Monday Morning Kickoff

Once again the S&P500 moved higher last week as the index traded in a range of 3414 to 3509 closing the week at 3508–a gain on the week of around 3%.

The 10 year treasury moved in a range of .62% to .75% closing the week at .73%.

The Federal Reserve balance sheet fell by $20 billion — after rising $53 billion the week before–it has become obvious that the current buying by the Fed of government debt, mortgages and other assets will be pretty lumpy week to week. The globe is awash in money and even a meager coupon on U.S. debt is attractive compared to nothing, or less than nothing in some countries.

The average $25/share preferred stock and baby bond followed along with the common stocks and saw an increase on the week of 10 cents a share. CEF preferreds were up 5 cents/share, banks up 9 cents and investment grade 17 cents.

Last week we only had 1 new income issue sold and that was a baby bond from REIT Sachem Capital (SACH). While company has issued a press release with pricing shown as 7.75% the SEC paperwork has not been filed–I expect it will be filed this morning. Sachem has a couple other baby bonds outstanding.

10 thoughts on “Monday Morning Kickoff”

  1. Sold most of my high flyers on Friday, even my SPY fund in my 401k. Raised level to almost 40% cash. Kept investment grade preferreds, utes, staples and telecom. Will sell puts on stocks I would mind owning 15-20% lower and will sell calls on existing positions.

    Holding this philosophy till after the election and/or a 10-20% correction. Stat safe all!

    1. You had the courage to do what I have considered doing, but have not been able to pull the trigger. I know not what to do with the cash. Would you share your plan?

    2. Thank you for posting Yazzer. Why don’t you invest in something like NGHCO? It’s almost a breakeven with a divy in the next month, but after that, you earn the divy until Allstate calls it, which they stated they will.

      Just curious and wanted to know your thoughts of an idea like this vs sitting in cash.

      Tim, if you are reading… maybe this is another topic where many of the ideas are buried in replies, but do not have their own thread. The category or topic would be: “Cash Alternatives”

      1. Mr. Conservative: Thank you for reminding me. I have some NGHCO, but can add some more. Any ideas are greatly appreciated. Being 83 years old makes principal protection a priority – I don’t have a lot of time left to make up losses. My choice would be CD’s that pay a decent rate.

        1. Another idea jag is RCP, a baby bond, with a maturity date in April 2021, and trading near par. I don’t see this company going bankrupt in 8 months. Disclosure: I own about 4,000 shares.

              1. ah correct. so actual ytc is 4.25%. of course by the time i redid the math it went up 4 cents! (6.1% annualized @ $25.19, still pretty good!)

                1. That’s what happens with a short period to call or maturity when above par. (Not to be a stickler for jargon but RCP is actually YTM, not YTC). A few cents change in price can have noticeable effect on annualized YTC or YTM.
                  6.1% is certainly good these days as a general matter, and Mr. C is probably right that they’re OK for 8 months, but this one looks pretty risky.
                  Is extra yield justified over, say, ~5.6% current yield for investment grade old friend AATRL (suitable only for non-taxable accounts) – even after run-up since the dark days? For some, maybe; for others, maybe not.

        2. 2WR’s MVCD might also be worth a look. Not generally a big fan of BDCs, but this might be OK. Seems like a similar situation to NGHCO/P.
          If called on 12/15/20 (just an assumption, who knows), I get a YTC of ~5% at last price of 25.29.

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