Monday Morning Kickoff

Last week was a loser week for the S&P500 as it traded with a low of 3004 and a high of 3155 before closing the week near the low at 3009–down about 3% on the week. With the SP500 around 3000 the index is off 7% year to date and about 12% off of the 52 week high.

The 10 year treasury traded in a range of .63% to .73% and closed the week at around .64%.

3 month Libor (as the reset variable for most fixed-to-floating preferreds) closed last week at .37%. As fixed-to-floating rate preferreds move into their floating rate period this is an important number.

The Fed balance sheet FELL by $12 billion last week. The balance sheet has fallen by $86 billion in the last 2 weeks. The REPO market has been very quiet the last few weeks–obviously there is plenty of liquidity in the system, at least temporarily.

The average$25/share preferred stock and baby bond fell by 28 cents (around 1%) last week. Every sector fell, with lodging REIT preferreds falling hardest with the average share off around 6%.

Last week was a quiet week for new preferreds and baby bonds. There we no new issues.

Brookfield Infrastructure Partners (BIP) announced a new issue of preferred units–but as of this moment we are not aware of any pricing of the shares.

We did see the start of trading of the WESCO International 10.625% preferred (WCC-A). This is a fixed-rate-reset with a reset spread of 10325%. This is a special situation and investors should make sure to do their due diligence.

28 thoughts on “Monday Morning Kickoff”

  1. I just want to say that it seems it the same 4 or 5 smart asses that are continually cruising this site. It takes the enjoyment out of it putting up with their condesending nasty behavior. Truly RUDE A—Holes.

    1. Hmmm, Chuck, you are the first person I’ve seen resort to name calling here on Tim’s site.

      1. Hey Mikeo….Actually it happened several times, and only him…Most odd….But anyways back to things that are actually relevant…

      1. Tim; This is in reply to your comment from today at 11:33AM. You need to go back and read my “original post” to get the real gist of their ridiculous condescending and sarcastic remarks. Iam specifically referring to Maverick and Mr. Lucky. TIM; It just gets old after a while. I have had to put up with those 2 and one other one continually with really nasty remarks, as if they are the only ones that know anything about buying preferreds/bonds. I have been buying bonds and preferreds for decades now. What I have never said to anyone is the “fact” that I do as much research as I can possibly do but in the final analysis I do have a “Forensic CPA” that I will run it past on large investments. If they are not large I don’t call him as I don’t want to pester him to death. My point being this: It would be nice to think that everybody could atleast be decent and civil but it seems rather difficult for the names I have already mentioned. I most likely will NOT be making many posts in the future thanks to just a few people on this site. By the way please check your messages as I did send you one.

  2. Though its disjointed and not effecting illiquids of mine, I have noticed a bit of price sagging past couple days in my accts. For example take one of my favs SR-A. I sold out completely around $27 again only couple weeks ago. Got eager beaver and toed back in around 26.30 and then 26.08..Noticed it dropped under 26 at close today. I will need more drop to buy more though. Some others though seem unaffected.

    1. Grid – Do you have any insight as to what caused the drop for SR-A? I believe it was on high volume too.

      1. Dick there is nothing wrong with company. Getting near end of quarter and maybe some funds dumping and rebalance for whatever reason. I noticed same thing happened to SCE-J dropped like rock late in day on volume. I bought 40O at 20.40 just because it was 80 cents lower than it was an hour into trading. Even illiquid CTA-B had huge volume late driving it down to 92 though I see its back around 98 or so already.

        1. Hi Gridbird,Do you have any thoughts on the other SCE preferreds B thru E`s
          for a safe qdi yield buy and hold?
          Thanks B/L

          1. Hey Lou, The Series B-E sit above the SCE trust preferreds in cap stack. But that layer is so thin I suspect its largely immaterial. The credit agencies basically view it as such also. They are the tricky ones being more illiquid. These can move a dollar or two in price just on a few thousand share buys/sells. So which of those is best in terms of value can change day to day. They wont be redeemed; they are 50-60 years if not more past call already.
            JMO, But I am a reluctant player in SCE, but I will. When I bought the SCE-J admittedly I dumped some of my SCE-L at a small profit. Im just not going to get over exposed in CA utes for the usual obvious reasons.

