Mav61, I’ve been adding commons on the same principal: valuations. Not just based on nominal price drops, though based on earnings projections, PEs, ratings and leverage. CSCO, RY, EQR, and MMM are a few. And BMO not missing a dividend since 1869 and available at 2010 pricing? That’s interesting enough for further investigation. You may want to check it out. The capital gains of even modest moderation of the price to historical valuations would trounce the dividend of any similar-rated preferred.
Alpha, there is a third way to invest that you havent considered that needs to be mentioned in fairness. The Pendragon Y method. Buy EPR at $70, XOM at $80, SOHON at $26, a slew of others and publicly claim it is still a great investment because the dividend is still being paid. The fact the prices have dropped 50-75% since purchased doesnt matter at all. 🙂
Rida Moron did update his website saying 1st qtr they are down -31%. My guess is that this is still fudging because his PetLoungeLizard (aka Pendy) have posted horrible buys in posts. By the way me and several posters have been getting our posts deleted right and left. I posted 3 and within 10 min they are gone. They are even wiped so you cant see it in your history of posts.
Welcome to the club, Mr. Lucky… I am monitored and I am lucky if anything gets through. A lazy monitor lets a few in and then they get deleted later usually. Sometimes my sarcastic back hand put downs sneak through when I am sneaky.
Grid, Pendylizard’s losses are breathtaking and yet he’s still a bellicose big-mouth; evidencing an astonishing lack of humility. I have at times (sincerely) felt sorry for him and his apparent psychological disability. It has to be hell being trapped in that dark abyss of denial and bravado. Moron on the other hand strikes me as a textbook con man who generates stock tips from sources such as his apparent twin the McDonald’s hamburglar. I would not be even slightly surprised to one day learn most of their followers were aliases they created.
Alpha and Lucky, All my insult posts got pulled over weekend. Just snuck one in this morning using Moron’s own quote against. Bet this dont last long either.
”We are somewhat cautious on STAG because they focus on lower quality properties, and are extremely unfocused” ….Your salient comment can be relevant to your own portfolio selection process too.
It’s interesting Alpha you named CSCO, RY, EQR, and MMM. Your choices are all solid picks. While I did not necessarily buy those particular stocks, I was right there with you with others in the same industries
You bought CSCO, I bought AVGO (ok not same industry but tech related)
You bought RY, I bought BMO and CM
You bought EQR, I bought AVB
Seems we had similar thinking but settled on different targets. Now that said, AVGO or AVB are not the same compelling values today as when I bought them. They have bounced around 25% or so from where I bought them. I had liked the companies in the past but didn’t buy back then because the valuation was high.
I actually did buy MMM – but after holding it a week or two, I ended up selling. I think it is a very solid company but it had some issues before the crash and I just felt I could put the dollars to better use in other opportunities
As you note – it is all about valuations
Maverick61, If we could had 7%, BBB+ (or higher) perpetuals, I probably would be less interested in the commons and be searching for the next beach to explore. But we don’t, so looking to set aside a few $$ in well-priced companies that can be reasonably expected to grow over longer periods of time. The recent month or so of opportunities has been worth the (very long) wait. For each of these, like you I’m sure, I’m expecting total returns well-above what our preferred holdings could produce and without challenges like YTC or exposure to calls. Especially as we enter a zero rate environment, I have some concerns regarding the redemption “cliff” we’re facing from 2021 to 2024.
I have been mostly unwilling to buy commons over the last bunch of years due to extreme over-valuations. Boring I know, but no matter how long the wait, and no matter how much they were climbing I need to stick to fundamentals. Low PEs, high Moody’s/S&P ratings, low leverage and strong growth projections are starting points for me – and ignoring news headlines is equally important. And when doing the homework up front, after I purchase something I’d rather see it go to zero rather than sell at a loss. This may be counter-intuitive to some, but it has worked. Anyone looking at the price chart for Apple for will have a perfect example of why.
