Mid Day Rambling

It is a nice day in all of the markets–although both common stocks and preferreds are a little stronger than I would like to see.  I simply like prices to move by a dime a day–these big up moves set up some selling for the future, but I have said that for a week and prices keep going higher.  In the end I guess higher is better than lower.

The energy sector is moving higher as Saudi Arabia announces further export cuts and this helps all of the energy related issues-even LNG carriers.  With crude up over a buck it remains under $50/barrel.  Any significant cut by OPEC will be met by more pumping from the shale producers as new pipeline capacity comes on line in the second half of 2019 in the Permian basin.  Also with stock markets calming down and the talk of a slowing economy falling off  we will see a little upward pressure on energy–but the $80/barrel level the Saudis want to see is a long, long way off.

Over on the READER INITIATED ALERTS page folks are talking some on the potential PCG (Pacific Gas and Electric) bankruptcy, oil prices and the rebalancing of the S&P Preferred Stock Index which will take place effective January 22nd.  The rebalancing of the index drives sales and purchases of preferred stocks by ETFs and likely some CEFs as they seek to match the performance of the index.  REMEMBER THAT WE WILL ERASE ALL COMMENTS FROM TIME TO TIME ON THIS PAGE TO KEEP IT FRESH SO CHECK IT OFTEN AS INFO WILL DISAPPEAR.

To see what preferred issues are being added to the index and which are being sold you can go here.

Part of the attraction of watching this rebalancing is that the big ETFs that track this index DUMP shares on the market in large quantity thereby sending shares tumbling.  This creates bargains sometimes which can be snagged by interested individual investors.

Lastly NOTE that we added an errors and omissions page here.  If you see missing items or typos please let us know on that page so we can readily see the issue and get it taken care of right away.  These comments will also be erased after a week so items are kept fresh.

 

30 thoughts on “Mid Day Rambling”

  1. Since we’ve been in a thankful mood, I ‘d also like to offer mine to Tim and all who post here. During the recent downturn I added Kim-L, NNN-F, and NCZ-A. With that boost in quality I’m going to sell the recently added SPKEP, picked up 100 ex-div and now up about .$75 so a little positive from that dog. I’ll keep my original 200 SPEKP – thanks for the idea of adding to it, Tim.

    1. I added a little more NCZ-A today with the price down near 23 again, and a yield on this lot of 5.9%.

  2. Tim — Annaly (NLY) just announced that they will be offering 75M new shares. No price was given at this time. May I have your thought for a long term investor?

    1. Jeff, Not particularly good news if you own the common as the sale is dilutive to the divvy unless/until the proceeds are contributory to the bottom line in excess of the current distribution, though it was reported the shares are going out north of NAV which is a positive and if you own the pfd the additional capital coming on line lower in the seniority stack is also positive.

  3. Tim – is it possible to put the latest comments/alerts at the top/beginning so you don’t have to scroll all the way to the end to see the latest stuff. Then you might not need to erase the comments as often.

  4. Locked up some nice flips today…Sold off the QTS-B up almost $3 in a week. Help a bigger chunck of DCP-B bought it last week and sold into that huge morning spike. That was crazy when it got to plus 5% today, I hit the sell button. About a 1.80 share a gain when I sold. Sold some KTN at 29.40 also, though I kept some.
    Not many good prices now for what I will play in and I took some profits and ran. Went back to the age old reliable trade that works for me. Last 2 days got my full position again in BANFP buying yesterday at 26.30 and today at 26.40. Im usually a bit early but its hard to get in at low. It always pops over $27 in time around next interest payment. This is a “me trade” not a reco. It just always treats me good. Buy into liquidity and sell into illiquidity. Its a past call issue though with a 2034 maturity.

    1. That’s great Grid. Six-month’s interest on QTS and about 9-months on DCP in less than a week and rolling right back in new positions. Someday when I grow up….hahaha.

      1. Thanks, Alpha, I am sure you tracked things, but there was big money to have been made past 3 weeks. I got some licks in and then went back to my old reliables, but if one had hit the shippers and BDCs better money was out there to be flipped. But I dont have the nerve to buy those things at just about any price. The ones I flipped out on may go up even more. But those are not core conviction holds, so I can sell and get my profits and not be upset if they climb higher as they generally arent in my wheel house anyways.
        Getting my full position back in BANFP is in my wheelhouse. If it drops all the way to $26 I will double down and be content to hold for short term loss as it always pops back once liquidity dries up.

  5. Still lots of catch-up potential for GLOP/C and TGP/B. Fair value especially for the latter is much higher considering their NOK denominated floaters have very low spreads.

  6. Tim, I posed a question about FF preferreds in today’s Kickoff comments. Not sure if you saw it.

    1. Hey Wilson, I will give you some fat to chew on while waiting for Tim’s response. Another variable you have to consider is will Libor even be around by 2022, and what will be the “suitable replacement” if one replaces it. One I read being dangled around generally had a lower yield than Libor. Plus you would have to read each prospectus of any F/F you owned to see how they will proceeed if a change occurs. Then you will have to comprehend what was written in prospectus because the replacement options can be hard to decipher.
      I play F/F with a different strategy…I only own one Libor preferred and it is a live one currently, ALLY-B. My preference is to float off TBill. I own a live synthetic floater off 3 month TBill and 3 off 5 yr Tbill. The sweet spot is to try to mitigate the asymetric risk buyer incurs with F/F by getting them well under par. I have done that with two Enbridge reset floaters buying at cost basis of around $18 and $11.50. For these two a reset of 50 basis points lower 5 yr Tbill than present will still net me a 25% basis point increase in yield in 2022. But these opportunities are rare though. Im guessing maybe a third of my preferreds are F/F related so I still have more in term dated and perpetuals.

