Party On!! Who’s Smoking What?

The equity markets are up 11% this week before todays ‘party’. I don’t understand it at all–no surprise that someone who sees the chaos going on couldn’t understand stock prices moving toward where they were a month or two ago. Maybe I am all wet–and should be 100% invested at this moment, but I am fine with 60-65%–I think I will have a chance at lower levels.

At some point markets will wake up–I think–but not now. Investors need to use the levitation to continue to get positioned—maybe you have some issues that you aren’t comfortable holding—a good time to lighten up.

A continuation in nibbling is still the plan. I couldn’t help but add more of the Affiliated Manager 5.15% trust preferred issue (AATRL) yesterday–I am overweight, but the 8% is too attractive to me.

The issues I mentioned Monday and the smaller banks I mentioned yesterday are still attractive–for nibbling. Excepting the AATRL issue I noted above it is all about nibbling.

77 thoughts on “Party On!! Who’s Smoking What?”

  1. I’ve done a little nibbling, but with the pain coming from lack of earnings, huge unemployment, and the wide range and duration of the virus, it looks like a severe reversal in the market is coming- whether July or August or later or sooner. Lots of dry powder–holding off here, but nice to see some gains at last.

  2. Although I have been net selling and continue to, I did pick up a couple hundred more of GGO-A at 39.70 today. There is a big seller out asking $39.75. This is puttable back to Gabelli in August of 2021 at $40 “par”. So a decent way to pick 5% off the bone without undo duration risk.

    1. Excellent snag! If you don’t put them, they continue to be 5% perpetuals at that point, is that correct?

      1. Irish, they will become perpetual with Gabelli having the right to redeem whenever after that. They also will set the dividend at that point yearly as a minimum of 5% or up to max of 7%. I wont be around for that action though. If I hold until 8/21 I doubt one even has to put them as the market will know this and trade accordingly around it.

        1. LOL Grid – If you hold until 8/21. C’mon – you know you will have them out the door in a month on any pop 🙂

          And I am not saying that is a bad thing

          1. Now that could be very true, Maverick! :)…. I need to stay in the market to some degree, and yet we are back to 5% issues being well 5% issues. So I try to pluck away at a few things that wont expose myself always to duration risk and clip the 5%. Unless of course something better comes along! But, at this stage I am overloaded in cash, so I dont need to sell something to cover a buy trade for now.

    2. Is it simple to exercise the put? Or is it a hassle? Don’t want a smallish position if it’s too much trouble to get out.

      1. very easy, just call your broker should take a couple minutes tops. If at IB its a webform thatll take 15 seconds 🙂

      2. Yes a put is easy….But….In reality the market should create the trading put online anyways. Its just the way it is; unless you swamp the market with a major volume dump, just sell the shares open market into the put period.

        1. hey grid bird, I sold IPLDP yesterday near the top. No more upside other than the dividends. Better to hold cash than wait for the next dip. Now it’s a buyback candidate.
          Also got out of USB-O though that’s more controversial, might not be much of a dip.

          1. Martin, I hear ya! I got out of IPLDP earlier and in essence tripled down on SR-A and dumped all remaining of them yesterday. The economy is in shambles and the market is ignoring it thanks to the Fed pump. Im about 25% cash trying to figure out a way to raise more, and sit things out largely with that cash. This entire market is crazy to me. I am up 3% on the year and feel grateful having been caught with my pants down fully invested during the temporary crash.
            I got a few minor flippers in play now, and could ditch those no problem, but largely am struggling to decide what inside the remaining herd I want to cull from here. Im not selling the shorter duration issues such as KTN, ASRVP, and KTH. LANDP is a quasi term dated issue and I got them at $21, so not really exposed there. GGO-A has a put… Have some deep illiquids I will never sell…. That leaves semi perpetual issues like MER-K of its ilk I own where I will have to make a decision on….Decent quality, decent yield, but in reality like your IPLDP, pretty much fully valued….Decisions decisions…..