If the fundamentals are intact, when an issue’s price drops, I’ll continue to add at pre-determined price points – sometimes with long-standing bids that are filled in a window that occurred when I wasn’t looking and lasted for a few minutes. Extremely effective for lowering the basis over and over. I did something similar in the recent preferred armageddon, buying every day all the way to the bottom with zero emotion and zero CNBC. Despite some laggards like RLJ-A, the fixed income/preferred account-returns are now heavily in the plus YTD, even as credit quality improved and scheduled income (ROI) increased. It’s these “events” and valuation opportunities that make the difference. I wouldn’t own a lot of currently held preferreds or any of those commons if not for the recent price resets.
I know some are worried we could see further trouble in our markets. That will eventually happen. Could be tomorrow or five years from now. More important I think to be prepared for it rather than try to time it. If holding junk-rated issues there may be reason for default-concern, but I’m sure as heck not selling high-rated holdings on the chance there may be a temporary or even long lasting decline in face-value. But I’d be a relentless average-down buyer of the higher-rated issues if the opportunity presents itself again and a few commons like CSCO, RY, EQR, MMM and some others would be included. Heck I’d probably even add more DAL and XOM. But still no BDCs, shippers, MLPs etc. – or movie theaters haha.
Alpha
Yeah, I think it goes back to my point that everyone is different. We all have different needs, timeframes, etc. What I do today is different than what I would have done 10 years ago.
For me – my portfolio is much more conservative today – but I still own some BDCs, Reits and Common Stock. I had been moving over the past 14 years from more aggressive to a Dividend Growth and Income strategy and then to even more conservative the past 3 years in adding preferreds. But the portfolio I talk about here is just one component of my total assets. When I retired a couple years ago at age 57, I structured things as follows:
1. Safe Assets – 15% – laddered CDs and high yield money market funds – that would provide at least 5 year worth of living expenses in case a downturn or crash occurred
2. Retirement Funds at my last employer – 17% – I left these there for now because they are with TIAA CREF and give me some options I could not get elsewhere. I have them positioned about 40% in equities, 38% in Real Estate, 12% in guaranteed and 10% in bonds. The real estate is a really unique option as it is actual real estate TIAA own and manages and functions more like a bond with average returns of 6% since inception in 1996 with the only period of poor performance being 08-09 (this year it is slightly positive YTD) and the guaranteed is similar to a retirement annuity earning about 4% annually
3. Retirement funds at my wife’s employer (she is still working part time through this year) – 22% total – of which about a fifth is in a traditional cash balance type pension balance from her company and the other 80% in a 401k with probably a 50/50 equity to fixed income split
4. My tax Deferred and taxable accounts that I trade and talk about here – about 46% of the total. So I am willing to be more aggressive with this component given how I have structured everything else
Over the last 10 years, every common stock I have owned except one fit in the DGI school of investing. As the market rose, I profited from the dividends as well as the capital gains. Many were Dividend Kings or Divided Aristocrats. But over the last couple of years, I started selling a lot off due to valuations and putting the money in preferreds.
Today though, those common DGI stock valuations are much more compelling and hence present some good opportunities. It would be foolish to ignore them just because they are common stocks. Just like you said, I mainly stick to the fundamentals and ignore news headlines and daily up and downs. Buy quality at good prices and just sit back and let the power of time pay off for you. I don’t need this money today so why worry if I did my homework upfront
And like you said – If the fundamentals are intact, when an issue’s price drops, I’ll continue to add and lower the basis. I too did this in the recent crash. A good quote to remember is in a panic situation that “When it is time to buy, you won’t want to”. People have to learn to take emotion out of it. and not get paralyzed with fear.
Now one area where we do differ is I also own some BDCs (typically the strongest ones) a few strong MLPs and some Reits. And while I don’t own mReit common, I do own mReit preferreds. I do avoid shippers. But I feel comfortable doing this given how I have positioned everything else in my overall portfolio.
Mav61, Realize that TIAA assets are ‘true annuities’. The Assets are not yours, but the promise to pay is and often variable. There are only spousal and in some cases benefits for under age minors when you die. Traditional beneficiaries who get it all are not the way most plans work.
Some have Life Ins provisions that do work with beneficiaries.
