Monday Morning Kickoff

The S&P500 traded in a range of 2727 to 2842 last week before closing the week at 2837–which was about 1.3% lower than the close the previous Friday.

The 10 year treasury closed last week at .60% which was below the close of .65% the previous week.

The Fed balance sheet grew by $210 billion last week–with the balance sheet now holding $6.573 trillion is assets–and amount which will never lowered significantly–not in my lifetime anyway.

Last week–believe it or not–we had very little in average $25/share baby bonds and preferred stocks.

The average $25 issue was 3 cents lower last week, bank preferreds were 8 cents lower, investment grade issues were 1 cent lower–the only group that we track which had a gain was the closed end fund preferreds which were 26 cents higher. mREIT preferreds are at $17.77 amd Lodging REIT preferreds are at $11.71–no doubt that some time in the future there will still be large gains in these sectors–wish we knew which companies ended up being ‘winners’ and which ‘losers’.

So we enter the week with the DJIA futures up a couple of hundred points–whether it holds or not is anyone’s guess.

I see General Motors suspended their dividend this morning as well as any stock buy backs–this is a sign of things to come and no one will be too surprised by these moves.

52 thoughts on “Monday Morning Kickoff”

    1. All Mall stocks and preferreds are having a great day. KBWY, the mid eREIT fund consisting of many Mall stocks and generally more leveraged eREIT up 6%. PEI (presumably the one likely to fail, after CBL) up along with nice gains. KRG, groceries anchored eREIT, Brookfield eREIT, BPYU (with its sister BPY, Brookfield Property Partners LP ) also see 8+, 6+% gain. I sold my KBWY, legacy Rida Morwa’s 2017 with severe net loss just a week ago or so, thinking that it looked like to be underperforming as it did for 3 whole years. EPR Properties, which own cinemas and ski resorts also enjoyed 11+%. In general, Rida’s recent “picks” with the exception of EPD, ET and fossil oil and pipes enjoyed a great day, actually moving up for the last few sessions. I do not follow him but use his CALLS as signals to see if other SA or fundamentals which may suggest unacceptable risks. Brad Thomas’ trash SKT, Las Vegas unpopular freeway stop (SKT is the one with less frequent visitors with names like Forever 21, once upon a time senior women retail, several other stressed tenants; the other freeway Mall seems like privately owned) with almost 16%. The shipper stocks, GLOP-A, B, C, GMLP and GMLPP continued to see good gains. HMLP-A, the Russian route is now $22.73 with bid of $22.65. TGP, TNP with all its preferreds, CMRE, former Seaspan, Hong Kong based largest container ship, all rallied. Quality preferreds and second tier preferreds continue to gain as well. CORR-A is now $15.3, after an article by Rida et. al. arguing that the second one who filed bankruptcy several years ago unlikely to file again. His take “the fact that CORR recovered last time, should show its strength ….” NYMTO, old leveraged preferreds with suspended dividend (which I luckily sold before COVID 19), is $18+ up 5%. This rally has nice breadth. Almost 79% of stocks up in NYSE. All bank stocks see nice gains, suggesting the bank stocks typically leading out of a recession and declining into recession. I have not listened to the CNBC pundits, bet that they must be overjoyed. The market seems to rotate out of the Tech sector to others. Nice day once again for BDC’s too.

      1. JohnKCal – I would certainly advise you from taking stock picks from SeekingAwful. At the present time, I certainly don’t consider them a credible website. I’m on “probabtion” there now, because I simply asked a few questions about the authors and mentioned a website called TipRanks. Turns out their #1 authors, Brad Thomas and Rida Morwa are at the bottom of the bunch. BT is ranked (and yes it is rank) with a zero star rating out of 5 (but I guess he could have a negative rating) and Rida has 1/2 star out of 5. When these facts were mentioned on the website, my comments were promptly removed. Clearly, a site you may want to avoid for financial advice – unless you want your portfolio to crash.

        1. Kaptain, HA HA. Join the growing club. I have been censored and screened for over a year warning about the trash they pump. About 10% of my posts/insults get through and half of them are scrubbed within a day. I amuse myself by trying to code insults to see how many sneak through.
          Dont mess with their meal tickets as SA gets 25% of the cut from each subscriber who pays those services.

          1. Grid – all I actually did was mention that BT was in the bottom 2% of the bloggers and TipRanks rates him very low and then they kicked me off the site. It was not very offensive at all… but it was honest. Know they take 25% off the top, but that is a hell of a price to pay for people that give bad advice. Rida gets a 1/2 star out of 5. I would trust you more than those morons to manage any of my funds.

