Monday Morning Kickoff

The S&P500 traded in a range of 2962 to 3008 before closing the week at 2986.

The 10 year treasury moved in a range last week of 1.69% to 1.77% before closing the week at about 1.75%–all in all a pretty quiet range for interest rates.

The economic calendar is pretty quiet this week, but with all the political turmoil there will always be a chance for fireworks.

The Fed balance sheet grew by $16 billion last week–this brings the balance sheet to a point $201 billion above 8/28/19 which was the lowest point in 6 years.

Last week we had a couple new income issues sold.

Aegon Funding LLC (division of insurer Aegon NV (AEG) sold a new baby bond issue with the meager coupon of 5.10%. This issue is investment grade as you might imagine given the coupon I am not showing any exchange trading in this issue at this time.

Ellington Financial (EFC) sold a new perpetual preferred issue last week with fixed-to-floating rate coupon. The initial coupon is 6.75% which will be fixed until 2024. This issue is trading on the OTC Grey market under ticker EGLLP in the $25.20 area righ now.

14 thoughts on “Monday Morning Kickoff”

  1. I bought them a couple times for the dividend capture with mild success. Not interested in holding long term. The rate is high for an insurance company but I don’t like risk.

  2. Good Morning….does anyone have a background on the preferred issues associated with National General Holdings?

    1. I hold the NGHCN issue and previously held the NGHCZ. They’re certainly no AIG and the number of lawsuits hanging over their head don’t appear to be going away anytime soon. It’s a small speculative position for me that struggles to maintain par pricing.

    2. SteveT, 3 Prefs and a BB series. I own QDI pref-O in taxable and the BB-Z in IRA which I bot awhile ago. Here’s my memory:
      Did some work at that time which also included a look at the quality of their insurance pool holdings which is strong IG and liquid. Go to their site and you will find that info, I think it was in the Presentation near the end. The reason I like some of the insurance cos is exactly for these legacy holdings which just churn along in addition to the corporate ax-men always nudging premiums up and dropping bad risks (if they are doing the job right). I know there is/was some lawsuit threat which is always a target/magnet for lawyers, but these things go on for years and years and looks pretty minor in the schema. Might be time for me to revist these too.
      Happy Hunting! JA

    3. SteveA,

      NGHC is the strongest of the 3 legacy insurance companies, founded by the late Michael Karfunkel, a self made billionaire in NYC. Google search suggested that Michael was a religious American Jew of Hungarian descent. He also had an associated insurance company in UK, Maiden Holdings Ltd. Many years ago, we saw extreme valuation drop in Maiden preferreds, presumably caused by alleged questionable financial statement. Micheal hired a big accounting firm to clear his name and restored the commons in AmTrust Financial (AMFT I believe) and Maiden preferreds, bragging that he almost punished his enemi(es) alleged edge fund managers, presumably shorting his stock to bankruptcy. Fast forward October 2018. Micheal died. His son in law, Barry Zyskind took over Amtrust and was accused of “insufficient reserve” booking one quarter of profit and attempting to make every quarter looking profitable. SEC came in. Quite a few in SA wrote tons of articles, trashing Amtrust commons. Presumably Zyskind hired an Israeli private I, same firm used by Donald Trump, and was caught. Then FBI and then some disgruntled employee whistle blower. In one Earnings Call transcript, Zyskind was asked the question “despite Amtrust being one of the Fortune 500 companies, how do you plan to restore investors’ trust?” Zyskind attempted to go private. Activist got in, the time I should HAVE SOLD, common and preferreds both climbed. AMtrust preferreds and notes are still trading in gray market, increased from its beaten up prices, Preferreds around $16 – $17, notes around $20. NGNC has ALWAYS been the strongest of the 3, CEO of Michael’s son. It did have one bad quarter, presumably caused by buying Amtrust common and preferred stocks (I suppose it is all in the family). The last (I have not seen the latest quarter) quarter was good. Readjusted policy price on catastrophic Insurance and auto insurance premiums. It seems to me the Michael ran a very tight ship and always wants to low ball on the policy prices. BTW, I disagree with Doug Le Du, Maiden was NEVER the owner of Karfenkel enterprises. I continue to own 935 shares of NGHCZ, notes bought at IPO paid a little more than par plus 500 shares of NGHCN bought at IPO slightly below par. Despite awful sentiments, I do not believe that the Karfunkels and Zyskinds are crooks. As for Maiden, it was always a offshoot from Amtrust. Unfortunately it business tanked once it decreased the Amtrust associated biz. It is possible that Maiden could be the sacrificial lamb, exchanging shares with Amtrust; my memory got fuzzy there. I still have way too many Maiden D shares (dividend suspended for quite a while (first suspension 8/30/2018 per Le Du). Read news that it somehow got registered in another state. ???

