Monday Morning Kickoff

The S&P500 traded in a range of 2984 to 3233 last week before closing at 3041 which is a loss of about 5% on the week.

The 10 year treasury traded in a range of .65% to .92% before closing the week at .70%

The Fed balance sheet grew by only $4 billion last week–certainly the smallest rise in months.

The average $25/share baby bond and preferred stock fell by over 2% last week. Bank issues fell by 3%, utility issues by just over 2%, lodging REIT preferreds by 6%. This was the 1st losing week since back in early April.

Last week we had 3 new income issues announced.

We started off the week with self storage giant Public Storage (PSA) announcing a new perpetual. The new 4.625% coupon issue is trading under temporary ticker PUBXL now last traded at $24.50. They have called the 5.375% PSA-V issue with the proceeds of the new offering.

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Associated Banc-corp (ASB) announced a new non-cumulative preferred issue with a 5.625% coupon. The issue is trading under OTC grey market ticker ABBCL and last traded at $24.67.

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Lastly annuity provider American Equity Investment (AEL) announced a new non cumulative perpetual preferred that is a fixed-rate reset issue (reset every 5 years). The issue is trading under temporary ticker AEIHL and last traded at $24.56.

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32 thoughts on “Monday Morning Kickoff”

  1. Thank you Comroc,
    I am a novice at this and any help is greatly appreciated ..I am not trying to bother anybody , and if it feels that way ..I AM SORRY !
    Thank you very much for your help !
    Stay safe and healthy
    Danny

    1. Please Danny, never apologize. We are glad to help. Fire away with your questions. Even the most basic of questions causes one to refresh their brain or possibly catch a related thought that can then be explored to possible open another door of opportunity that we can then bring back to the site and share.

      1. Thank you A4I,
        you helped me before also. Do you think that the bank preferred are a safe now..dividend wise? I was looking at C,GS, JPM,BAC
        Thank you very much !
        Stay safe and healthy !
        Danny

        1. IMO, JPM and BAC would be the safest. Jamie Dimon has publicly said that he sees no reason why JPM would need to cut any dividends. They’re not even thinking about it. Many of the banks will be setting aside more for loan loss reserves and with interest rates being lower for longer, they will not make as much money – but the big banks will not be cutting dividends, with the exception of maybe WFC. JPM and BAC preferreds trade the strongest of all the bank preferreds I own/manage. They would be my safest recommendations but trade too high to buy them now (unless we have another swoon down). Citi usually trades much weaker and I really don’t bother with GS. Anything new that BAC or JPM issues will be in the 4.5% area for sure. The days of them offering at 6.0% are looooong gone.

          1. Thank you very much A4I,
            As always I want to thank you and all of you guys that educate us on the art of investing. I was looking at GS as the ROCK of Gibraltar in the banking industry..I guess I am wrong , you are a very smart one ,and I’ll follow you advice as always..then is JPM and BAC. i was also looking at foreign banks..RY,SAN…Your thoughts or anybody’s else will be greatly appreciated.
            Thank you very much for all the help !
            Stay safe and healthy.
            Danny

  2. Grid,
    thank you ..I guess I am like your father ..the safe income is what I am looking for..if any of the securities that I have don’t tell this story ,then I have to learn to discipline myself
    Thank you!
    Stay safe and healthy
    Danny

    1. Danny, I wish I was so wise! I only feel somewhat knowledgable in the few segments I really invest mostly in. Anything else a monkey throwing a dart is as helpful.
      A main point in general is when we use the word “safer” in terms of the preferred over common stock divi of company is often just a thin veneer safer. Covid proved this. Look at many of the sectors hit hard suspended the common and preferred at the same time. And even ones that held off preferred suspension notice how the prices sunk in relation to risk of it still occurring.
      Cumulative can matter but usually not a savior in itself. PCG had it and 3 years of dividends will be restored at some point. But many just get wiped out in a bankruptcy process right with the commons. Human logic can sometimes be deceiving. I always find it amusing when some say they will buy only cumulative preferreds, but wont buy baby bonds that have deferral clauses in them. Its the wording that throws them off. Cumulative sounds positive deferral rights sound negative. But in reality the deferrable baby bonds are actually “safer” (there is that word again, ha) than cumulative preferreds. Because the preferreds below it must be suspended before the baby bonds can be. Plus they have a finite suspension period unlike a cumulative preferred which can be suspended in zombieland for infinity.