      2. Dick, I also own SR-A and noticed the drop as well. Other ute preferreds, like EP-C, IPLDP also dropped.

        I am suspecting end of quarter window dressing or rebalancing.

      3. Not connected with SR-A but I saw CHSCM go below $24, wondering what happened to that one?

  3. Banks are trying to find ways to ways to account for future loan losses even to tracking cell phone data of calls and visits to the unemployment offices. Asking credit card companies to take borrowers off mailing lists for future card offers if they are behind on existing cards.
    With the government telling businesses that can’t report who is delinquent on payments the banks are trying to come up with creative ways to find out.

  4. RE: BIP

    Most unusual for a major player in the capital markets to put out a red herring and not follow through. I’m sure there is a story but I’ve seen nothing in the press.

    If anyone has the inside scope please post.

  5. Just remember, this is a short trading week. Hard to tell if investors will take advantage making it a longer holiday or not. Think we may be able to tell at the end of the day or tomorrow. I may miss all the fun on the Monday after the holiday.

  6. Something I’ve always done before even thinking about buying anything is just as a reference point check the company’s common stock and see what its done in its “history” if you will. So for fun I looked up “WCC”. Here are its historical returns according to Morningstar: 1 Year -32%, 3 Year -15%, 5 Year -14%, 10 Year -0.69%, and 15 Year return +0.65%. Quite impressive wouldn’t you agree??? LOL. Regardless of the great coupon Iam not going to touch these type of issues. I view things quite differently than Pre-Covid. To me the world has now totally changed and I want to own what I call “Rock Solid” companies.

    1. Totally understand your position. This was a $5 stock in early 2000’s and got as high as $95 in 2014. The 50%+ selloff this year certainly makes those annualized numbers unattractive. WCC was a spinout from Westinghouse, it has a very long survival history. The purchase of Anixter makes them stronger operationally. I would expect these to be redeemed in 2025. Not without risk but I added a small position.

    2. Ummm try looking at Wesco’s financial statements. They tell you a whole lot more about a company than simply looking at it’s stock price gyrations.

      Wesco has been around since 1922 when it was a subsidiary of Westinghouse Electric. Actually it was around even prior to that as a division within Westinghouse. Westinghouse sold it to private equity in the mid 90’s. It has made numerous acquisitions and grown considerably since going public in the late 90’s and is a Fortune 500 company that has been profitable with a positive bottom line ranging from $101 million to $225 million each of the last 5 years. Plenty of room to pay the preferred dividends.

      But go ahead and focus on stock price instead of the company’s earnings and ability to pay this dividend.

      1. Maverick; I stated clearly that its just the “ First Thing” I look at but far from the last. Buy it all day long I sure don’t give a damn what you do.

      2. Great info, Maverick. Thanks for sharing! Holding small position as an anchor in the ol higher risk bucket

        1. No problem Gridbird. While they are a global company, they are headquartered locally where they originated and while I haven’t followed them closely, I have read or seen various news reports over the years when they have made acquisitions, etc. Before this acquisition, they were doing over $8 billion in revenue annually and the Anixter acquisition almost doubles that.

          1. Yes, understood…These double digit yield issues have a checkered past and frequently end in a trail of tears, so I play infrequently and small. The last time I went bigly was a 10% bank trust preferred that kept hanging around not being called for some reason. Their finances were good but the grandfathered status and tax break kept them from redeeming well past call date. Ah, the good ol days, ha.

      3. Maverick, as a fixed income investor, i simply just look at the pretty pictures of the charts, look at historical returns of the “common” stock, or revel in confirmation bias from other investors. No need to look at the books, how much is cash flow vs outflow, short term vs long term debt, dividend and interest coverage ratios, etc. No need to even look at the existing bonds at finra. The historical returns of the common tells me if a company is rock solid.

        1. LOL – I need an assortment of Smiley emoji’s here to respond Mr. Lucky 😉 🙂 😉

        2. Mr. Lucky; Why don’t you go back and read very S L O W L Y once again what I wrote. I said it was just a starting point SMART ASS.

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