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Nice Preferred Share Bounces

Finally we get a bounce in banking and insurance preferreds after the SEC mentioned potential market manipulation in small bank common shares. I mean is there any doubt than big players have been instrumental in the pummeling shares have taken–although not necessarily illegal. Of course I am talking my book–I don’t like losses or worse yet seizing of banks by the FDIC when there are ‘runs’ on other wise reasonably strong banks.

Here is the sea of green in banks and insurance issues.

Do I think the issues are over with – NO! It is going to be a long time until this is behind us.

I did not sell me banking shares in the community banks since we are seeing a glimmer of hope–we’ll see where this goes next week. The reason I considered selling is because there is no telling which bank will be taken down and shares end up at zero. I am positive holders of First Republic preferreds thought they would eventually recover–obviously not. I am 70 in a few months and there is not time to recover massive losses (although I am going to live to 110) I continue with very nice gains since December so I am now in capital protection mode until we resolve the banking issues.

Employment was much stronger than forecast–not helpful for that potential rate pause, but lots of data to come out in the next month so we will see where that takes us.

17 thoughts on “Nice Preferred Share Bounces”

  1. Update on my thinning the herd on the banking preferred. Sold another 3 banks for a loss of $3,865.00
    I did buy 2 others and am up on one, even on the other. I am keeping a full position in HTLFP, ONBPP & ONBPO, Also WTFCP as I hope the shorts will leave them alone. I also hold a full position in NYCB-PU as it’s one of the few banking preferred that is cumulative.
    I decided to do this after reading other peoples thoughts here and my own feelings and felt it was more prudent to conserve my capitol and my wife’s account is still projected to produce almost $53,000.00 in income over the next yr. The account is still about 1/2 in dry powder.

  2. Tim, great thing about this website is all that I learn from others and watching you think out loud :😀
    After the big bounce in bank preferred last Friday I got to thinking about what you said and I expected a follow through today but also the possibility of people harvesting profits. Also, this isn’t over AND most are 1 to 2 months out to the next dividend so some time to see what happens.
    I thinned the herd and sold 3 if I count the divy’s I had a loss of about $5,200.00
    Then I turned around and bought another bank preferred! thank goodness it’s not covered by the SA crowd

  3. added to JXNpA 23.55 and 24
    Bot LNCpD at 25.10 and 25.01 ;
    added to SNVpD at 18.00 and 18.75
    bot HTLFP at 23.40 and 23.47
    add to SFYpA at 15.77 15.70 and 15.53
    all purchases 100 each
    anybody care to comment ?

    1. Instead of JXNprA, I started a small position in JXN common with the intention of expanding it to a full position as funds become available. They’re offering a well covered 7% dividend. The only thing I can’t figure out is with such a good cash flow picture (on paper ), why they needed to float a preferred at all. Their latest report is due today or tomorrow.

      1. Not a reply as I can’t figure out how to add a comment to the top……..

        very brave or very crazy? can’t resist 17+% div in a few days, (maybe) on pacwp. 100. @11.20. x on the 15th.

  4. Tim, Another thing to be considered is trading on your holdings to lower your cost. I have been doing this with my NYCB U and just a guess I have lowered my cost basis from about 41.00 to 38.00 counting dividends. But this doesn’t help if you get wiped out to zero. But considering what inning we are at in this game now might not be the best time to start doing that.

    1. Chas: …adding to your comment:
      …if you add and feel assured with waiting for a comfortable time period to let things reassert, one can sell off the higher cost lots and return to a “normal” or right sized position at some point by choosing tax lots to close. That’s a tough decision when you get in the batter’s box and the pros may be throwing brushback and bean balls.
      Hey, I feel lucky…last night we won a 58″ HD TV at the raffle we went to to sit around with friends, bs, play live dealer casino dollar chips and open bar. Gotta look for portents in the full moon!!

      1. Hey Joel,
        Maybe I should go and get my 1.00 lotto ticket for today.
        T Rowe defaults to FIFO which is pretty much my first buy is the more expensive one. I think a lot of us are in that position with bank preferred.
        There is always a curve ball thrown but its not always the same. I can’t say I saw the drop in the market coming when Covid hit so I could be waiting a long time for something like that to happen again. Banking crisis seem to happen more often but its always slightly different each time.

        1. Chas, You have the settlement period, Trade Date plus three business days, aka: T+3 (or T+2 on some exchanges optional ) to designate tax lots. Once it settles it is damn near impossible to change it except by manual manipulation.
          Explore TROWs Gains keeper, you’ll find it. What I do is determine the tax lot I’m selling and as soon as it trades and BEFORE settlement, go in and designate the shares. Sometimes it stays at the default, so let it ride. The brokerage ledgering and software is a boon to customer service and a superb use of computing applied to consumer affairs that was FORCED upon the brokerage industry over a three year period and DAMN was it a bummer to implement.
          Now, it serves citizen-investors and there are hundreds of other applications like the Election System and Healthcare Systems where it should be inserted by mandate too, to serve citizens, esp with blockchain verifiability tech.
          Sometimes gain/loss adjustment is a small consolation , esp when the total average price is below water and something needs to go, but it is something and can lead to good end of year strategy. Simple when you get to know it. The system applies to options, futures and bonds too.
          The Best!!

  5. Tim, forgot to ask. You mention your concern about banks and on your list you put insurance co’s on the list with banks.
    Any concerns there? I remember the issue with AIG in 2008 or 2009 and the recent LNC scare where thy had to re-capitalize by issuing bonds and preferred at 9%

    1. Good question.
      Just my $.02, kind of a long answer.

      As far as the financial space, insurance companies and banks are the opposite sides of the same coin.

      Insurance companies may own the same type of securities like long term bonds and government debt. With rising interest rates these get beat down like a snowman on a warm spring day. We all know this.

      This is how I understand it.
      I don’t recall the capitalization limit but smaller regional banks are not required to pass this stress test thing. So in the event of a liquidity issue they don’t have enough securities to sell to stay solvent. Disaster.

      Here is the difference in insurance companies.
      People can rush to transfer money and assets out of a bank and eventually the bank runs out of everyones money to give back to them because of leverage.
      However, I don’t recall anyone rushing to cancel their insurance policy because of a bad event.
      Will big events cause losses and people to sell the insurance companies debt? Sure, but a well managed company can plan / manage this and clients will keep paying. As well as the paper debt. (fingers crossed)
      So I feel there is risk in insurance companies as financials but less given the current situation we are in.

      Full Disclosure: I have a full positions in PRH, LNC/D, ALL/I

      Be well, stay safe

      1. Thanks PN, just got me to thinking. Also the same with some of the asset manager preferred and bonds that get talked about on here got me to wondering about them as well. We were just reminded that BX restricted withdrawals from it’s BREIT fund for the 6th month in a row.

  6. OCFCP was under 20. Thin volume pfd but $19??….. was a give away. And Old National Bank evansville 7’s were also steeply off. Old national is a good bank and going it aint anywhere….founded 1843

    1. Wow, I missed out on ocfcp. Honestly, not even on my radar as it’s not rated on quantumonline so I doubt I checked the ratings agencies. I have been heavily leaning to national household names and long-standing banks & corps w/o a bk on the books in the last 40 yrs as far as preferred stock and bonds go. However, I hadn’t looked into onb, but I am interested. I may add it in to diversify.

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