            1. I’m holding on to REIT preferreds because of wild arbitrage opportunities when the market is in free fall. I was trading all day long, not keeping up with the price drops, then when they bounced back my trading profits showed up like a charm. Best trading account is up 25% for the year. While my mostly buy&hold account is down 15%. In case there’s any doubt I was doing the right thing.

              1. For whatever reason largely unbeknownst to me, I have never been a big Reit guy. Just have LANDP and MAA-I I bought recently in low 50s. Im catching a huge break this year with most of all gains tucked away in tax free accounts, and losses in taxable. So assuming everything from here out stayed totally even (which of course cant be assumed), a lot of my dividends received should be about tax free from offsetting losses.
                I say this as I am working on my taxes today and painfully am addressing that the opposite happened last year where my trading profits were bigger in taxable than they were in tax free.

                1. Over the years I’ve maneuvered most of my money in IRA’s. That’s where I trade so no tax concerns unless I stumble into K-1’s. My GF had an awful year, highest tax bill ever because of too many excess profits. I have sense 2020 will be better at tax time.
                  I don’t necessarily recommend REIT preferreds. I’ve learned how to trade them so they work for me. Better than some of the other experiments I’ve tried.

        2. Grid – Yes you would think exercising a put is easy and it normally is, but getting paid what you’re supposed to is not always that easy. Right now, I’m already in battle with TD Ameritrade over TVE and the put now in place to be optionally put back to TVA on 5/1. TVE’s coupon is going from 3.36% to 2.216% after the 5/1 coupon payment and that trips off a put option availability for anyone holding TVE, provided the shareholder is aware of the information. TDA has not even informed TVE shareholders @ TDA of the put option being offered to them, and, when asked their rep, is telling me, “I have reviewed TVA and see that they have announced a tender offer and the coupon rate is changing from 3.360% to 2.216% effective May 1. The terms that the transfer agent provided us states that shareholders who tender their shares will receive $25 per share. Our cutoff is 4/17/2020 at 11AM Central. They didn’t tell us any info about the accrued dividends, so we can’t confirm this will be paid. You can reach out to the issuer for confirmation on the payment amount.”
          So despite the TVA press release stating “TVA will pay $25 for each bond properly put in addition to the standard quarterly dividend payment occurring on May 1, 2020,” and confirmation available thru TVA Investor Relations of that being the case, TD Ameritrade cannot confirm what they will be paying and of course they blame their incorrect interpretation on a third party, not themselves, despite it being perfectly clear in TVA’s eyes what somebody who puts TVE back to them is entitled to… And believe it or not, they claim they have not told their TVE shareholders of this corporate action because the action is voluntary…. Talk about specious reasoning!

          1. Hey 2WR, Glad to hear from you again. Assume you are doing well! Those TVA issues are a piece of work though. I seen for years several times in years past people touting them. Not understanding the resets were only for going down…Not up..
            I have interacted with Gabelli on a few of these things and if memory serves you have too. They have always went off as easy and efficient. Personally if I had a bet between the market acting rational in the manner our economy is in, or being able to sell GGO-A around “par” into the market during put time without even exercising the put, my chips are all in on the latter.

            1. Grid – I was actually just using your post on the ease of putting to vent on TD Ameritrade and how they’re seemingly handling this TVE situation just to see whether there are other TVE holders at TDA…I probably should have posted on the Broker/Brokerage Info link but I don’t see that even listed anymore. You’re right, I’ve participated in a number of Gabelli and other puts and it’s always easy been easy. And yes, I’m also in GGO-A but hadn’t noticed the seller, so thanks for that… I’d just hate to have to go to war with TDA on this TVE put when it’s plain as day what someone putting is entitled to receive… I seem to remember having the same type of argument with TDA about this in 2015 the last time around when a put was available on the TVA bonds as TDA attempted to claim I was not entitled to the coupon because I committed to putting the bonds prior to the ex-div date even though by committing to the put you were committing to not selling your holdings…

              1. 2WR, did you get in on the action? It looked like after I posted a few thousand more shares went by the board then the $39.75 seller was out of shares as it closed at end of day with an ask around $40.35 or so.
                Yes, that third party blame is crap. Its amazing what they stick to as if it came from God. Those 3rd party things are garbage entered garbaged received. And the times I have complained it was like you stated. A third grader would know it. But they arent going off script and nobody is making the 3rd party change their errors either.
                That crap is the reason Tex got the AILLI shares and I didnt. I tried to buy first from Vanguard but forgot they block AILLI because the vendor says its a private company but allows all other Ameren Ill preferreds to be bought but that one. So by the time I fired up TD, and hit entered he beat me by no more than 5 seconds, ha.

