New Week – Same Stuff

There is no use trying any longer to figure out the best spot to try to catch falling knives.  At this point we are waiting for the knife to fall to the floor and stick.    Although when we see plunges like we saw in GasLog Partners preferred shares (GLOP-C) early today (a 10,000 share block knocked the price down to $18.75 before it bounced back into the $20.65 area) we are always tempted to jump in and lower our average share price–but we are doing our best to resist at this point in time because there is no sign of a bottom.

While overall we are probably doing as well as can be expected we have had one of our accounts fall into the red today.  That particular account holds the perpetual preferreds that we own–and needless to say if you have GasLog Partners (any issue) and Spark Energy preferred in your accounts you have gotten spanked-like us.

When we look over the daily volume leaders it has a few new names pop each day.  For instance today we see REIT Apartment Investors and Management preferred (NYSE:AIV-A), a large apartment owner, has traded 55 times normal daily volume–a large chunk in a 100,000 trade early in the day–shares are off just 41 cents.  The preferred shares of hated National General Holdings continue to tumble sharply on very high volume–this insurance company is a sister to Maiden Holdings and AmTrust Financial and simply is disliked because of this relationship.  Preferred shares of all of the issues of REIT Pennsylvania Real Estate Investment (PEI) are trading down sharply on very heavy volume.  Shippers of all sorts are much lower today.  Preferred shares of the various Tsakos, Teekay, GasLog and Seaspan issues are lower by more than a dollar.  Let’s face it–this is a bloodbath like we haven’t seen for a very long time.

It is interesting that again ‘term preferreds’ are kind of soft and trading on higher volume–Eagle Point Credit term preferreds are trading on 5 times normal volume.  Even our beloved Kayne Anderson 3.50% term preferred (KYN-F) are trading below $25–of course these are redeemable in 2020 so these shares aren’t going to fall far.

For now income investors need to be very careful and consider simply sitting tight without further purchases for the time being.  The sell-off will end–but when is simply a guess.  At this point in time each ‘bargain’ we buy becomes a better bargain the next day–and that is a bit painful.  When we reach a bottoming there will be plenty of time to search the bargain heap and buy a few.

27 thoughts on “New Week – Same Stuff”

  1. Today I initiated positions in Summit Hotel preferred both the “D” and “E”. I have had my eye on that one and have wanted to increase my exposure to hotel preferreds. I couldn’t resist the massive drop early this morning to do so.

  2. I thought I was done with purchases till the last week of January as I didn’t have any dry powder available but I was just too tempted by the drop in CHSCL. I sold a corporate bond out of the portfolio to add more CHSCL today. Am I insane to sell a 2.96% safe bond to catch what might be a falling knife ? I guess time will tell but I a now overweight at 3.2% of my holdings. I generally keep issues between 1.5% and 2% of investable assets.

    1. Retired, take comfort in fact your are no more insane than me, who bought one more dose of EBBNF today. At least CHSCN has an ask offer, lol… I actually tried to buy an Emera preferred (Canadian utility that owns a boatload of US utilities) that is just like EBBNF on the grey market tickered ERRAF. But Vanguard doesnt sell it. I even called trading desk but they couldnt get it accessed.

      1. I’m amazed at the stuff you trade. Congrats to you…I’m jealous! I saw a previous discussion on this site regarding EBBNF but Fidelity doesn’t trade it online so I moved on.

    2. Thank you for your tip on CHSCL. I bought some CHSCN and CHSCM, making the mistake of pulling the trigger too fast slightly above par, before it got smashed. Today, I picked up some CHSCL at $25.307. CHSCL IMHO is safer, just in case the Co-Op Farmers should decide to issue another preferreds because of the possible stress caused by the trade war on commodities and agri’s.

  3. Today I swapped some of my IHIT for PBC. Not for any particular strategic reason other than I had an abnormally large position in IHIT and wanted to trim it. I’m a big believer in diversification because it keeps the inevitable mistakes from being fatal.

  4. Tim, I have been over the cycles with fixed income investments over the past 20 years and my best advice for investors is not to panic if you hold good securities that have sound financial statements. While today was disappointing, the strong issues should hold up well. Plus, for long-term investors like me who will hold issues for years, it all comes down to one thing: A secure stream of income for my retirement. It appears the Fed may slow down any rate increases next year, which should be good for most preferreds. Of course, there may be bargains out there the next couple of weeks and investors should look for companies that have solid balance sheets and earnings.

    1. Truly OUTSTANDING advice kaptain lou! I too have been through so many economic cycles and market meltdowns to know that the large institutional accounts always pick up the low hanging profitable fruit when the small investor panics. Wishing you profitable investing, Nomad

  5. Tim, thanks for sharing your thoughts as always. I sold 400 some shares of MH-D early this morning at $6.8 to decrease my way too many shares of this worst of the 3 Karfunkel/Zyskind enterprise. Bought some HBANO @ 25.05 after reading MStar considers the issuing bank should be doing fine, only to see a slight decline, below par. Moody IG, Baa3 SP BB. Sold some my legacy German stock, SIEGY, bought a few AAPL (Apple Computer) common, leaving small amount of cash in my retirement account. Nothing stands out in the pREIT, MPW perhaps still too high. VTR?, O?
    I may buy a few more shares of HMLP-A. Once upon a time, many in SI consider this shipper to have sound financials. HMLP-A was bought at IPO always above par. Then again, with trade war and commodity decline, who knows? Like you said, perhaps it is best to wait. For just a few thousand dollars, I may buy just a bit more of HBANO. 6.25% coupon ex dividend 12/28/2018. Many believe that the Feds will cease to raise the rate and give a dovish outlook Wednesday. This time, MStar analyst on the bank common stocks give similar “bullish” comments as Rida MorwA et. al. Funny. BTW, MHNC, a baby bond traded slightly higher. I do have small position. So, it is possible that Maiden might not go under. Then UNIT (UNITI) eREITS were trading positive until it got smashed with the big tidal wave wiping nearly everything out. AIV-A and RLJ-A are one of the few survivals. BTW, RLJ-A is a legacy preferred, NOT CALLABLE.

