Monday Morning Kickoff

Last week opened with the SP500 at 2558 and hit a high of 2641 before closing the week at 2488–around a 3% loss on the week.

The 10 year treasury traded in a range of .57% to .72% before closing the week at .59%.

The Fed Balance sheet grew by $600 billion last week–a 3 week total of $1.5 trillion to a new highest balance ever of $5.8 trillion. The printing presses are running as fast as they can run.

The average $25 issue of preferred stock and baby bonds fell by about $1.50/share last week to $18.90.

Banking issues were exactly flat last week at $22.89. mREIT issues were hammered much lower–by $5.50 per share and this remains a very dangerous sector. CEF, Utility and investment grade issues were all lower, but only by 1-2%.

So we are kicking off the week with strong futures markets–in my opinion too strong (but maybe I’m wrong) and I know that I won’t be buying today–as shown by last weeks action in preferreds and baby bonds it remains ‘early in the game’. While it is so tempting to start to pick up shares investors have to be very careful to not get carried away and instead to ‘leg in’ to positions.

I am about 55% invested so I remain with high levels of dry powder–most of my holdings are utility and CEF preferreds and baby bonds bought at lower levels–this is where I prefer to be now–but I am chomping at the bit to buy some lodging and housing REIT issues, but it is too early for these segments. I am trying to be patient.

51 thoughts on “Monday Morning Kickoff”

  1. FED to backstop SBA PPP loans by purchasing these loans from banks, thus transferring risk from banks to FED, while banks make incremental margins without risk…WSJ

  2. Did Fed say that they may buy the PPP loans from banks today?

    If indeed true, this would be good for banks as they get to make the loan and then sell the risk to the Fed and make more loans as their cash is freed-up. Also, it would be a bit better for mREITs that many of us are holding preferreds of…

  3. KTBA yielding 6.5 percent at current price. I’d appreciate thoughts about the safety of this issue. I’m certain we won’t be alive when it matures. Will T?

    1. I own and have been buying. The big 4 providers are about to become just 3. T isn’t going anywhere and even if they got into trouble, there is plenty of money to save by cutting the common divvy (which I don’t see happening) to tide them over till pastures turn greener. VZ is still the better purer play, IMO, and I also own that. Their equivalents in Canada would be TU and BCE, for example. KTBA’s performance during this swoon speaks for itself, IMO. It hasn’t even dropped below par when 90%+ of other offerings in our space, have dropped to, below, and well below par values.

      IMO only, I’m sticking with it and have been nibbling at it for weeks.

  4. As much as I want to believe the worst is behind us, I don’t. Buying SQQQ today.

  5. Optimism may be based on Johns Hopkins New Covid Case Graph Data

    Spain peaked on March 24 trending down
    Italy peaked on March 20 trending down
    Germany peaked on April 1 trending down
    US too soon to call, but had 33k new cases on April 3 & 28k new cases on April 4

    1. I saw that but are we not in a recession ? The stock market up 4-5% , for what reason? This market is way overvalued considering what profits will look like.
      I guess Im wrong and everyone is making money except me because I still feel we are not even close to the bottom S&P 2150

      1. At the same time, South Korea and Singapore may have the spread re-occurring. I don’t think we have good numbers from these areas.

        1. steve
          Singapore just initiated a total lock down. Up till now it has been semi open i.e. no public gatherings over 9 people and most bars and restaurants closed or not populated. Their problem has been that up till recently they could trace all new cases to new returns. Now they have many that they can not trace the origins to. Have close friends there so follow it day to day. SC

      2. Not to be gloomy, but don’t Bear markets have a lot of dead cat bounces?

        My sense is that we won’t see a turnaround until months after we get a handle on this virus thing, and the economy begins to struggle back.

        Meanwhile, this is a good time to survey the market for those investments you coveted but were way overpriced a few short months ago.

        1. this market has been more like a dead lion bouncing down a 10 story flight of stairs…….

  6. I am not a net buyer. Still using changes in the market to strengthen my preferred portfolio but positioning if we get the magic snap back to be at 0% for the year. No way, do I believe that will occur.

  7. I’ve been watching NEE-N, DUKB and GUT-C looking for a entry point. Should I been concerned about any of these issues? The folks on this forum seem to be a lot more knowledgeable than myself. Your comments would be appreciated.