                1. This may sound crazy, Grid but I spent the day outside, enjoying being able to get down to the ground for the first time in almost a year and dig in the dirt again….. Who’d a thunk pulling weeds could be so satisfying, but once I’m down, I still need a prop to get up. Nevertheless I was so darn proud of myself! So in answer to your question, no I didn’t notice it until after hours so I couldn’t get in on the action but when I saw trades under par, I thought Grid has just got to be in there someplace… After seeing your post here and seeing the last trade of the day at 39.73, I was holding out hope that maybe the seller was going to show up again on Monday so thanks for dashing my dreams… ha

                  1. Glad you continue to heal up. Now if you were 25 you already would have long ago forgotten about the injury! Its possible they could trade under $40, Monday. I saw a bid creep to $39.80 with no action on it at close.

        3. Grid,
          People need to be reminded again this is very ILLIQUID stock. not saying everyone in this conversation doesn’t know this, just for Newbie’s like myself on this forum, do your own DD. I read Tim’s and 2ww’s conversation from Aug 2019 and looked at the stock at TD and you need to buy this at the right price or be prepared to hold it for about 1-1/2yrs for about 5% yield
          Not trying to rain on the parade, but last week it didn’t even trade for 2-1/2 days

          1. Charles, Everyone needs are different, I get that. But you are confusing lack of volume with lack of interest. These generally dont trade from small floats and lack of selling interest not buying interest. Those 100 shares were only posted that morning at that price and were plucked within minutes. Selling quality illiquids is never a concern, its overpaying for them while chasing is the problem. If you compare AILLI to all other illiquids you are going to find it to be a very fair deal, as most are 4% ish, and others have negative YTCs.
            I bought an illiquid 2 years ago that hadnt traded in twelve years, yes twelve years…Bought the noncallable $100 par 7% issue at $140 and sold a couple days later next transaction at $182.50. Another one I bought last week at $119, and its previous 100 share transaction was July 2017 with me dumping a couple hundred at $129.99, after previously buying in $113 range…I have never had a problem selling an illiquid. I have done this for years….But I also make sure I dont overpay and chase. That is where the deceptive wide bid ask comes in and people get suckered… Presently trying to get another that hasnt traded in a couple years…No luck yet, but I will stay vigilant and continue trying.

            1. Yes Grid,
              That does clarify what I was trying to say. Its all in buying at the right price and selling when you know the demand and interest is there. Thanks for mentioning a few of these over the past couple days.
              Since I don’t follow these illiquids I found I have done better with the ones that have a large interest and larger volume like IPLPD or right now I am keeping eyes on some common like GSK and others whose business is up or hasn’t been affected by this virus. We will know who the winners are when second qtr. reporting comes around.
              Now I am off to playing in the garden, I have to repair a avocado I was trying to graft that I broke !

          2. Charles, correction, I see you are referring to GGO-A not AILLI… Pretty much same thing except this one is easier, as the bid ask arent separated in dollars like AILLI is. GGO-A has a float of 2 million shares. The liquidity was there Thursday. Its a dearth of selling not buying that is generally the problem as with most quality illiquids. A 4700 share dump Thursday only dropped it a quarter…Think about that as you mentioned it rarely trades (I know as I follow it on my tracking list). The fact it has the put is gonna anchor it pretty tight. But pennies matter here as I am assuming to redeem at $40 next year and dont want overpay as that will decrease the YTM.