      1. CIMXP apparently started trading. Last price according to is $1,282.6548 or it was closed at. Using an ancient Excel spreadsheet from Doug Le Du modified from $25 per share to $1,000 per share par value as in WFC-L or BAC-L, the Dividend yield = 6.6 with cap loss in the several quarters for sure giving an disappointing % EAR (Effective Annualized rate of return: meaning all the dividends are reinvested at the same rate) of 4.982%. Not good at this price IMHO. This convertible preferred with temporary symbol CIMXP and the issuer XEC are both recognized by XEC went up 2.88% with unspectacular volume.

      2. When i see the name Karfunkel, Zyskind,… i hear “Shyster.” If you are going to have various family members on various boards.. .you really should run a private company. For example this is how Cargill is ran. Family members everywhere, but it is ok as they are not public. These are contributing factors on the failure of Amtrust, Maiden and NGHC. Family member get togethers should be reserved for birthdays, graduations, Thanksgiving.. .but not on public companies with millions of public money. Separation and segregation of duties are called for.

        Sorry for everyone that got burned on these, but when you play with fire, well… you have fire. These showed smoke awhile ago.

      3. John, I have designated monies strictly for “stink bombs”. And admittedly I have played here and been fortunate. I got in and out of NGHCO for a quick buck or so a share flip earlier this year. I just flipped out of NGHCZ today at 25.95, buying a week or two ago when it went down to 25.60.
        When those Amtrust preferreds cratered to around $12 a year or 2 ago I jumped in for a quick buck. Didnt ride them up though as patience would have rewarded me more. To be honest I got a modest amount each of AFFS and AFFT bought a few weeks ago. My plan is to hold these a bit. They are private but they arent dark…AM Best reviewed them 2 months ago and have the these above subordinated debt issues as rated BB+. Me perusing the financials to double check AM Bests review would serve no purpose other than to waste my time thinking I know something I dont.
        So that being said, risk/reward for my higher risk monies, there is precious little of anything yielding well over 9% that is rated BB+. Im certainly not promoting Am. In fact I will just refer to it as Am because I dont “Trust” it. Of course I am sticking with the subordinated debt only because this has to be paid without triggering events unlike the non cum preferreds. If Am went under the subordinated debt would receive the same fate as preferreds I would certainly imagine.

        1. BTW, I need to clarify on AFFS and AFFT. I focused on the negative of the company and where it resides in my high risk bucket allocation to make sure I am not being misunderstood touting a “safe high yield issue”. But I need to clarify this to make sure it is understood.
          FWIW, I consider AM Best to be a decent rater of insurers as that is what they focus on. However, what I failed to mention is I forget people are unfamiliar with AM Best rating scale and I sent a misguided signal there for people who dont know their rating scale. It is not the same rating scale as Moodys or S&P. The letters have different meaning. Here is their scale.
          aaa Exceptional
          aa Superior
          a excellent
          bbb Good
          bb Fair
          b Marginal

          The Am subordinate debt issues are notched “+” closer to good. Their bb rating is describes as….
          bb+ / bb-
          Assigned to entities that have, in our opinion, a fair ability to meet their ongoing senior financial obligations. Credit quality is vulnerable to adverse changes in industry and economic conditions.
          Hopefully this further explains why its a 9% plus issue and not a gift from God laying there to scoop up, lol….

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