Midday Report

After hitting near 2.90% overnight the 10 year treasury has settled in to a trading range of 2.84-2.87%.  We are assuming that investors are awaiting the CPI release on Wednesday before trying to drive rates over 2.90% on the way to 3%.  It must be remembered that once rates are stable it takes a few days before investors are willing to tip toe back in–if we get a Goldilocks CPI report we would expect rates to be stable for another week and maybe we will gain a 1/2% in average capital gain on issues we own.  Of course we have only lost 3/4-1% on most the the issues so it is unlikely we can have significant bounces.

With interest rates remaining under control the average preferred/baby bond is up 1 cent–with most issues up or down 10 cents or less.  There are a few larger movers.  Colony Northstar (CLNS) has 3 issues moving 2-3% higher as they had been too severely punished for a decent REIT with high coupon preferreds.  CLNS, like Ashford Hospitality (AHT) is simply an unloved issue.

Of course everyone knows that equity prices are way up with the DJIA up another 400 points–a bit of irrational exuburance for the day.

REITs are down almost a percent again.  The retail related issues we are watching closely are mostly flat.  KIMCO (KIM) is flat at this moment at $14.19 after being as low as $13.75–current yield is 7.90%.  Realty Income (O), the cause of continuous fighting over on Seeking Alpha, is down 46 cents trading at $48.44 giving a current yield of 5.25%–a point at which we normally would be interested, but not this time.  Tanger Outlets (SKT) is just barely positive at $22.88 for a current yield of 5.99%.  Whitestone REIT  (WSR) sold off early today (must be because we just bought shares last week) going as low as $11.75 before recovering to now be at $12.11.  The sell off was caused by an investor presentation released by the company which can be found here.  We skimmed the presentation and didn’t find anything worthy of a selloff in it–but there are enough investors willing to try to read between the lines which means there are sellers based on nothing at all many times.

Utilities are flattish and MLPs are up a percent or two based on higher energy prices.


5 thoughts on “Midday Report”

  1. Hi Leonard–no I’m not too concerned with the downgrades–at least for the notes. I personally probably won’t hold the preferreds at this time as I prefer the debt position in the capital stack. I think NS has to be watched to make sure they get all the parts and pieces of the company moving in the right direction, but for now I am comfortable with NSS

    1. Tim, I might be a bit of a chicken, but I gladly give up a few bps to jump ahead of 700 plus million in cap stack of a leveraged company, also. I always fight for “backside price support” too. As an example the AHT preferreds. A month ago F was 25.20 and D was 25.09 with higher yield past call and already destroyed by earlier partial calls. I bought D instead and it currently trades higher now than a month ago while F has tanked $2.25 since then. “Look them in the eyes and dare them to call” has been my mantra. But you just have to pick your spots.
      But I am very suspicious of true perpetuals now…They used to be about everything I had but now out of 18 issues, I only have 3 left…FIISO, CTWSO, and AHT-D.

  2. Tim, I see NSS is in the Enhanced High Yield Fixed Income Model Portfolio and today NS-A, B, C are getting whacked because, I assume, of Moody’s downgrades to NuSTar’s notes and preferred units. You think the downgrade is cause for much concern regarding NuStar’s notes & preferreds? I presently hold NS-C and was thinking about buying NS-B. Thanks for your input!

  3. WSR release of new presentation and growth/deleveraging declarations before their 3/1 earnings release was puzzling to me.. doesn’t that make you nervous? a signal of maybe bad news? or was it an attempt to calm the selloff in WSR (and all reits really?) .. I think it was the latter but waiting to revisit WSR in my watch list till the report comes out.

    KIM did the same thing.. put out a statement of plans to sell properties and postponed their final 2017 release until 2/15 ( prior years was always around 2/2)…

    a lot to ponder and that gives opportunity of course at times. Bea

    1. Hi Bea–yes it did seem a bit strange, but I own it and don’t intend to sell it. It may portend a distribution reduction, but they have reasonable coverage (83%) so it’s not like they are not covering the distribution, but they want to reduce leverage–that means they could have another public offering of common shares coming–of course that wouldn’t be well received–they never are.

      This is why I personally have a wide diversifidation of issues in the portfolio. My WSR position is modest and won’t move the needle much so I will just hang on and see what shakes out.

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