  3. Wow, I continue to creep higher than I have ever been. This is crazy. But I keep selling, about 25% cash now. Here is a perfect example of the market gone crazy….Last Thursday I did a small shameful yield grab on HLM- at 25.50…Over the weekend they announce a suspension of the trust debt interest…I quickly sell at $26.50, Monday morning… So what is HLM- trading at now? $28.69…. That is insane… It is now up the equivalent of over a years worth of payments, despite getting the payments suspended.

  4. 71% cash. Snap back to February and I am up 2% for 2020.

    I am done selling as of this morning.

    This rally is as reckless as I have ever seen. This is not investing, this is guessing. Nobody has any visibility or certainty.

    1. Why do I keep getting the feeling that being educated in engineering and finance is a handicap in this game?

    2. SteveA–I am wrestling with this market–just nibble to add to my IG issues and then the FED comes in and backstops everybody and their dog. So markets move higher while I wait for a drop to do more buying—wtf!! It seems to me no longer does a company need to manage their business because they have no consequences. Oh well–I will do just fine no matter what I guess.

      1. I know, the Wall street saying “don’t fight the fed”. They can stick it where the sun doesn’t shine. At the end of the day, this is the taxpayers money not the markets money.

        How are we going to snap away another 3 trillion in deficits?

        What will the deficits grow to this year with unemployment and a 0% GDP at best?

        Companies are always quick to layoff and slow to hire, what changed now?

        Where will the demand going forward from to drive growth?

        Wall Street runs like chickens and screams “socialism” when they hear proposals they don’t like. YET, they party, embrace, and love “business socialism” which is what we are all witnessing. That folks is an definitive agenda.

        Anybody who screams “earnings drive the market” is repeating slogans that have now risen to the level of propaganda.

        The new slogan for Wall Street needs to be “We are the epicenter of business socialism”. It is what it is.

        Each of us will deal with it, our own way and I wish everybody luck.

      2. Right. The markets have been nationalized and us fools were worried about budget deficits and social security running out of money. Just print as many dollars as you need. If badly run companies don’t have to worry about their debt, we shouldn’t either. Print dollars and pay for my health insurance and while you’re at it, how about a monthly payment of $1200 instead of a one time deal. If you wanna go socialist go big and stop saying we have capitalism and free markets. Free markets were pricing risk a couple of weeks ago. It’s all risk free now, just send the bill to Treasury and the fed.

        1. Bernie won the election without a vote taking place. I mourn the death of a great U.S.–but I’m old so the kids will have to worry about it.

        2. You couple of guys seem quite bitter that the Fed and Government rightfully and forcefully stepped into an unprecedented situation to rescue the economy.

          Oh well, I am happy and enjoying it. This was an amazing week for the market. And while the market was up big, high yield and riskier stuff was up more 2 and 3 times that which is awesome 🙂 . Glad I made the moves I did during the crash and getting nearly fully invested by the end of last week.

          Kudos to the Fed

          1. Not bitter at all. Just not willing to pretend that this is capitalism and earnings are driving the market. What we are doing is “business socialism”. We gave huge tax cuts to business (among the lowest rates in the world), for the most part they took the money brought back stock and increased dividends. Now, we need to increase deficits, even more, for bailouts.

            I am quite thankful the Fed did it. I am thankful Congress came together with the administration to get this done. If they had not, pretty clear to me – it could have become another depression and wiped all of us out.

            But that does not mean, I am going to close my eyes and pretend this is capitalism.

            40 years ago Ronald Reagan told us, “Government is not the solution, government is the problem”. We have come full circle – we are dependent on the government providing solutions.

            We are fully engaged in “business socialism” and it is working.

  5. Sold a little Tuesday. Sold a little yesterday. Selling a little more today. The longer the bear market rally lasts the more I’ll have in cash. Keeping enough positions to trade no matter what.

    1. danzeb—don’t be bailing on me–haha–I just looked and it is very nice higher today. A downdraft day will take it lower–I am torn–am overweight so maybe will off load a bit and hope to re buy later. I want this one long term so don’t want to be out of it.

