Irrespective of the push to higher interest rates the S&P500 rose by 2.7% last week closing at 3942 versus 3839 the week before—you can’t fight the Fed and easy money. We are at record highs and there is no obvious reason to think this will change anytime soon.
Last week as interest rates paused I thought we would have a 3-4 week respite from higher rates–well the pause didn’t last long as the 10 year treasury popped by 11 basis points on Friday to close at the highest level in a year at 1.635%. The markets, which typically almost always ignores the PPI (producer price index), decided to pay attention to the slightly ‘warm’ number. In addition to the PPI we had only ‘so-so’ treasury auctions and there should be almost no doubt that in the year ahead that the ability to absorb more debt will become increasingly more difficult.
The Federal Reserve balance sheet grew by $22 billion last week. The balance sheet is just below the highest level ever ($20 billion or so below).
Last week the average $25/share preferred stock and baby bond rose by 13 cents last week. Investment grade issues rose by 10 cents, banks by 13 cents and mREIT preferred’s by 20 cents. So we have 2 weeks in a row with reasonable gains as rising interest rates paused. We didn’t see reaction from the big rate jump last Friday–we’ll see where rates go from here.
Last week we had 2 income issues announced.
BDC Oxford Lane Capital (OXLC) priced a new issue of notes with a coupon of 6.75%. This issue has not traded yet as far as I can tell.
JPMorgan Chase (JPM) sold a new issue of preferred stock with a coupon of 4.55%. This issue, which is trading under OTC temporary ticker JPMJL closed last week at $25.16
Read today on Yahoo that the ECB is going to start up the printing presses and take the funny money and buy more questionable securities. Seems their interest rates have been moving up in tandem with US treasuries and they can’t understand why , so they don’t want to derail the economic recovery starting there.
Taking a page from our playbook. All this does is encourage companies to issue more debt.
I just feel like the modern monetary policy is not going to end well.
Johnkcal said: “Preferred stock Trader (credible per Gridbird and I notice that this guy is a sharp shooter for Rida Morwa).”
JKC, word of caution on Preferred Stock Trader, with all due respect to Grid. PST is mortal. He had a ringing buy endorsement on MDLX/MDLQ back in 2018. They went into bankruptcy last week and are trading @ ~ 3.00. They were trading @ 24-25 when PST recommended them, so a small $21 capital LOSS on them. . .
I have been holding my breath waiting for PST and/or Rida to issue a mea culpa. Turning a little purple so far, so hope it comes soon.
Link to PST endorsement on SA:
https://seekingalpha.com/article/4208613-mispriced-baby-bond-bargain-7_6-yield-to-maturity
No doubt, Tex. He generally is a notch or two above my usual risk scale (not presently now as I have been riding up a lot of lower quality issues past couple months myself). But he knows what he is doing and most of his trades are spot on. But this one not so much. I dont do BDCs (or Mreits except for dining and dashing on ABR preferreds) so I paid no attention to this one.
But he knows his numbers and knows his risk tolerance, and has been at it a long while. I cant say tail blindly because I never do. But he is honest and means what he says, so I do respect his knowledge. He is the only one of the bunch I personally view as credible.
Grid, what I would really like to see from PST and Rida is a post: “Yeah, we blew it on MDLX/MDLQ”, here is what we got wrong and what we are changing so it does not happen again. . .
Everybody blows a call from time to time, but we have to admit it and learn something from it. Lord knows I have a long list of bad calls, one of the biggest errors was constantly thinking interest rates would rise. Been wrong on that for probably a decade or so.
I’ve done very well with his calls since he joined HDO. I never owned the ones you are referring to. However the link is from 2018. Do we know if he sold them? He might of made money. He pretty nimble like some of the smarter guys on this site. He’s also a very nice man. I have e mailed him many times with items I think are good and he always replies with good information as to why he likes it or doesn’t. He is the only reason I keep my subscription.
My two cents.
JB, I have never subscribed to Rida’s service, so I cannot say if PST issued a sell signal on MDLX/MDLQ since the original 2018 recommendation. It does NOT show up when you do a SA search, so if they did issue a sell, they only did it for their paying customers. Which is equally bad since many people read the free posts on SA. When you look at the 2018 post, there are comments added as recently as last week. PST could have spent 30 seconds anytime between 2018 and last week to post “We no longer recommend this, we sold out at XYZ on ABC date.”
