Monday Morning Kickoff

Well we are starting a new week—will it be an up week or a down week for equities—no one knows but almost undoubtedly it will be exciting.

The S&P500 opened last week at 2908 and traded in a range of 2766 to 2946 before closing the week at 2864–down about 2% from the Friday before.

The 10 year treasury traded in a range of .59% to .74% before closing at .64% which was 4 basis points lower than the week before.

The Federal Reserve balance sheet grew by a MASSIVE $214 billion last week to $6.94 trillion–remember last week the FED was going to begin to buy exchange traded funds (ETFs)–primarily composed of investment grade corporate bonds issues, but also some junky high yield corporate bonds.

There were 3 new income issues sold last week–the most we have seen in over 2 months. It is becoming obvious that new issues are not being received all that well as all 3 issues are trading under $25–we shall see if these were priced right or if the coupon were simply too meager for the marketplace we are in at this time.

None of the 3 are investment grade, but the Farmer Mac (Federal Agricultural Mortgage Corporation) issue is fairly high quality (in my opinion) and if rated would be low investment grade.

Stifel Financial (SF) sold a new non-cumulative preferred–details are below. The issue traded on the OTC Grey market under ticker STFLL and closed the week at $24.84.

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Federal Agricultural Mortgage Corporation (AGM) announced they had sold 3 million shares of 5.75% non cumulative preferred. The issue is trading on the OTC grey market under temporary ticker FAMCP and last priced at $24.45.

Lastly Chicago banker First Midwest Bancorp (FMBI) sold a new non-cumulative preferred issue with a coupon of 7%. This issue is trading under the temporary OTC grey market symbol of FMEEL and last priced at $24.55.

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It looks like markets will move strongly higher today on some cheer leading from FED chair Powell last night on 60 minutes as well as some potentially good news from biotech company Moderna on a vaccine–hold on for a ride.

37 thoughts on “Monday Morning Kickoff”

  1. I imagine that the SEC is scrutinizing all of the COVID-19 news by public companies for unusual trading activity. The Sorrento announcement was very interesting in that they used language that was fairly absolute which is never good in this business.

  2. Did Powell actually say that the Fed will do anything to facilitate the recovery? Sounds like Atlas carrying the globe on his shoulders.

    Let’s not ignore the good news coming out about the preliminary success at opening up. De Santis (Florida) is beginning to overtake Cuomo. The alarm over Texas seems premature.

    Finally, the $3 Trillion package seems deader than Luca Brazzi.

    1. Indeed George. Sadly the NY centric media talked up Cuomo who has been an absolute disaster in his decisions – what he did with nursing home patients in his state is criminal while bashing DeSantis and Kemp. Yet Florida has had far better results (especially given the number of NY’s who fled to Florida when this was going on) – and both Florida and Georgia show good news so far in opening up. Alas you do not hear about that as much

      Those are not the only two states showing positive news.
      With the money on the sidelines, it doesn’t take much good news to make the market jump

        1. Nah. I was down in the Tampa St Pete area for a month when this all hit. Trust me, people were not cautious and staying at home. They were out and about like normal. Restaurants where locals go (not tourist traps), beaches, bars, etc were all hopping up until I left around March 25th I believe

          And I was purposefully looking for less crowded places, lol

      1. But let’s not forget the tough media scrutiny that Gov Cuomo has been subjected to. Imagine how much he must have sweated being interviewed by his own brother!

        The media for the most part has done the nation an enormous disservice in its COVID coverage.

  3. Very nice start Monday morning news for me….On track for a nice score here in the preferreds. Even managed to snag 200 more (which I need like a hole in my head due to how many of the series’s I already own) of E series at $22.66 out of gate today.
    PG&E says fire victims strongly support bankruptcy settlement

    May 18, 2020 8:57 AM ET|About: PG&E Corporation (PCG)|By: Carl Surran, SA News Editor
    PG&E (NYSE:PCG) +5.7% pre-market after saying preliminary voting results indicate “overwhelming acceptance” by wildfire victims of the $13.5B settlement for wildfires caused by the utility’s equipment, an important victory in its effort to resolve its bankruptcy.
    Based on the preliminary results, PG&E says it remains on track to meet the June 30 deadline to qualify for a $20B wildfire fund created by California lawmakers to help cover the cost of future fires caused by utility equipment.