  7. Good afternoon Tim…kudos on the RSS feature. I’m now getting timely updates using something called Feedbro, Hat/tip to the person who recommended it. Now if only I could figure out how to post those smiley faces…

    1. Tim, the comment I posted over the weekend about an RSS feed for comments is probably buried and lost. So I’ll repeat – this site has an RSS feed for comments at:
      http://innovativeincomeinvestor.com/comments/feed
      This is what the “Feedbro” users are finding, and I’ve found it with feedly. Perhaps WordPress or whatever your underlying platform is, gave you this feed by default and you aren’t even aware?

    2. You’re welcome Citadel, that was me who discovered the comment feed that can be scanned by the RSS feed readers. Glad some are finding it helpful, as I know I sure am. A lot of posts would get lost otherwise with the increasing amount of commenters now participating in the threads.

  8. Mark to Market every day… have to re-visit this Tim writing..

    after perusing some articles on SA today… there are 4 prominent (from followers prominent, that is- well into the thousands or tens of thousands of followers ) bragging about their “income being up” in 2018 but who had capital losses and who are happy with that..

    this is the new strategy I guess.. lose your money… “but my income is up!”.. lol. omg. I thought rule one was don’t lose money…

    1. Bea–seems to be the mantra of the few folks I look at (occasionally) on SA. Each of them is followed around by PendragonY who defends them at any cost.

      1. And Tim as you well know….We are not talking about a $1 or $2 price loss which can happen any day….We are talking 25%-40% haircuts in some of these issues. And that dimwit acts like he is making money with “higher income”. On some of those multi year horriffic picks, they could put all their money in the mattress and pull “income” out of the mattress and been way ahead financially.

      2. I’ll say it again – SA lost all credibility a long time ago. I haven’t commented there in over a year, and what little I do read there, I simply use as guidance to do exactly the opposite. There no longer any point in trying to engage the authors and create good discussion, because SA is now just a shell game drawing page clicks.

        With that said, as I get closer and closer to ending my working career, I have put much more priority on safe and potentially growing income. Because that’s what will pay my bills. Preferreds and commons both have a role in that. I have learned that trading and flipping and market timing is a fool’s game, not to be engaged in at all.

        1. 2 more authors today publishing losing DGI portfolios.. in total they have 40,000 followers.. one negative comment, bashed to the high heavens..and one “contributor” defending w 30k followers.. “but the income is up”..

          yes, in a Mark-to-Market basis though, including div’s/dist, only one of the 6 gained total value of 1.1%.. one lost 12.5%.. cash was up about 2% last year..

          they all pretty much follow the now dead David Fish programs.. I don’t bother engaging w any of them , like Fish, they are never wrong. IF we get a 1966-1982 or similar period in stocks, they will all be bagging at Walmart in retirement..

          1. Bea, I would appreciate it if you (and others) refrain from bringing “SA gossip” over here. We can be better than that. OK?

            1. Larry, it is not gossip, it was a reference to a previous post by Tim to people who fail to look at the total value of their portfolio and fail to Mark to Market, a worthy read. I feel most of my posts are worthy and relevant. oh and the word “gossip” seems sexist, even if you say ” and other people”..

              The point is DGI crowd is losing money, not all strategies are fail safe.. we dont want to lose money.

              I thought Mid Day Ramblings and similar posts were a good place to exchange our ideas. Perhaps Tim needs a “general comments” page instead.

              1. What Amy said – ditto. And Bea, I always look forward to reading what you have to say. Your mark-to-market post is 100% relevant and also instructional to some who might be influenced by ludicrous statements such as one SA contributor regarding multiple trash issues that “the more it drops the more I buy”. Looking forward to your next post. #ThankYouTimForThisTerrificSite

            2. Larry,

              Not that I was asked but….I really don’t want to see this site start to go down the road of too much censorship with regard to what we can or cannot post…except for the ‘no politics’ rule. I figure that everyone here can simply scroll past what they don’t want to read.

              I thought that Bea’s post was rather benign and a good reminder to mark to market and consider the potential for capital loss….rather than to just focus on the dividends.

              Maybe I enjoyed her post because I spent far too much time on an SA chat group where the prevailing ‘wisdom’ is that “you have not lost money if you have not sold the issue….so just keep hanging on and collect those dividends!!”

              1. Tim, I would just like the quality of the discussion here to remain good. By and large it does, but bringing complaints about experiences on SA to this forum, just seems like a bad thing to me. Because before you know it, people on SA will be repeating what’s being said over here and then you’ll have arguments between the two sites and that’s just silly.

                Of course it does not rise to the need for censorship or anything like that.

          2. “cash was up about 2% last year..”

            An extremely low bar to jump over, but then 12/31 is also an arbitrary endpoint. Its been a bit surprising how quickly some valuations have jumped up a week later. My own record improves considerably using 1/4 as year end.

          3. Bea your post reminded me – I recall one of the most-followed DGI SA contributors sold his his entire lifetime DGI portfolio early 4Q 2018 – and basically warned his 55,000+ followers to do the same. Another lesser known DGI contributor did also – sold a lifetime-accumulated DGI portfolio went to Treasuries much for the reasons you outlined; potential for “major” negative TR. I cannot help but wonder if much of the overall DGI success of the last 35 years is rooted in the concurrent 35 years of overall declining interest rates and tax policies that have more or less improved steadily during the same period. That’s done with.

  9. Tim- I hope you don’t get tired of your community thanking you, but it’s true … you and all other contributors are very much appreciated.
    14 of my investments are from what I learned by tuning in. Thanks to you all, I did not panic sell and I’m glad I stayed strong. I’m gaining knowledge and confidence 😃

    1. Thanks Bigbear, but you have to know that without lots of participation nothing works so well.

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