Monday Morning Kickoff

Last week was a phenomenal week in equities as the S&P500 as the index it opened the week at 2578 and closed the week at 2789–a gain that was highly ‘juiced‘ by the Fed’s printing presses.

The 10 year treasury traded in a range of .64% to a high of .78% before closing at .73%.

The Fed balance sheet grew by $172 billion to a new all time high of $6.08 trillion–on its way to at least the $10-12 trillion area this year (my guess).

The average $25 preferred and baby bond closed last week at $21.84 after huge bounces in many areas–in particular mREITs. As expected CEF and UTE issues continued strong trading with CEF preferreds closing the week at $25.11 and all utility issues closing at $24.12.

So we are starting the week off with only small losses on equity indexes, but earnings season is about to begin. Whether investors pay too much attention is anyone’s guess , but does it matter anyway as the FED has taken the risk out of the risk/reward equation.

I am in the area of 62% invested and don’t really have a plan for the week. If there were bargains in CEF and UTE issues I would probably be a buyer–BUT I don’t expect any as they are already trading in the $25 area–and I want to buy lower.

Will the markets trade lower this week as the fundamental long term economic damage is finally admitted to? No one knows–but we always prefer to error on the side of being conservative.

28 thoughts on “Monday Morning Kickoff”

    1. TVE is in a midst of a tender on May 1 as they reset the rate to about 2.2% from about 3.3. I wonder how it will settle after May 1. I have used it as a near cash alternative for a few years.

      1. When you look at existing TVA bonds of comparable maturity, they are being offered in the range of 1.60-1.70% which should imply that TVE with its new 2.216% coupon can be worth a premium, however, the spread to TVA bonds vs TVE baby bond has existed for a long time, so it’s theoretically a tough call to hold…. I say theoretically because I’m tendering, period, having no interest in a 2.216% 9 year piece of paper be it AAA/AA+ or not..

        1. Yes, I already tendered as well, but if a trades down a few dollars after the rate drop, I may well go back in as a safe liquid investment. A sleep well alternative to the miserable money market rates.

    2. Georgette – TVC will also be resetting from its current 3.55% coupon just as long as the 30 yr UT Treas CMT remains below 2.61% on April 24. With 30 yr CMT now at approx 1.35% it’s a pretty sure bet TVC resets just as TVE has…. Were TVC to reset today, it would go to approx 2.33%. Still, in this environment it’s kind of nice to be able to consider a credit riskless investment like these two…

  1. For those of you that are still searching for decent quality companies at yet still a very decent price point here you go. By the way I own all of them. Most of them I own 3,000 to 4,000 shares each which is a normal position for me. Here goes: “FCNCP”, “WFC+Q”, “KKR+B”, “IPLDP”, “EQH+A”, and “CFG+D”. Hope to have the favor returned to me down the road. Happy Monday to All.

    1. Chuck P, why don’t you like WFC+R over WFC+Q or KKR+A over KKR+B? Is it simply because of price?

      I have a little WFC+R but i am waiting for another pull back to buy more. KKR+A or B seems like a decent ticket to keep an eye on.

      Thanks for sharing

      1. Hello GRHARMON; Hope this finds you doing well. I actually do own WFC+R (3,200 shares to be exact) but the reason I didn’t list it is because its still trading way over the PAR of $25. So what I did was list the companies that I like, and own that still can be gotten for par or a smidgen under or over. But WFC+R is way over par. That was the only reason. Yes, KKR+A is fine too I chose the KKR +B because of price. I spoke to the I R Mgr of KKR a couple of weeks ago and she assured me they have both preferreds “well covered” as they actually have over $3 Billion in cash. She told me they have over $218 Billion in assets under management.

        1. Thanks the the response Chuck P, i am young and new to the preferred and baby bond world, but i think it has a place in my portfolio.

          1. Might want to wait until after they report earning tomorrow. You might be able to get the preferred quite a bit cheaper as we begin to see the actual damage being done to these big guys.

  2. At 71% cash, waiting for another reasonable pullback.

    I like BEP/PRA ( IG ) renewable energy below $19 a share. Currently priced at $22.50. BBB- SP rating.

    1. BEP as you like renewables or like it as a preferred v/s straight US based Utility pref?

      I mean as this is a fund and not sure what they own (active management could make it better or worse if they pick poor holdings), so higher risk rather than a single company whose preferreds can be quantified better?