    1. Grid, what is the difference (if you don’t mind my picking your brain) between the PCG C, D and E preferreds, other than C is non redeemable and the other 2 are redeemable at any time. All are 5% coupon. thx

      1. Franklin, The C series is non callable. The D and E series have a $26.75 redemption price. Being the low relative issuance yield, I really paid no stock to the non redeemable feature here (and besides the preferreds range all the way back almost 100 years, so no real desire to redeem anyways). I just bought whenever based off best disjointed price in relation to the bell weather anchor PCG-A which is the non callable Series A 6% issue. The vast majority of my shares are the non callable 6% A series.
        Come July the dividends will be 11 payments in accrual.

          1. Franklin I forgot here was more relevant info not always known about the issues.

            Issue Description Redemption Provisions
            5% Redeemable First Preferred $26.75 after July 31, 1963
            5% Series A Redeemable First Preferred $26.75 after July 31, 1963
            4.80% Redeemable First Preferred $27.25 after January 31, 1965
            4.50% Redeemable First Preferred $26.00 after July 31, 1969
            4.36% Redeemable First Preferred $25.75 after October 31, 1975

            The non callable 6% Series A is the biggest with about 4.2 million shares outstanding which is about 40% of the entire various series floats. Series D 5% redeemable is about 1.8 million shares and non redeemable series B 5.5%. is about 1.2 million. The rest are all even smaller sub million share floats.

          1. Yes, come July the 11th dividend payment will have been accrued. These will be paid out at some point if present bankruptcy plan finishes up the two last hurdles. Every indication was the victim vote was the most important component. As Judge has indicated he will lean decision heavily based on victim votes. Governor has already approved and regulator chief has given preliminary approval also.

          2. They are, but went through the bankruptcy unscathed (for the 2nd time, no less) so the cumulative dividends will be paid upon exit.

            1. I assume they pay all backdated divs to whoever owns the shares at the time? i.e regardless of when you bought.

                  1. It seems almost too good to be true … all 10- 11 suspended dividends caught up would probably be $35-40 per share. Is that what you guys are speculating as possible? Guess I need to start reading the bankruptcy plans. Seems like a lot of capital to go out the door for the regulators to allow that.

                    1. Oops … disregard … I’m a decimal point off … $3.50, not $35. Changes the question quite a bit, huh? My bad!

                    2. Max, your math is all wrong. 11 accrued dividends is a bit over $4 for Series A. Filings clearly read preferreds were unimpared and thus did not have to vote. Projected post bankruptcy cash flow statement showed disbursement of 42 million 2020 and normal 14 annual for 2021 and 2022. There will be 3 years accrued come end of year. So it matches up. The key is “unimpared”.

    2. But wasn’t it interesting that all the PCG issues that traded near the opening bell traded well down. Makes no sense but I’ll take it!

      I guess all those Santa Rosa residents living in trailers are eager to get some building money. I would be, too.

      1. They did. I nabbed some. Now (after hours) looks like they’ve cleared a major hurdle in settling claims.

      2. Ya, but I snagged some E at $22.65 at open and it closed at $23.95… To be honest, Im not counting on much appreciation from here. But my last round up flip buy was $25.50 on the Series A, so I got breathing room. We still got to get last 2 hurdles through though. But once dividend gets declared for payout possibly later this year, I expect another bump.
        At these prices it isnt in steal territory, as market has been quite aware of how Utes cant be killed off very easily. But I am in long term until I get the bounty. I suspect afterwards the Series A will trade at least $26. It was ensconced at $31- $32 Level pre fire, so I am downgrading price range for weaker credit profile going forward from additional debt burdens.

        1. Grid,
          Not joking, fire season is coming up and not much PGE can do about fuels reduction on other peoples property. Late rains, pushing new growth on the grasslands, everyone on lock down with their minds on others things. County , state and city governments behind on weed abatement notices, all this should of been done by Memorial weekend. Doing my part with new sheep, weed wacking and hiring someone, but none of my neighbors haven’t done a thing with no push from fire marshal. You only have to live once with smoke in the air and seeing flames in the dark 5 miles from you not to be scared.
          We get one hint of fires and PGE stock will fall.