    1. BTW, RLJ-A, has announced ex dividend according to FIDO, $0.4875 ex div 12/28/2018. Dividend Yield 7.76%. 3.3 B Cap. 5.6B Enterprise. Seems not over leveraged. Common dividend 7.04% per Schwab. Commons considered “neutral” by Schwab and FIDO analysts. I have some legacy position, bought way too high plus some more at decent cost basis. I would go for this one instead of HMLP-A. I has way too much on the shippers, HMLP, GMLP, GLOP A and B. Plus huge number of SB-C and D. They also have headwinds on the environmental control requirements.

    2. Hi-JohnKCal–Sounds to me like you have had your hands full for the last few weeks. Hopefully you have some shorter maturity stuff like the term preferreds etc. While they are now trending a bit lower it isn’t anything like the various perpetuals.

      Of the LNG shippers Hoegh LNG, GasLog LNG and Golar actually have some decent financials and don’t deserve the pasting they have taken–BUT it is what it is and we can’t ignore the losses.

      This too shall pass.

      1. Tim, I couldnt catch a break on my beloved ute preferreds. No flash discounts there…Look even at liquid NISOP. Performed like a rock star unchanged on the day with half million shares trading hands. Would have added more there but no opportunity presented itself. Actually if it wasnt for NSS, CHSCN, and SRC-A I would have had a status quo day as a few of mine were actually up today. Those 3 were rotten apples today.

        1. Yes–have some NISOP and have some CHSCN. Of course a couple of hated pieces of junk which are disappointing me greatly–oh well this too shall pass.

      2. Tim, thank you. Yes, I am not terribly worried about rising rates. This is a challenging environment for me with rising rates in drastic contrast of declining interest rates in the “golden days” of Bill Gross of PIMCO. When I was searching for HBAN regional bank, the Morningstar analyst is forecasting just one (already priced in) rate increase this month by the Feds. He is predicting only two more rate increases in 2019. Federal deficits going forward and trade war, perhaps too much corp tax cut all could be headwinds. An old CNBC pundit blamed on too long holding the rate stable. Jeff Gundlach, which Barrons mag embraced him as the new Bond King, was quoted by FAST MONEY as Bear Market has started. I have stopped subscribing to Barrons, but came across via google that Jeff Gundlach’s pick on MLP closed end fund experienced “buy at the top and going downhill since.” I sold it at loss and replaced whatever is left with someone writing an article on Turtle Funds. TPZ still losing money is better than NTG (Gundlach) or NDP. Of course, MLP oil/gas has been so far seems like the worst sector. BTW, I bought GMLP commons following Karen Finerman. GLNG despite its huge cap size is not a great company. It issues more GLNG (which pays only 1% as the holding company) and I am assuming that they also issue tons of GMLP. Finally they reduced the insane high dividend on GMLP. They are financing their new ship by issuing more shares of the commons. I believe I need to say for the next 10 years to get my money back without net loss, at the worst case. It is all, as it should be Return of capital.
        Yes, it shall all pass and after selling some of my Maiden and Amtrust today at huge loss (AmTrust helped with dividends already collected) I will just hold tight and be prepared to pay sizeable estimated tax due Jan 15. Still less headache than dealing with tenants.
        All my best to you and all those who commented on your Website.

    3. MHNC action is strange. A recent report stated the Board did not declare divs for the common or preferreds, but MHNC goes UP! Look at the chart and see that little dip? I sold in that.

  6. B in D
    Right there with you. I’m finding over 7% on some dumps of quality issues. Easy does it for me though. There’s still a lot of fear and bottoms are impossible to call.

  7. Tim, Thanks for the opening commentary. Painful indeed and I have been doing just what you noted. Sit tight for now. Only sold 1 issue which was PEI-C last week for a tax season loss. I do hold 500 shares of KYN-F at $25 and really have an itch to add at these levels. however, I spider-man senses are saying hold off but I think I have to scratch that itch.

    1. Rich–I have 1942 shares of kyn-f–the 1 issue I have confidence in at the moment.

  8. Like you Tim sitting on the sidelines till the fire stops then maybe look for some good fire sales.Looks like a flee to quality alot of fear in the very high interest junk bonds.

  9. Nothing like a Fed meeting and year end tax selling to make the folks go weak at the knees. I don’t know if the knife has more to fall but I am legging into some very good issues that earlier in the year had risen to silly levels. Why would anyone buy an issue at 1-2% YTW? But they did. Same issues are now 6-7%.

  10. Bought a few more NSS today near end of trading. Goes EX in ten days, so got an effective cost in the high $23s (!).

    1. Had considered this one as well William, but going to sit tight through the week.

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