MAKE SURE, you understand what they call YOUR “Plan Rules”. They are all different and will be followed to the letter. This info is usually available from funding institution. Each funding institution must have one designated “expert” on staff that is responsible for communicating to participants. FIND THAT PERSON. That is the best way to go.
Or call TIAA and get in touch with the rep who is the ‘specialist for that institution’. Do not stop until you get ALL the ANSWERS.
Really that is the way it works. I did it on the 17th floor, downtown Denver. May want to do a spend down there first and retain personal assets for other planning reasons. You are CORRECT, their funds are very good and have privledge.
PS: Soc Sec is designed as a True Annuity also and works well, but the “management” has not retained the assets. If TIAA acted like SS they would have been prosecuted for fraud. Actuarial Science is well established and effective unless politicized and grabbed by private interests.
TIAA does it right AND well!
The BEST! JA
Mav61, Bases-loaded home run. Great diversity and low maintenance. You’re not going to be losing sleep anytime soon. I was initially interested in preferreds for steady, boring income. Not sure that’s happened for many of us who entered in the last few years. Though after the recent event hoping that with a larger and now mostly below “par” core of holdings for less frequent and more opportunitic trades.
Alpha – Thanks, that was my goal and I am happy to see how different components worked as I envisioned over the last 2 months. And yes, I moved more to preferred in recent years to give me more of that slow boring income. HA. the last few months have been far from that. But I knew from 08-09, in a crash situation you can see some preferred prices plummet. Hopefully people have picked up some bargains and improved the credit worthiness of their preferred holdings during this time
Joel – thanks for the info. Yes, I am impressed with TIAA – they have been really solid. I especially have liked the real estate option they offer as a nice way to provide diversification. And I am aware of all the details – I happened to work directly with TIAA in my last job since as CFO, I was the Plan Sponsor and Plan Administrator for the company. Right now I have not fully annuitized the guaranteed portion. I can draw those guaranteed funds out (albeit in 10 annual installments) or I can choose to fully annuitize them (in which case, as you note, they would only be able to benefit my spouse upon my death). I haven’t decided what I will do in this regard since if I went the full traditional annuity route with the guaranteed funds, I can’t make that effective until I turn 59 1/2. My initial inclination was to draw the funds down starting this year – but In my last meeting with them, I decided to wait til that 59 1/2 age when I can have them prepare some scenarios on what the annuity options on that piece would look like.
In any case, I do agree I will likely draw down on my total TIAA assets first when the time comes. The bond and equity components in my TIAA plan are in separate mutual funds from non TIAA managers we made available under our plan. So I have thought at some point rolling them over into my IRA but that is down the road. Thanks
Exactly Alpha.
In my initial post on this I said ‘It all depends on ones focus, timeframe, risk tolerance, etc.”
Every single person here is different. We all have different time frames, risk tolerances, needs, etc. There is no one size fits all answer for everyone. I pointed out some potential values today. Like you with ROST and VPU – it is all about valuations. And how one decides to allocate their funds and diversify.
Preferred stocks are not immune to drops during times of crisis as this event and 08/09 proved. I remember buying a few preferreds from ING and other banks that had crashed to single digits in 08-09.
Again, It all depends on ones focus, timeframe, risk tolerance, etc.
Thanks Chuck for educating us poor uneducated masses that “common stocks could be subject to “Bigger Price Fluctuations”. Who would have thunk it.
Of course, as this black swan event proved as well as some past events (taper tantrum, 08-09, etc) preferred stocks could be subject to big price fluctuations too. Mind blowing, I know
And you had no point when you chose to use as your example buying CM at basically it’s all time high price several years ago, comparing it to today and saying see, look it has fallen. Duh. I was talking about potential stocks that are values today. Not several years ago.
As far as what most investors want or don’t want – I am glad to know you speak for all of them.
@Maverick61 I agree with you, ignore the blowhards.
Thanks BlueHen
Chuck –
What’s with all the quotation marks and the capitalization of terms within them as if you’re using defined terms? And how does “For that reason I don’t buy any “Common Stocks” for an “Income Stream”” jibe with ” Iam not saying to not buy common stocks. I have a handful myself?”