PST might be the nicest person in the world and very responsive to questions, but that does not forgive him for 100% missing this one and likely causing investors to suffer ~80% losses, and NOT owning up to it. It is the NOT owning up to it that bothers me the most.
Tex, Im not trying to change your mind. But I would need more particulars to
take that opinion being that was a 2018 article. Heck, I usually own 25-30 preferreds at a time, and the only one I have continually owned from that time period is the old Phoenix PFX bond that is now delisted. Im on them when they recommend something and it goes south in a couple days or weeks. And/or issue victory lap articles on the second purchase making money while being underwater on the initial one. I dont remember him writing any victory lap articles on all his many successful picks, like the other derelicts do, so that is kind of the other side of the argument also.
Hey Grid,
Once and a while I throw you a questions and you have always been nice enough to answer. I have to say thank you for an off the cuff comment you made in September. You said you just bought your local power company Spire. I had owned the preferred for six months so I took a look and bought the common. Still have it and with dividends I’m up about 45%.
So thanks
JB, I should have followed your lead, lol. Im not much of a common stock guy. But Spire dropped into $50s so I bought 300 or 400 shares. It went up $2 bucks and I sold. Its back in the $70s now. I knew Spire was fine but it seemed like all gas utes were being rerated down. I didnt know what was going on market wise in general, and dont have a temperament for it anyways. Congrats that was a great buy for you.
Send him a message. I think he will respond to you.
Personally, I scan the post to see what you are buying. Not so much the trades and flips but the grabs like NI.B / SR.A and IPLDP and such. Although more of those types of issues are a generation away.
I’m like one of your dependands but you can’t get the tax break.
A stupid question about SA if I may. As of Jan 1, I can only read 5 articles a month. “Articles” sometimes includes mere news releases or dividend announcments. So I really don’t read any author-written articles at all any more. AFAIK, the only solution is to pay $30/mo or more for a subscription. You folks are far too smart to be doing that. Aren’t you? How are you able to read anything on SA, and more to the point why do you bother?
Hi, Larry,
First, I’m not aware of any limits of articles anymore. I have all the access to every article. They used to lock them but recently they have opened them all up.
Second, I use it as an investment idea forum. There is a lot of people throwing darts at ticker symbols for sure. But when I read the first article about something like WPC, I wait, watch read more, wait and if I like it I take a position. I own it in a Roth and there is no appreiation over the last 5 years, basically flat but it has been a solid 6%.
DEA, also basically flat but a solid 5% from the US government. Long term T-bills cant give you that.
MAIN, flat over 5 years but solid 6.5% pays monthly. Before the virus hit there were 2 yearly special dividends.
Unless you were specifically speaking about the fixed income articles which are weak. Then my ramble is a waste of the last 25 seconds of your time.
Cheers,
I just opened an article that I hadn’t looked at before and it said that was my 4th free article of the month out of the 5 allowed. No they have not opened up the articles unless you have a secret back door. People still whine in the feedback forum about this ridiculous new policy (I did back in January and am now blocked there for at least the third time that I can remember).
SA used to be a tremendous resource for ideas. Many of my best stocks were purchased after reading about them on SA. And SA is where I first discovered preferreds and a guy named Tim McPartland who wrote there infrequently. But SA got very very greedy and chose a horrible business model, and they will soon be gone or at least reduced to what Motley Fool became when it imploded.
I don’t understand why you are being limited on SA. Yesterday I viewed 3 articles on SA and just now I viewed 5 more as a test. No problem. I’m using a windows PC and Firefox not that it should matter. I as signed in and never sign out.
Don’t sign in or sign out clear your browsing history. You will get 2 free each time you re-clear your browser.
As long as we’re talking about calling preferreds, does anyone know why the ALLY-A’s haven’t been called? It floats at Libor plus 5.875% and sells at $26.40. Ally should be able to refinance much lower?
Morning everyone – just got an alert that AILLL stumbled 15% this morning to 25.06. Anyone aware if it’s been called or is this a buying opp? BTW Tim – first timer here – you run an excellent site. Much appreciated.
Lots written on Reader Initiated Alerts tab on AILLL. Good luck!
I freely admit I have NO CLUE, but will just say its down $4.44 to $25.06 so an educated guess is they are going to call it. I looked it up and its callable Anytime. Hard to understand why it was trading so high up there in the first place if you really stop & think about it. I watch all my call provisions like a HAWK. You have to.