    1. NEE-N and DUKB can be had around par, with some patience. With all the talk about ‘retesting the lows’, you should be able to get these in the next few weeks. NEE-N is certainly in my crosshairs but I won’t chase it. For now, I’m gaming the massive swings in the NEE common shares. NEE is the cream of the ute crop. I also own plenty of DUK common shares and liquidated the DUK-A shares before the swoon for a fat profit. I also think you could consider if DUK-A may work for you. SOJA is another good one also.

      GUT-C = not for my tastes…

  8. Good morning Tim and Everyone; Like many of you I spend the day researching ideas and in particular look thru preferreds and their prices, coupons, call dates, etc etc . I have a question especially for you guys that “DIG DEEP” into balance sheets, debt load, and a companies ability to continue to pay the preferreds that they have issued. Here goes: Can you CPA types take a look at State Street ( STT) and Citigroup (C). Both have preferreds that as of right now are very attractive looking with nice coupons, and good call protection. Would love to hear from anyone that can add some color to the question. Thank You.

    1. Chuck – as you drool over STT and C, take note that both of the STT issues and 2 of 3 C issues are fixed to float and would float way down at present LIBOR rates. Make sure you look at reset yield, too.

      On a broader note, it’s worth noting that almost all the F2F issues have taken a pounding. They used to sell at a premium to non-F2F issues but no more. If you are of thew opinion that rates are headed back up this is a good time to load up on F2F. I’m not doing so.

      1. Totally agree, Bob as I’ve been positioning and ejecting FtF rate issues one after another. Most have substantially underperformed since the Fed effectively went to near zero last month and floored the printing presses. I believe it will be quite a few years (at least 3-5) before we see rates rise, thus, anything falling prey to a reset is going to drop like crazy. Just witness the trashiness trades of BECEF which I know you are familiar with – to get a whiff of what we’re saying. I know Grid takes a different position with the ones set to reset in quite a few years, but I still see them underperforming fixed rate securities at this time (e.g. ESGRP, ATH-A, MBINP). But then again, there are other factors involved like the credit ratings and such that can affect how they are trading also.

        1. A4I, No I am not in disagreement, it was just a few were great trading vehicles like INBKZ. I bought them at $14-$15 and dumped them at $20 the other day. I dont hold out for the last penny. So I am all out of those. I only have a very small amount of CAD resets that are a tick on my rear. They are roached out anyways, so I will hold. So really everything I own is term dated or perpetual fixed. I also built up a modest amount of GGO-A under $40 “par” that I can put next fall if I want and are still holding. That one can still be had at $40. More of a put play than anything do to the fact its a 5% issue.

          1. That’s the one I was referring to, the INBK ones that you flipped a week or two ago. I held thru the storm but should have joined you in that imbalance between those two (the L and the Z).

            1. A4I, I only own 3 bank issues anymore. Fighting last war I know, but never have been overly comfortable here anyways.

    2. Chuck this wont help you, but this came from Jamie Dimon who is CEO which is a credit notch or so above Citi anyways. This is what he said it would take to have common stock divi suspended.
      Jamie Dimon said that in a “extremely adverse” downturn in the U.S. economy, JPMorgan Chase would probably consider suspending its dividend to preserve capital.
      If a more severe “extremely adverse scenario” happens with a 35% decline in gross domestic product and unemployment at 14%, the bank would face tough decisions.
      “If it were to play out, the Board would likely consider suspending the dividend even though it is a rather small claim on our equity capital base,” Dimon said.

  9. Be careful with yield chases. I lusted over one for several years that dropped to 25.50 last week and bought a couple hundred. (HLM-) Shameless yield grab. Well over weekend they announced suspension of the trust preferred already from covid. I dont think anyone knows as it is trading at $26.50 now, and I actually made a buck a share holding it less than a week and the payment is now suspended.

    1. good catch Grid,
      What were you looking at over the weekend when you saw this ?
      I assume you got rid of it today at the opening ?

      1. Im dumb do not know how to make a spreadsheet and unwilling to learn anything new so I use a free yahoo finance spreadsheet that keeps track of all my issues. This then links into their data base and sends me automatically any company related info when released. So that was how I got the info. And yes, dang right I sold, with a buck profit too! 🙂

        1. funny I look at Yahoo too, I will look for that spread sheet !
          got to go, off to work ho ho

            1. This company provides supplies for companies that are considered essential, open and actually doing business. Cannot understand how they come off suspending the preferred dividend, and why investors don’t seem to care. Maybe they are not reading past the title of the press release. Almost like the company felt ashamed to give investors a dividend with the virus raging.