    2. Danny,
      There is nothing “safe” about buying preferred stock. A generous approach
      would be to consider it 1/2 common and 1/2 bond. It is a very complex and
      opaque market, particularly when delving into direct buys, as opposed to
      etf’s or cef’s. At a reasonable price, FFC is probably the best option.

      1. Thank you Ricopet,
        I did buy this ETF awhile ago..you are right is a safe one having such a large base..going with the individual preferred I guess is giving the opportunity to flip them on the price increase , on top of the dividend..imo
        Thank you very much !
        Stay safe and healthy !
        Danny

        1. danny, regarding FFC be aware it is a closed end fund (CEF) not and ETF. There are significant differences you should be aware of before investing. Then most important is price discount or premium to net asset value. Best to buy when price is discounted relative to net asset value and consider selling when it is at a premium, at least from a historical trend perspective.

  3. Can anyone explain why Pacific Gas & Electric PCGprH can trade at 23.79 with a suspended dividend? That seems awfully optimistic on somebody’s part. What am I missing? The shares are callable with payment of unpaid dividends but then there’s the chapter 11 filing. Too messy for me.

    1. Jersey, The dividends are accruing, the filings dictated they will be paid. All shareholders complaints after Friday are done. The Judge will be rubber stamping bankruptcy exiting approval very soon. Dividends will likely be disbursed in Oct. based on cash flow dispursement statements from March. This is an old trade and everyone knows what is happening and the accruals are priced in. Its been a very profitable ride past two months for me. Too bad the party is over.

        1. Even though Judge hasnt officially approved I believe he has given approvals to all the recent shelf activity past week. This wouldnt be done if the ruling wasnt to be affirmative. All is about beating 6/30 deadline for insurance pool.

          1. Gridbird – If you were to buy today which series would you look at? And how much accrued dividend is there for that series that might get paid in October?

            1. Jay, come next month, 11 accrued dividends will have happened for every series. You really need to back out those dividends to get your true yield and also get over the mindset that those accrued dividends are “free money”. It was free money a couple months ago, but price has been baked in.
              Let me give an example…Come July $4.12 will have accrued for PCG-A. So that leaves current price $25.61. That is a present yield of 5.85%.
              Remember this is not PCG credit wise of 2017. It will exit bankruptcy with twice the debt and is issuing junk bonds at the holding company level.
              Today I in dribs and drabs bought a small 500 share limit of SCE-L between $21.52 and $21.77. That puts it at a 5.75% yield, essentially the same but EIX the parent and SCE utility are in better shape financially. In fact EIX just raised its dividend. I am taking advantage of SCE-L late dump Friday today as it hasnt recovered yet from a late 700 share dump.
              Eventually my plan is to pare down my PCG-A holding by using SCE-L as the placeholder. For a short time I have too much, but waiting to see if there is a foolish bump in preferreds once bankruptcy plan is approved and announced.
              ….Anyways, Jay, I guess my point is at this point from an income perspective, in terms of relative safety, I would rather snatch up SCE-L than PCG-A or any of them…Day to day or flip to flip, I have no idea. And being honest, these are not of the safest segment of ute world to look for safe income.

              1. Grid, are you making this move to SCE-L because you think the PCG-A strategy has fizzled, or is it something else? Hard to tell what news may trigger the market to move PCG-A higher, but last time we spoke the rough math was $27 plus $4 accrued dividends =$31 share price. Has that equation changed in your opinion?

                1. CW, Im really diversifying more than anything. Either way most of easy meat has been picked off PCG bone. I suspect as long as fires stay at bay, those prices are still accurate. I just think ultimately if PCG-A holds $27 after disbursement SCE-L will fall in line yield wise in sympathy. So from here for me Im just looking to spread out the risk some. Wont ever sell all of my PCG preferreds just cull the herd and rake some more of the profits in.

                    1. Yes, Nhcoast. Just my personal preference to avoid any Libor short rate instrument. Doesnt mean Im correct. At some point I may change my mind. At its current price, if it was tethered 5 year Tbill instead of Libor if would be interesting to me though. It still has 5 year protection which is a lot though.
                      I hadnt looked at its price today until now. It really has dropped a lot in short time. Will have to monitor it better now since it is a better price.