Anyone paying attention to this? Nearly 1/2 a billion in new money coming in…
Ameren Announces Pricing of Senior Notes Offering due 2028
02/24/2021
ST. LOUIS, Feb. 24, 2021 /PRNewswire/ — Ameren Corporation (NYSE: AEE) announced today the pricing of a public offering of $450 million aggregate principal amount of 1.75% senior notes due 2028 at 99.908% of their principal amount. The transaction is expected to close on March 5, 2021, subject to the satisfaction of customary closing conditions.
AILLL is a FULL call with a 3/29/21 call date at $25 call. I got broker notification this past Friday. Too late to try and trade out of the higher price.
Anyway, reason for price drop this morning. sorry to see it go
The call notice was published FEBRUARY 22nd as a line in their annual report.
This would have been a home run for anyone who shorted it with 3.50/4.00 guaranteed gain in less than 40 days if anyone who saw that.
talk about an inefficient market
My brokerages dont allow shorting OTC issues.
Duh, I should have realized that.
the 2nd issue mentioned that was being redeemed was AILLG (CUSIP 02361D704) , which doesn’t appear to have traded in years.
For what its worth to you guys SCHWAB literally just came out this morning with a brand new preferred. I was told the coupon is 4 1/2% and of course the usual 5 year call protection. I’m not buying it but I thought I would just pass the info along to you guys.
Pretty vague on what they will do with the proceeds (We intend to use the net proceeds from the sale of the depositary shares, each representing an interest in the Series I Preferred Stock, for general corporate purposes) but SCHW-C is callable.
Do you have a temporary symbol? Thanks
https://www.sec.gov/Archives/edgar/data/0000316709/000119312521080603/d143702d424b5.htm
Not yet, but here is the 424
Here is the FWP:
https://www.sec.gov/Archives/edgar/data/316709/000119312521081577/d108210dfwp.htm
– 4% for first leg
– resets at 5 yr Treasury + 3.168
This will not have a symbol
With rates rising there may be a rush to market of new Preferred or bonds as companies try to refinance debt. Some may start to find the cost not much different than the debt they already have so refinancing old debt doesn’t make sense. Then buyers may not be interested in new issues as rates rise demanding higher coupons or discount to redemption value. Not willing to hold in a rising rate environment.
In this game of chess, might want to see when equilibrium will be reached.
May continue to stick to soon to be called issues.
People holding common stock and preferred’s with good capitol gains may want to lock in their profits.
When Venezuela had hyperinflation their stock market went up. But not as much as inflation.
While quality names seem lack of buying opportunities for decent yield, the ones with some calculated risks could be decent buys:
1. SBRA, medical eREIT with some SA writer (not Rida but also a risk taker) got his nod. It is also on Hoya Cap reit list. I missed that one with ex dividend date passed.
2. Picked up some STWD, a mixed eREIT and mREIT, got upgraded by some analysts as reported by Schwab.
3. Some company has lots of money offering to buy assets from Glop partnership, GLOG-A is safe. The daughter GLOP got its dividends reduced to 1 penny sometime ago, waiting for consulting with some firm, while GLOP-A, B and C continue to pay dividends. I sold some as tax loss but the market considers such actions as POSITIVE for the preferreds. GLOG-A is safe because the owner has large positions on the parent common as reported by one SA writer.
4. I am filled up with all the Gridbird’s non SWAN but reasonably good positions such as WCC-A, QRTEP. JMPNZ is safe as deemed by market action on the parent and Preferred stock Trader (credible per Gridbird and I notice that this guy is a sharp shooter for Rida Morwa). But JMPNZ is not a bargain after its ex div date getting close to 7%.
Safe Bulkers B and C have positive articles on SA and it remains my largest single company positions. Market actions seems to suggest the huge QDI dividends are safe. The two Greek brother owners are super honest and ethical. Perhaps too ethical at times to have good quarters, e.g. they are way ahead on the environmental control equipped certified by US Coast Guard. Tsako (which i also own) is in exact opposite side of the European regulations, not yet enforced. LOL.
Disclosure: I sold lots of STWD at loss after the COVID then I bought Tim’s best AATRL. After Rida Morwa with Preferred Stock Trader doing all the reearch and PICK, it has earned the same respect as JP Morgan Chase. Thanks, ,Tim.
You’re welcome JohnKCal