      1. Brookfield renewal partners is a limited partnership company not a fund.

        https://bep.brookfield.com/~/media/Files/B/Brookfield-BEP-IR-V2/events-and-presentations/bep-corporate-profile-february-2020-vf.pdf

        https://bep.brookfield.com/~/media/Files/B/Brookfield-BEP-IR-V2/events-and-presentations/bep-investor-brochure-feb2020-vf2.pdf

        Good for an IRA, it does not generate UBTI income.

        Is Brookfield Renewable Partners a Master Limited Partnership?

        Brookfield Renewable Partners does not have the same tax characteristics of a U.S. Master Limited Partnership. There is no U.S. source income that flows out to investors that would cause U.S. federal, state and local income tax filing obligations. There is no UBTI (Unrelated Business Taxable Income).

        1. BEP has been holding its value. It does require K1 for non IRA account. For IRA, best to limit income less than $1,000 per tax deferred account. I sold the last of CLNY-G (7.5 %) bought in Day 1 in my daughter’s account at $17. Former CEO Thomas Barrack now still chairman seems to have off balance mortgage subsidiary, paying huge dividends, incurring tons of debts. Barrack has asked the President not to Margin call. A few days later, stock prices did come up a little. Huge decline in commons. Thanks to Gridbird, I picked up 200 shares of his PW-A at $25.27. AATRL dropped a lot. I have assume that this is OID problem. Looks like market is more rational for us income investors. Thanks to Tim and others, CMSC and SREA are both holding well. Ditto for Steve A’s USB-P and some other on USB-M both well above $26. Too late for my daughter.

          1. JohnKCal,

            The income limit of less than 1,000 is for UBTI income only in an IRA.

            This following comes directly from BEP Investor Relations website.

            “Brookfield Renewable Partners does not have the same tax characteristics of a U.S. Master Limited Partnership. There is no U.S. source income that flows out to investors that would cause U.S. federal, state and local income tax filing obligations. There is no UBTI (Unrelated Business Taxable Income).”

            So no need to limit the income in an IRA account. It’s all tax free in an IRA

            1. Steve, Yes. Only for IRA account. I have just filled out the K1 for my non IRA account. BEP is better than most. Instead of Line 4 (b) for Guaranteed payments fully taxable as ordinary income as most of the MLP’s including the trashy names, it report as 6a as Ordinary dividends and a large percentage of dividends as 6b, Qualified Dividends which is taxed as QDI for the Feds. The best K1 has to be EVA, a wood chip renewable MLP. In 2018, it cleverly reported Expense as Required, offsetting dividends. In 2019, it reported (510) as Orindaryh Business loss with a positive Distributions, end up with very little tax. EVA is not a SWAN, lots of people thought that this is just another energy (oil/gas/pipeline) play. Recently one SA writer recommended EVA. SA writer Richard Hills ran the numbers and echoed. And I made a post on the nice tax treatment. I bought some more. So far so good. Sponsor has established customers in Europe and Japan and General partner makes the stuff. Financials seem to suggest some net income and not overly leveraged. No preferreds.
              There is a lots of debate on NSS at Silicon for the last few days. Having bought way too much and lots of shippers, I got gun-shy. The yield is fantastic. Then NuStar hs a history of “taking no prisoners” almost like NGL. Like Gridbird said, it works until it does not.

  3. I’m getting more positive on the markets now. The levels that are important to me are 2447 Spx, and 29.60 pff. If this pullback can stay above those levels we may have bottomed. It’s good to be hopeful after Easter. ATB

  4. Too many non-investment posts going on. Wish there was a way to flag them. Don’t have time to sort between investment posts and random chatter as this site gets more popular.

    1. Use Tim’s sortable Sheets. Download an update at each use. That’s waht I do.
      I have only seen one thing worth buying when I reviewed it last night. Self directed investing doesn’t really get any easier…or use an actively managed mutual fund or CEF??

  5. I hate to do it but I bought some SH this morning – the short S&P etf.

    It’s not conceivable to me that the market has much upside from where we are right now.

    I think going short the market after a huge up week is as good of time as any.

  6. Morning Tim,
    Trying to get to about 1/3rd cash, last week’s rally is not sustainable. Was reading DoctoRX over on SA and maybe too much gloom and doom but he doesn’t like this rally either.

  7. Do you think they can see our national debt pile from the International Space Station yet, or are we a few months too early?

    1. Soon we won’t need a spaceship to get there. Just climb the debt pile. Starving people will raid the space station looking for food.

    2. See it? They had to go into higher orbit to avoid colliding with it.
      I fear for my children and future grandchildren, as the national debt will have to be repaid, one way or another, or the unthinkable will occur, with very unpleasant ramifications. It simply cannot grow bigger indefinitely.

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