Hi Chuck, before you go knocking down common stocks… there are a lot of smart DGI folks focusing on dividend champions. Going back into the day of David Fish putting together some of the best analysis of companies for thousands of investors. Outside of fixed investing, you probably would get shot for saying something like common stocks are bad. If you have some spare time outside of the squawk boxes, look up David Fish (he has passed away), but his legendary thinking still lives on in people that have picked up his work. Many millionaires follow the philosophy of defining what dividend champions are. Once you define them, you look for opportunities like the current market to re-invest in these sound companies. I have already seen some posts here about buying common of sound companies, and that is probably a great idea. The stats used are pretty well defined on what items in the financial books to pick out to define them. If you are not a details kind of guy and want the slick glossy, there is some publications that will rank them.
Mr. Lucky; I never once said buying common stocks was a bad thing. Don’t know where you got that idea from.
Hey Maverick…I’d be cautious about buying the common stock of any Canadian banks in this market until more is known about their Pillow-2 reserves and exposure to residential/commercial loan defaults. More reserve disclosure should be forthcoming from Canadian D-sibs later this month as required, but the exposure to loan defaults, especially in oil/gas remains a great unknown. Caveat Emptor!
Citadel – I think the exposure to loan defaults, whether they be residential / commercial or oil/gas related are there for any big bank, US or Canadian given the times we are in. Actually I think the risk is bigger with US banks because you have people in Congress who don’t like that banks were bailed out in 08-09 and want to extract their pint of blood. You had a Fed governor suggesting the banks should suspend all dividends to increase liquidity. So I see more political risk in the US with banks than in Canada.
As to oil/gas – It is all a matter of risk / reward and one’s own comfort level and tolerances. I reviewed the most recent financial data on both BMO and CM and personally am comfortable with the level of oil/gas exposure they have. But others may not be.
Thanks
You all have good points IMHO. With common stocks including SOME from Rida Morwa’s value destruction machine, timing is everything. EPR for example, was ONCE UPON A Time, a decent eREIT with reasonably decent balance sheet. I thought the music should continue. Ditto for WPC. I have never had the skill or the luck to try to out-guess the “correct” entry point and exit point. Decade or 2 ago, I try to learn technical analysis, the like of Stan Weinstein, John Murphy plus one more. Then I got gun ho with Preferred stock investing, Simon Wadsworth, Ken Winans and Doug Le Du. Thought that it would be good to diversify with Rida Morwa’s subscription. It seems that there is no perfect answer. This WEBSITE is the best. Read and then do some DD IMHO. After I sold a small position of an under-performing, I picked up some shares of GAINL remembering that Gladstone (no Gabelli) is a savvy BDC. BDC BUZZ just published a positive article on GAIN, low leverage a decent article. Then I really do not want to gamble with more BDC’s with tons of ARCC which I stupidly failed to take profit. Nonetheless, my unrealized loss has decreased considerably. Like Doug Le Du used to say when his preferreds got killed, “you still get the same dividends or interests”, as long as they pay. Hence, he has 10 criteria, which the ONLY one is true: BUY Moody/SP Investment Rated. Most of the time, the issuer does not file for bankruptcy. Thank you all and have a great weekend.
BTW, I looked at two of my other mutual funds (all US), their performance was certainly unspectacular. Upon looking at the positions they hold. They all gapped up. So, they could be investing in out of favor positions. Best to hold regardless what MorningStar has to say.
Sold my BAC-M this week at break even, I’m ahead the dividends I collected since last year. Increased my IHIT position slightly today @ $7.56. I have placed GTC orders for several IG issues slightly above the 52 week low hit on 3/23. If they never execute I’m happy. If it spikes lower and they execute I’m good with that too. Monitoring everything very closely hoping to sell some of the junkier stuff at / near break even. I was fortunate enough to pick up several UTES and IG issues way below par on and after 3/23 (DUK-B, CMSC, CMSD, ENO, IPLDP, SR-A. ALL-G, HWCPL, increased GDV-H). Will add to those if the opportunity presents itself. I have greatly improved the quality and yield of my holdings but still have work to do.