Party On!! Not a Bad Time to Bank a Few Capital Gains

I have watched the equity indexes go higher and higher–good news is great news. Also apparently ‘fake news’ is great news also. I think todays employment report was pretty fake–meaningless.

For many reasons the economic news is fake. PPP (paycheck protection) money is being used to keep folks on the payroll playing tiddlywinks so they don’t hit the statistics. Company earnings are fake as they are receiving a tax credit for keeping folks employed (compliments of the CARE act)–I noticed Best Buy showed profits of around $150 million on the quarter, but they had tax credits for keeping folks employed of $60-70 million included in there. Also companies are able to defer paying the employer portion of the FICA taxes until next year–so more money the Federal government won’t collect (at least for now)–you would think the government was solvent.

Things are pretty fake all around–oh well, nothing we can do but enjoy the party.

I’ve had my 70-73% invested position for a month (more or less) and the 1st of the month brought some nice dividends and interest payments–June will bring another batch in.

I decided today to do a little selling–not bunches, but a few percentage points. Even quality utility and closed end funds get to silly prices–or at least darned high prices. I would be just fine holding these issues, but am a bit nervous with crazy high prices. At this rate I won’t get above 73% anytime soon.

I sold some of the Spire 5.90% perpetual preferred today (SR-A). I had paid $26.20 and sold for $27.20 to book a capital gain. This one I have been in and out of many times–each time booking 3-4% over the course of a month or so.

I also sold some of the DTE 5.375% baby bonds (DTJ). I had a very large capital gain and had just collected an interest payment so I let 1/2 the position go at $26.16.

All week I have watched the new issues come out and while I was willing to pay $25 for some of them they opened too high and I didn’t chase.

I anxiously await next week.

19 thoughts on “Party On!! Not a Bad Time to Bank a Few Capital Gains”

  1. SOCGP closed @ 38.98 up 5.18 or 15.3%. This is for a non-callable, $25 par, UTE that is currently yielding 3.85% ! Either somebody had one too many at the party or it is a sign of where we are headed.

    1. SOCGP is non-callable, pays 6% and Moody’s gives it an A3 rating. The dividends are cumulative and QDI. If you compare this to an A3 rated make whole bond from a utility, the price is completely justified (the 52 week low was $27.75).

      1. How is the price justified-when it has a $25 par/ I must be missing the point.= thx

      2. It’s non-callable but at the current price its yield is only 3.8% not 6.

  2. If a bank too many more gains I won’t have anything left to bank.

  3. Tim, I believe the job numbers include the number of people marching as fully employed since they are marching every day for at least eight hours- thus accounting for the two and half million added to the payrolls. This is not your grandparent’s depression with huge unemployment lines and people peacefully waiting for food in 1930. Jerome Powell may be installed on Mount Rushmore if the economy does not collapse from covid, looting, rioting,etc. New bank preferred issues seem to be doing fairly well two weeks after initial issuance with seven percent yields making preferred bank investors and Jerome Powell smile about the power of the Fed.

  4. Things have got very expensive, and I’ve been pruning too.

    Dumped all my LANDP a couple of days ago at prices between 25.80 and 26.00 and its now sitting at 26.08. Crazy price for that stock, given it is callable at any time and has a mandatory redemption in Sep 21 (else the coupon increases from 6.375% to 9.375%). Maximum of 16 monthly dividends left totalling $2.12 per share (could well be less if called earlier), and a guaranteed capital loss of $1.08 per share. YTC at today’s price of just 3.01% per annum.

  5. Tim, you beat me, I dumped my Spire at 27. Been shooting fish in a barrell. Lock in gains and buy sumpin’ else. But its still party on PCG preferreds time. A hit $30 today, wow. The judge hasnt even ruled yet.

    1. Grid–I have you to thank for this little buy/sell/flip–I suspect you have near doubled your money off it–it has been a reliable range trader.

    2. I would not have thought that PCG-A could get to 30, but it did! So much for my crystal ball.

      So, if I may ask, what’s your exit strategy on PCG? I’m thinking once the bankruptcy is done, and the back divis paid, a lot of holders may head for the exit. I’m thinking to unload half my PCG position before that happens. Just in case I’m right.

      1. Bob, Let me think. We rented a weekend cabin getaway and the Hurricanes have been flowing…I have traded these off and on since bankruptcy but have had these preferreds by the short hair pulling hard for several months. Biggest position (adding all the series’s together collectively) by far. Aint inclined to let ago yet as dont underestimate peoples greed to collect bounty. But we are not out of the woods yet. Pulling the plug wouldnt be the worst thing. But I about got it in the whites of their eyes and still holding on.

        1. Colorfully put. I still remember sitting in my first investment course at B-school and hearing, from a future Nobel laureate no less, that in the end markets run on fear and greed. Still do.

          1. Looks like we have gone between one extreme to the other and back again in a little over 3 months.

          2. Bob, the math really is saying not a lot of meat on the bone left. Considering SCE-G as rough marker (though probably will be financially stronger) A should trade roughly $27 post payouts. Some I plan to keep ongoing, others will be peeled off.

  6. Agree with Tim…economic news from the govt. usually is based on pretty flimsy data, especially when they want it to be favorable.

    Having bought around the 3rd week in March I’ve some nice paper gains, but in it for the income. Will let them run for a while.

    1. Ron–that is why I was resisting selling anything–most of what I have is stuff I want for long term income–but I think I can buy back a little lower (famous last words).

      1. Tim, I think we may be seeing unemployment in the 8 to 12% range. The jobs are coming back. Now I don’t know about the service industries but in building my company was close to plan all the way up to May. In May we mis billed 35g and had to back it out, but June billing will be our best month in 10 yrs. All my distributors suddenly can’t keep up on the phones. Lots of projects got put on hold that now are being rushed to start.

        1. Charles M : It is hard to tell what the correct unemployment number is. I am thinking once the extra $600 a week from the government runs out at the end of July we will start to see some figures that are more believable. When people make as much money or possibly more money to sit at home than work it distorts what is temporary from long term. Case in point, my dentist was “allowed” by the overbearing state of California to re-open last week. Office staff was not very happy about it as they were making more on unemployment when he called them back. If you throw in childcare, gas and other working expenses they probably took a pretty good cut in pay 🙂

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