              1. Don this is a complicated company financially (not what they sell). They have SEC filings but are privately held and of course no common stock. On the surface the numbers look bad but I viewed it as like a Glacier Water was (many people owned that trust preferred back in the day despite horrible GAAP finances). They have had several acquisitions this year so it seemed like they were alright. But they pulled the plug quick which makes one wonder, and of course leaving an 11.75% preferred outstanding the past decade really is mind boggling.
                A love learning lessons (which I need) and still made a buck on it. Stay in my lane. When I stay in my lane I make money. When I try reaching for yield good outcomes are never assured. Im like a toddler needing a smack on the rear every now and then to remind me how to behave.

                1. Grid, funny you should mention my much loved Glacier Water Preferred. It took me a year to figure out what was going on with that. Once I understood it, I would just watch people drop quarters in the Glacier Water machines and feel the color of green flowing through me. Never worried about the dividend because of those quarters.

                  1. Ha, Don, good stuff. Yes I am more of a GAAP math guy being in companies that use it in a “normal” sense. Was awful nervous with Glacier always losing money mostly through non cash depreciation, if memory serves, but I owned it for several years, as it was a good trading vehicle too. I think Tim used to own it also.

                    1. Tim is the one who turned me on to it. I was one of those people dropping money in it so in essence paying myself. Once I figured out most of the shares of the trust was owned by insiders and the losses were deprecation I was ok with it. Once it was sold I kept a eye on it and when Primo issued new stock to pay off the money they borrowed to buy Glacier I knew it was only a matter of time before They refinanced the trust and called it. I was just lucky to get out before it was called.

              1. Yes, I was aware of that but didnt mention it. For about 9 months or so. Maybe traders assume its short term, or they still dont know, as 13,000 shares traded its still even now 75 cents above when I bought it last week…Most strange. It got down to about $12 during that crisis and suspension….I had my fun with it…Im done…

              2. Update, they suspended starting 1/1/2008 and didn’t start paying again until mid-2009.

                1. Not that it matters because it doesnt, but the last payment was Dec. 2008 and next payment was in July 2009 all in arrears paid off at that time and payment of about $1.50. The main thing is there are going to be more dominoes to follow.

                  1. Justin its a squirrelly thing, probably because it being privately held. Rumors have been long that part of the deal was letting the insiders keep their shares and not redeem it. Just rumors…The real problem was why I tracked this thing for 5 years only to finally get a shot and had to sell 2 days later to avoid the suspended payment, ha. The fact I had to wait 5 years and actually got a shot should have been screaming something was wrong as the volume was up bigly lately. Lucky to be out and with a couple hundred profit…Lesson learned…For a few weeks anyways, ha.

    2. Hello Grid
      My scars speak to your observation. I analyze the financial statements carefully and calculate several ratios. Such statements are records of past history, not predictions for the future, and they often hold secrets management would rather not be known. You never know if management will announce a shocker.

      1. Hey Jeff, Yes I do better with honest management, being made honest by regulators watching over them…And captive clients that cant leave them from screw ups, and also get stuck with the bill for the screw up on top of it.

        1. interesting, its B Riley. That good or bad? does the broker just promote the shares for sale or do they buy them with the idea they mark them up for resales ? what if they don’t sell is the broker left holding the bag ?

  10. Any thoughts on UMH-D? Is this a housing REIT that falls into your “chomping at the bit housing REIT?”

    Reviewing their balance sheet this morning before i bite.

    1. Bill, from what I have read on here its a buy and flip stock. Follow it for a while and see what it does on highs and lows. Look at the top right of this screen and see flipping and div. capture comments

    2. fyi, they just announced their dividend and conference call on first qtr. scheduled for May first. good example of what I have been saying about old data will already be two months into 2nd quarter before you find out how they were doing in the 1st

      1. Thanks Charles – I am not a flipper but the price seems pretty good for a long term hold…..

        Actually becoming cautious today though and looking at more of the blue chips for a hold – JPM/D for example. Missed my chance for sub 25 though….

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