  6. I’m up 6.6% on my pdfs and baby bonds, with all of the gainers bought during the first leg down. Only 2 of my 10 positions are dragging: FCNCP and COF-J, both of which I bought just before the crash.

    1. That’s one of the reasons I’m selling. If the crash is over I made money on it don’t get too greedy, if it’s not over then it’s right to sell. I’ll pass on a modest profit to avoid large loss.

  7. any thoughts on RILYZ? 7.5% coupon, first call date end of May (maturity 2027). Trading at slightly under $21. Seems like a likely call, meaning $4 a share upside pretty quickly. Would love to hear anyone’s insight.

    1. Franklin,
      They mentioned at the time (or close to it) that the proceeds of their last offering may go towards the redemption or partial redemption, of RILYZ. Can’t always take them at their word as they have at times, been VERY slow to redeem when indicated. At any rate, I am literally buried in RILY issues of many flavors. I’m happy to keep cashing their checks right and left. I wouldn’t hesitate at all if I were you, to buy more. I would be buying if I already wasn’t shopping in other stores. Their financials are fantastic, IMO, but surely, please do your own DD. FYI, I own RILYZ, RILYP, RILYN.

      1. Franklin,
        Here is the actual wording from the RILYM prospectus I mentioned:

        Assuming we sell an aggregate principal amount of $115,000,000 of Notes in this offering, we estimate that the net proceeds we will receive from the sale of Notes in this offering will be approximately $111,177,500 million after deducting underwriting commissions of approximately $3,622,500 million, and estimated offering expenses of approximately $200,000 payable by us.

        We anticipate using 20% of the net proceeds from the sale of the notes for the redemption of a portion of our existing 7.50% 2027 Notes (as soon as practicable after the 7.50% 2027 Notes are subject to optional redemption on or after May 31, 2020) and the remaining net proceeds for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures and funding working capital. Pending such use, we may invest the net proceeds in short-term interest-bearing accounts, securities or similar investments.

        This prospectus supplement shall not constitute a notice of redemption under the indentures governing the 7.50% 2027 Notes. Any such notice, if made, will only be made in accordance with the provisions of the applicable indenture.

        1. Thank you, Affinity. I did pull the trigger on more Z today. I own a few other issues and am tempted to buy more but trying to diversify as i hunt for opportunities both long and short term. As you say, happy to cash the checks.

        2. A4I – Given the RILYM language was written pre-crisis on 2/10/10, I would think that can be considered ancient history with not much chance of it happening now. However, we should know for sure no later than next Wednesday as that would be the last day for a call notice to go out for anything to be done on the first call date of 5/15.

          1. Hey Buddy,
            As I said, you can’t always take them at their word and when push comes to shove, if they can make 12% on a new deal versus paying off these 7.5% notes, you know which move they’ll make. I’m OK either way because of their financial performance. I do plan to lighten up on my holdings, though, no doubt on that. But for now, I’m sitting tight. I hope they do take that 20% and call some RILYZ, but if not, neither of us will be surprised. It’s one of the very last things I bot more of right before all hell let loose last month.

  8. I am still working and have 1 part time employee right now. I was out yesterday and there seemed to be a lot of traffic compared to the past couple weeks. With markets rallying, it seems the “doom and gloom” cloud has lifted to some degree. This actually makes me more nervous as it feels like people are suddenly letting their guard down.

    I’ve been struggling with my portfolio. I was doing A LOT of nibbling during the “first crash” and used up about 2/3 of my cash. I am still down overall, but am up in everything I bought recently. Example, I bought 20 AATRL at $25. But I also bought some at $48.50 before the crash. Overall, I am still under water. SR-A is now a couple dollars above my average cost. That pig UMH-D (my first attempt at flipping / div capture…) still has not recovered. Ugh. I am typically a buy and hold investor. My struggle is whether to trim some of these positions and wait for the next pullback. My fear is that I will miss out on getting back in at decent prices.

    I guess I’m just thinking out loud.