          1. Very well aware, Charles. Did you know of the newly created $21 billion dollar utility fire fund legislation? This is in place and PCG will fund their part (per terms of post bankruptcy exiting process). If this wasnt there yes, for the play Im doing, I would be less inclined to doing what I am. So funds are in place for a next one to buffer. Yes, I could exit now with a good quick profit, but I am getting more and getting it all as this going through.
            Remember I got designed “pot money”. This play with all PCG preferreds is in my high risk bucket not the widows and orphans pile that predominates my stash.
            Remember the preferreds trade differently outside of a few dumps, The Series A has stayed at par or above the predominate part of bankruptcy process. Even when state was sabre rattling state takeover.

            1. Yes Grid,
              I live here and am aware but I am in SCE preferred and was overweight in it and sold some SCE-J at a nice profit. Same state , 2 different utes yet when market sentiment hit both dropped. Could happen again. Thanks to everyone’s comments here I need to look at my SCE and see when the reset date is for the ftf and rearrange my holdings. The only reason for the higher stock prices on PCG preferred is the investors looking to pickup on the deferred dividends.

              1. Im out of SCE preferreds. Wore them out hard last winter and spring. In fact over general trading past couple years I would say I have easily made biggest amount of trading money with SCE, PCG, and So Cal Gas preferreds.No interest in SCG or SCE now… And you betcha people are chasing that accrued divi and it will become more pronounced as it gets closer. That is precisely why I am in it also to milk that angle.

      3. Bob, quite a few have been rebuilt, they are at the landscape phase now, down to the home stretch. Still a few staying at the Sheraton where my son is a engineer compliments their insurance companies. Most of the commercial building that are going to be rebuilt have been, then this closure of business hit. couldn’t of been at a worse time for new small business owners. Tourists are starting to show up even on the week days to ride their bikes in wine country. I suspect Air B&B is listing rooms again.
        One look at the hillsides and along the hiways to see grass hasn’t been mowed brings back memories. lot of fires last couple years has been unhinged people or careless smokers setting them along the hiways.
        Brush and grass is bad this year with late rains.

  4. Martin; You and I think alot alike. Powell said it will be a slow and steady recovery and may not even recover fully until late 2021. Then I listened to the Moderna CEO this morning and he said its only Phase 1 and they still need to get much larger groups for phase 2 and phase 3. It seems that the market is just looking for any small piece of “Potential Good News” to hang its hat on. Which tells me there is a huge S—Pot of money on the sidelines that wants to come in and buy stocks in a big way. Well never get in front of a freight train. I would just add that for Affinity and myself it looks like AAPL has gotten away from us. I own a small position but wanted to buy much more.

    1. Many of these vaccines are companies self-promoting. Moderna is really significant. Why? 1st with Human trials. But even more important, it is done in conjunction with NIH. That means Fauci will have the data and will be asked to comment pretty shortly.

      Fauci is the only one not self-promoting or cheerleading. I doubt Moderna CEO would be promoting this way if there were any chance Fauci would shoot it down.

  5. Tim,
    The country is opening up and people are going to be out in force with the coming Memorial weekend. Then next week will be a short trading week so it will be interesting where this ride will take us. Companies desperate for new money that they have to come to market with issues right before a major holiday ?
    7% for a preferred and not cum. Sounds like junk to me, I will be happy to sit on the sidelines and watch it trade for a while.
    On a side note, BOA downgraded SQ saying too exposed to loans to small and medium sized businesses. Things look good until they are not. I had thought SQ was smart to offer loans to small business besides doing mobile processing of credit card transactions and kicked myself for not buying stock in the 20’s maybe I will get a second chance.

  6. I thought Powell’s statements were absurd and propagandic. Expected futures to drop. Shows how different I am than most investors.
    I scoured investments sites and found very little discussion of futures up 3%. They’re all discussing general news items.

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