      2. Brad Thomas finally threw in the towel on his mall REIT’s after they went down 50-75% …which means they are probably buyable. He also put Carnival out in the 40’s…It’s tough when you cover one sector and it gets decimated but he hasnt been accurate on a alot of calls. …And today was basically a “junk” rally.

  1. Does anyone know how the call on GDV-A works? They are calling about half of the issue on May 6th. When are the called shares allocated and when is it safe to buy GDV-A and get the post call shares? Thanks in advance.

    1. All partial calls work the same.
      on he date of the announcement, the accounts positions are locked so buys after the announcement are not considered.

    2. I don’t understand why it is still trading at $25.40+ , when in a week or so half of it will be redeemed for $25. Maybe a dividend computed in that will be added to the redemption price? But that wouldn’t be 40 cents/share… (?)

      1. Dave–as you know not all is logical in the preferred stock arena. There is no reason for this other than some folks still want it that bad that they will pay a premium.

      2. you answered your own question. The trades at 25.40 are betting that the other half won’t be redeemed for a while.

  2. On a different note just want to make sure you guys know that Ford Motor Corp. also is coming out with $8 Billion in new bonds that will yield somewhere between 8.5% and 9.65 according to the underwriters. This tells you quite alot about their situation. I sold all of my F+B back 3 or 4 weeks ago. No longer interested in these slow bleeding darlings.

    1. Suspect F bonds are as risky as GM in 2009. Hopefully, F & GM won’t need a taxpayer bailout like 2009. Both have now suspended stock dividends, time will tell.

      1. Tsunami: I really can’t wait to see how this goes. I am thinking when states start opening things up and most people get back to work, car sales will be very good if not excellent. Not many folks are going to want to use public transportation unless they have no other choice. Same goes for car pools and vans. A lot of people will purchase a new car as their personal “bubble”, even if it costs a lot more than the bus.

        1. Bill: you may be right, but 25M newly unemployed Americans may mean people hold on to their existing cars for several more years. If they have any $$, used cars will pop before new cars IMHO. Hertz in trouble now, may dump many cars onto used car lots if they head into bankruptcy. I suspect the new car market will be marginal at best for a couple of years as we unwind the economic damage of COVID19.

    1. Tim; I was pretty excited about hearing of the new Schwab Mini bond/preferred so I got my guy on the phone in Chicago (Their Bond Guru at Schwab) and we started reading the prospectus togethor. He got me all excited as the “talk” is 6% but here comes the “BUT” Part–LOL. After the 5 years of call protection which takes you out to 6/1/25 it then goes to the 5 year treasury as a minus to the coupon. The way he explained it to me in laymans terms was at that point they will take the 5 year treasury (as of today its 39 basis points and subtract that from the 6% so hence you now receive a return of 5.61%. The reason I don’t like this type of issue is lets say that inflation returns and the 5 year treasury goes to say 2.5% which is not impossible. Then you would get a yield of 3.5%. Thats they way the Schwab Rep explained it to me. Would love to hear others chime in after you read the prospectus. Biogen, Air Products, and Emerson Electric all out today with 30 Year bonds. Anywhere from 2.9% to 4.15%.

      1. With help like that from Schwab, it doesn’t make me look forward to when TDA gets absorbed…. Prospectus says about the reset terms, “from, and including, the First Reset Date, during each reset period, at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date (as described below) plus %. ” So it’s going to be a typical reset where it’s based on whatever the 5 year Treas is at the time PLUS an amount [not minus any] to be determined. Perhaps he meant that the reset percentage is going to be set at a level that at today’s rate would lower the coupon from what they intend to price it originally, but it is not going to be reset at 6% MINUS the rate of the 5 year.

        1. To 2 Whiteroses; Yes, he called me back and said “sorry” he explained it rather poorly. I think Iam going to stop talking about these new issues. As it seems its to much subject to change BS. He told me after talking to his trader that they have yet to even determine what that reset rate plus the 5 year treasury even is. I do like the company but I will wait and see if its worth buying.

          1. Chuck – not to be hyper critical of the guy, but he didn’t explain it “poorly.” He explained it as if he’d never heard of a reset preferred before or how they normally work and was trying to bluff his way through an answer.

            1. And he was Schwab’s supposed “Bond Guru” WOW.
              Not hard to read a prospectus – so that is pretty sad coming from them

              1. Sounds like my gurus at Merrill Edge. Their skills are basically talking on the phone with a customer. They might have transitioned from car sales. That really is their strength is customer relations/communication.