      1. I have been buying UMH-D bringing my average cost down (and yield up).

        I think people are nervous about their low income tenants being able to pay – that’s what it comes down to.

        Agree their financials seem fine.

        1. Yep, these folks are going to be the first ones to typically lose their jobs or have their hours cut – resulting in lower sales/rent collections/loan defaults. It will recover IMO, it’s just going to take much, much longer than say an IG rated ute or bank preferred.

          1. Low income housing should be ok people will be downsizing. But if they can’t collect and can’t evict that’s a game changer.

        2. Bill- UMH is a funny company. The basic trailer park business is small but ok but they also invest in Reit stocks (about $100 million worth) and I think a fair amount was/are mReits (big losses coming I assume) I sold out of my UMH-D a little early but have had a hard time wrapping my head around their model over the past year I owned them. I also think they have an ongoing ability to keep issuing the UMH-Ds. I also never could figure out why they have large daily trading volumes.

      2. I’m just upset at it because my dividend capture / flip didn’t work out. I bought an outsized position in it (for me) and now feel I have too much money tied up in it. I got the dividend, but it never recovered to my purchase price so I could unload it. I did buy a few more shares to bring my cost basis down – so now an even larger out sized position….. That’s why I call it a pig.

        1. Mark,
          If you don’t mind answering, did you complete a good amount of DD on this before you bot it or did you jump a bit blindly into it just because somebody else may have said they were buying it for that same purpose? I’ll admit that in my haste, I didn’t do my proper due diligence before laying down that limit buy order and will count this in my “you dummy!” column of goof-ups trying to juice a little extra out of the lemon. I knew better, but made that mistake anyway.

          1. A4I, No, I did not do any Due Diligence. That’s the other reason I am upset. It’s easier to call IT a pig instead of laying blame where the blame really lies. I should be calling myself the pig…ha. I didn’t think it mattered because I wasn’t planning on holding. Lesson learned. At least for now. I’m sure I’ll probably make another bonehead move at some point. 🙂 🙁

    1. Keep plugging away Mark–it has been difficult–certainly I wished I was all in at the bottom instead of nibbling, but long term things will work out fine for most issues and there are plenty of ‘deals’ yet to be had.

    2. Mark,
      Sounds almost a mirror of my situation. I was moving money around on the first drop and almost fully invested then the big drop. Now still down but back to 25% cash. I feel the same way you describe looking around here too.
      Surreal and doesn’t feel right. I am not sure about the unemployment benefits as people have been already waiting 3 weeks and even though businesses say they have filed doesn’t mean they have the loans yet. As a matter of fact I just read NY Times article the first 10,000 is supposed to be a grant and up to 2 millon cap. now business owners are being told it will be capped at 15,000.00 Yesterday the Fed removed the lending limits imposed on WF so they can open up their program.
      If we start hearing bad news on these loans expect a quick pull back. Also its just a loan, if companies have no business how are they to pay these loans back?

  9. On a short side note are you familiar with “PW+A”??? I looked it up on Quantum and noticed it is callable at anytime. So that always concerns me especially with a 7.75% coupon!!!!! I don’t really understand what it is and what they exactly do???

    1. Chuck if you dont know what it is and what they do, then one shouldnt invest in it. At least that is my opinion and it generally helps keep me out of trouble. For me when I bought under par, the point it is callable is of no concern as I dont care if it gets called as I would collect the small par premium and the next dividend which is coming anyways.
      Quite simply, PW is a tiny reit. It used to just be a spin off from Norfolk Southern, and simply was a dummy outfit collecting a year ~$1 million premium from Norfolk yearly from use of tracks. David Lassiter took it over tried to sue Norfolk to get more money and lost. It then became a solar land reit on a few purchases. Largely wasnt a path to wealth from very low escalators. Next bright idea, buy land and triple net lease it to pot growers. The pot heads are paying great premiums for use of land and that is why the value of this company is jumping. But…There is a reason for that premium the higher risk of the tenants.
      I would suggest not your cup of investing tea. Besides this is a tiny outfit. You personally may have the assets to buy the entire company. 🙂