              2. Hi Grid,how is the puzzle going? you are a very smart kiddo and your wisdom is all the time more then welcome for all of us here..
                ” And being honest, these are not of the safest segment of ute world to look for safe income.” if you have to pick a few of them , can you please share with us?
                Thank you !
                Stay safe and healthy
                Danny
                ps-let’s go Cards

                1. Hey Danny, Remember my opinion is biased in my own expectations. I naturally own a lot of them, but I cant say any are a scream buy. Some of the safest may be the most expensive and thus subject to possible price drops despite relative dividend safety.
                  I try to play the middle and own some safe ones with lower yields below “par”, such as currently CNPWM and UELMO. I also “reach” for yield in some with higher relative yield but call loss risk such as IPWLK. And then the ones such as PCG-A and now SCE-L. Also own some baby bond ones such as SJIJ and PPX.
                  PPX usually is more stable of the two around par and past call.
                  So it really is what you want and your expectations and not overpaying for any extreme illiquids if one goes that direction…Take two liquids, PPX vs SJIJ (paying no attention to the fact they are in separate utility sub sectors largely and slight credit rating differences). Do you value price stability over call protection? Because one could be called and the other not, and then you are subject to reinvestment risk. But that could be a benefit too if others have dropped in price if that happened. So its really hard to suggest much. Sitting on sideline could be more profitable short term. Its a guessing game.
                  Also if there is a certain yield expectation you need, one may be better served going into other sectors of the economy besides utes. If you had more specific questions maybe I could help.

                  1. Grid thank you again and again for your help/info..i follow you here and also on SA,..taking your advise ,and others(TIM) I have SJIJ,DUKPRA,HFROPRA,NRZPRB..
                    I am looking for safety first , and time is not on my side..ha..income is a BIG Yes…SSD is not to much ..not to much $$$ to play so I follow your advise and try to spread to cover as much as my $$ let me do it..you mentioned “yield expectation” that sound so sweet good as long as the safety is on..I am not looking for much, 2-3% over the inflation put rice and beans on my family table.ha. You also mentioned ” Some of the safest may be the most expensive and thus subject to possible price drops despite relative dividend safety.” I am with you on this one,you are as I said before a master of the domain..teach me to fish..
                    Thank you as always
                    Stay safe and healthy
                    Danny
                    ps-go CARDS

                    1. Danny, see that is why its hard for one just to say “buy this” like the shameless Rida Moron outfits On SA do because they dont understand the risk of anything let alone the needs of each person. See my Dad was easy to help when he was alive and in preferreds. He told me he wanted safe 6% income (and that was very easy to find 5-6 years ago) and said he didn’t care if the price went to a dollar as long as the 6% income was coming in.
                      And that is just another example of ones goals can be. Basically what he was saying was he wanted a 6% income stream that would pay, and there would be some residual value leftover unlike an annuity would provide (along with a lower income stream).
                      It appears your method is safe streams with a bit of “yield spicing” going on (NRZ-B). I basically do that as I have a few of those types of higher yielding more speculative plays myself. Its not in the Mreit space, but that is just a personal preference not a judgmental insight on the sector. I just dont understand them and never have bought.
                      I like to trade some for fun and modest flip plays if and when. But things have largely slowed down and slightly drifted south, so my desire to trade much has been sluggish.

                    2. Let me take some of the pressure off Grid, Danny.

                      Per your stated criteria, here are some super safe ute pfds yielding ~2% or more above current inflation and that can be bought today below their call prices:

                      AILIH, AILIO, CNLTL, UEPEM, UEPEN & WELPP

                      Best of luck.

                    3. Camroc, Good options. I also own a few of those. Matched for below par safety/yield I would add PSA-E, PSA-J and PUBXL.

                      A bit over par, but call-protected and with even higher safety/yield: NCZ-A, NCV-A and GAB-K

                    4. Camroc, tell him the truth…With your 500 inch trading screen down in your “investing command control” basement with your IBM mainframes, you will front run any bid by a fractional penny and swipe them from us. 🙂

      1. While we are discussing PCG again, I managed to flip the PCG-E issue today for $1.50/sh. I had thought all of those opportunities had passed but there might still be a little volatility to trade on if you are patient.

        It is nice when you can both buy and sell the same day!

        I may finally get caught out on some of the options I was trading on the common though since the price is down a little. But I am well ahead on those trades and don’t mind owning a little of the common coming out of bankruptcy if they get put to me.

        Some of these things are like the watering holes in Africa. You get comfortable going back to the same one over and over until you make one too many trips…

        1. Yes, I agree Scott…Good trade…Its just hard in general to recommend something that largely has everything factored in. But you only need one over eager buyer to make it work. That is why I am still keeping all my A shares. Maybe down the road there might be one last pop being before or after divi payout.

        2. Day-trading on an income investing site. That’s pretty funny! 🙂 And good job. I’ve done it once or twice, but not something I intend to practice.

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