              2. Maverick; It may not be hard to read a bond prospectus but the problem with this one is it had blank spaces where all the important stuff should have been listed. So kinda hard to get excited about something when you don’t know the coupon rate or the reset rate. From what Tim has posted it looks like it will not even be publicly traded. So I don’t know if you would call that a private issue or what. You still come across as very Condescending. And I still stand by my statement that there are very few true bargains out there these days in atleast the preferred issue. Maybe I should have said in the areas that I consider. I now only look at high quality paper. If anything I think we all should have learned a few things from this March fiasco. And no I don’t just look at the Mega Bank preferreds. They only comprise around 16% of my holdings.

                1. The issue hasn’t priced yet, so the terms are unknown till then. Once it prices, they’ll file a final version on EDGAR with all the information filled out. This is typical of all preferred IPO’s

                  The front page of the prospectus states that it will not be listed:

                  “The depositary shares are a new issue of securities with no established trading market. We do not intend to apply for listing of the depositary shares on any securities exchange or for inclusion of the depositary shares in any automated dealer quotation system.”

                2. Chuck

                  Most of the language in a prospectus is standard. If someone is a supposed bond guru at Schwab, this would be standard language for them. As to the blank spaces for coupon and reset rate, that is standard as well for a new issue – and only completed once the issue is priced.

                  There are still bargains out there – I bought some last week. But glad you now have adjusted your view and recognize that you really were only thinking about a limited universe of what you deem high quality preferreds. Now what one deems high quality can vary from person to person, but if you are talking just large bank and utility preferreds, then yes no real bargains left there. I have been buying the Common Stock bargains I believe exist. And there are some other preferreds that are still in bargain territory depending on one’s risk tolerance. I have enough of them already so I am not looking to buy as I believe the opportunities in some common stocks are better

                  As far as you comment about being condescending – no, I simply state my views and opinion in a straightforward manner. All viewpoints here are beneficial. Just because my view differs from yours does not make it condescending.

                  1. I agree…sounds like a rookie mistake not a bond guru. Tough to trust advice on a misunderstanding of something so basic for an industry professional. And guru’s don’t exist at discount houses.

        2. I am having trouble finding info re a new Schwab mini-bond/preferred offering (mutual fund, ETF, or CEF ?) even though I am a Schwab account holder. Can someone direct me to the prospectus?

  3. Tim,
    GM is a big name. I think some people expected it and others who only look at their account balances and dividend checks don’t have a clue. I think there is going to be more coming down the road. The complacency I read on SA from comments may turn into panic.
    Seeing a complaint on Consumer Reports website by a 71 yr old retiree that he tried to cash in everything and his broker wouldn’t respond a month ago until he said it was too late and he lost more than he felt comfortable losing
    Makes you wonder where people like him are going to put their money. In that can buried in the back yard ?
    My concern is I look at a hundred dollar bill and I wonder what it will really be worth a year from now.

    1. I learned long long long ago, never let a broker in charge of your accounts.
      1. People who have a broker rarely conduct extensive research on the positions the broker selects.
      2. I can sell 100% of my stock positions within 10-20 minutes if need be or I can buy quickly during panic selling.
      3. A broker does not care about your money like you do.
      I have a friend who has brokerage managed accounts, he wanted to buy during the dip by the time his broker called him 2 weeks later, he missed the opportunity.

      1. @Todd

        This is why I never went for the “managed account” thing. In the first place, you have to deal with their brokerage, whoever that is. Secondly, no matter what they say, their only interest is in themselves.

        I learned this the hard way some 25 years ago. Now, I am my own research analyst (via help from this site and others along with independent research outfits such as Value Line and Morningstar ), and deal on line thru Schwab.

        I’ll keep doing this as long as I can.

    1. AATRL interest payments are cumulative. MGR does not state that interest payments are cumulative. But, MGR does state that 1) interest payments may be deferred for 20 qtrs, 2) deferred interest payments will earn interest at rate applicable to the notes. Failure to totally eliminate the common dividend implies that AATRL and MGR interest payments will continue near term.

      1. All three (AMG, MGR, AATRL) up this morning (AATRL bidding above close, but not open). The common up almost 5% on a good earnings report. What a market….where a company can slash the dividend to a cent and the stock rises 5%….

    2. They claim they cut the common stock dividend and instead will use the money to buy back stock. The stock price is up this morning. I don’t see any effect on MGR or AATRL.

      1. They increased debt on the books and shrink the equity base by buying in shares…. what may be good for common, the rating agencies might not think good for debt, yes?

        1. The ratings agencies should have downgraded every company that issued debt to buy back shares. That is the height of mismanagement.

Leave a Reply

Your email address will not be published. Required fields are marked *