      1. To Gridbird; Thank You for your very nice reply. I truly appreciate it. You are always a “Voice of Reason” and I enjoy that. You are correct its really not my cup of tea. I tend to go with very large companies and rarely stray from that philosophy. Iam in somewhat shock at how much all of these preferreds have jumped up big time in such a short time. Iam NOT an economist but hope to understand and find good articles as to what all these “TRILLIONS & TRILLIONS” of dollars will do to our economy over the next few years. There many times in life seems to be a “Price to Pay” for things like this and I hope not only to “Understand It” but also be “Prepared for It”. This virus certainly has made me and most likely millions of others very PARANOID. Not only about investing but about life in general.

        1. AKJ, Not for my purposes. Core FFO was 63 cents up from 56 in 2018. Net Income was 946, 894 up from 838,111 in 2018. Total preferred dividends are $280,232, so its well covered. I havent checked recently but they were working off some NOL’s from the litigation which had benefitted the preferreds, tax wise.
          The risk is the small limited concentrated dealings they have with the counter parties of the leases. The rail contract, however, is in essence a high quality perpetual bond payment to them.
          I would be averse to buying now as it appears to have jumped up to par plus next divi. His family members had owned 10% of the float. But there has been some liquidity recently so its possible there dumping knowing it may get redeemed soon. I personally wouldnt be looking at it above par. I will keep but if it jumps to $26 I will feel compelled to dump though.

        2. Any REIT with 100% return of capital merits a closer look, as they are either doing something wrong, or it is a temporary thing that is explainable.

  10. Regarding Party on, etc:
    I have a question that Gridbird and perhaps a few others can answer. I recently recommended CTZ (baby bond of parent CTL) as something to consider at a good yield–below par–low Inv. Grade rating. I hold quite a bit. This morning on Seeking Alpha a contributor opined that since CTL is primarily a holding company it & the Quest baby bonds ‘under it’s umbrella’ have junk assets while CTL has more solid ones. Furthermore, his thesis was that the Quest B Bonds could default but not their parent CTL. I know that Gridbird enlightened me & others some days ago about the difference between holding companies and their subsidiaries that they have & that sometimes the subsidiary bonds are safer & sometimes those of the holding company are. My question, if it can be answered, is ‘can the Quest baby bonds default and not be protected by the parent CTL’? I am starting to realize after all these years of investing that this could be a ‘dicey’ and important consideration!

    1. Lurker, I just wanted to let you know I read your post. I really dont know the details of CTL and Qwest enough to give you any info. It certainly would be possible as that is a purpose of a subsidiary, to wall off problems. Be it either direction based on what their purpose or thinking is. But the relationship can be intwined and complicated depending on the situation. Sorry, not much help here.

      1. >>>just want to thank Gridbird & Qniform for commenting on my question re Quest & CTL. Re the link that you gave me, Qniform, as you opined in your response, I also get a sense that CTL did take on and is the guarantor of Quest debt.

  11. Tim; Thank You for your nice comments. I sit at 16% cash now and probably am done buying at this point. I’ve really gotten “Lucky” in many ways. Was down a ton but have gotten well over 1/2 of my losses back now. Most of the really high quality companies including the Mega Banks preferreds could be had “All Day Long” at what I call bargain basement prices of $22 to $24 just a few days back. Now all the ones I have bought are up CRAZY. They now all are at $26 to over $27. Iam NOT a trader and will not be selling them as they all have several years “call protection” and some even over 4 years protection. I just don’t see the wild predictions over on S.A. coming to fruition. I’ve read articles over there that are predicting the S & P 500 will fall to 1,500 to 1,800. After all of these “Multi-Trillions” being thrown at the economy from Chairman Powell I just don’t see that happening. From todays level of 2,785 to a level of say 1,800 that would be a fall of over 35% from today. On a side note for you bond buyers you can still buy an investment grade company at a good price. I own quite a bit of Viacom CBS. They have a 5.90% bond that goes out to 2040 trading at around 99. Iam sure their advertising revenues are way down but again I think they will be a survivor. Theres a short list of names that still look somewhat attractive but that list has now shrunk by well over 95%.

  12. Tim, I agree with your thoughts on lightening up on those issues that make you uncomfortable while they are running. These moves by the Fed and Treasury are stunning, I’m partying along with the others today but worry long-term about what freedoms we give up in exchange for this bailout. Everything has a price.
    I’m not smoking but will be drinking tonight!

  13. The stock market should be renamed the Fed market. I asked once before if we are going to be the next Japan. We are inching closer to that with each new fed “stimulus” package annoucement. Now they are buying junk bonds, basically saying don’t worry about credit worthiness we’ll back you up if you make a mistake. Soon it’ll be straight up stocks and stock ETFs. Unemployment skyrockets but the market goes up big because the fed announced yet another multi-trillion dollar “stimulus” package. More than ever, stock prices are now worth whatever the fed is willing to pay, fundamentals be damned. We’ve seen this movie before in 2008-2009, a trillion dollar was thrown in to fix the problem igniting the last bull market. This time around it looks like the fed will be throwing 8-10 trillion at the current crisis, with no end in sight. We saw what happened when the fed tried to draw down its balance sheet in 2018. Is the fed ever going to draw down these 8 or more trillion? When, how? Does debt even matter anymore?

    So should we buy, sell, hold? Who the heck knows but sure looks like the fed will announce a new kind of purchase every few weeks for as long as it takes and the market will zoom up each time as more types of assets keep getting added to what they are willing to buy.

  14. jobs report out this morning 6.6 million more filed for unemployment. Maybe people are seeing light at the end of the tunnel that this is going to end or maybe that is the train up ahead. Been a strange week for me, steady on Monday, dead on Tuesday then off and on yesterday. Most of my customers sales people working from home and want to spend time chatting since they are slow. I think its smart the gov. is planning on how to get things going again but a set timeline isn’t in my crystal ball. I still see a mix of people taking safety precautions and people who disregard doing anything.
    Could this kind of a miss mash cause a flare up or extend the illness?
    On a side note, I went to look at new trucks and seeing the car lots full of inventory and no customers or sales people was nice to window shop but troubling to see all that capitol sitting there. In the past I have seen dealerships fail, one day the lot is full the next the bank is taking them to auction. Not sure it will happen this time around.
    Didn’t find my unicorn, and doubt dealers will want to order one from the factory for me right now.

    1. I bought a slightly used Jeep in January, and am currently emailing the dealer about trading it in on a new 2020 with 0% financing plus incentives. May be able to do the swap at nearly breakeven.

  15. Hard to fight the fed bazooka. But I would look for a reversal in the 2850 – 2935 area Spx. I will be trimming positions on this rally. ATB

  16. Tim, I am riding the party and will sell today because I think you are right.
    My wife and I each own a small business and we have been locked out of getting PPL loans and employees can’t get into unemployment websites.

    I am fine and will be but a lot of people who need this assistance will not get it or it will take too long to receive. Even if you get the assistance a lot of businesses simply can’t make it on the meager government handouts vs being shut down for business. If this lockdown goes on for 2 more months, we will be looking at a depression instead of a recession.

    Maybe I do not see the whole macro picture, but from a small business micro level it does not look good.

    1. I am glad I am retired and do not have to ride this out with the small businesses I owned. That would have been tough.

      Best of luck to you. I think this will be over sooner than people think. We might have to do a few things differently, and be vigilant for a while but the quicker it is over the faster the recovery.

  17. Totally agree with you Tim. This market is beyond irrational. I get that the Fed / Treasury is throwing Trillions at the economy BUT until we resolve the VIRUS issues EARNINGs will be bad, very bad across most Sectors. I listened to Bill Gates this morning on CNBC and his knowledge and understanding of the Virus issues was amazing. Clearly we have a long long way to go to resolve the Virus issues to the point where the economy looks anything close to normal.
    I am not buying anything for now. I am selling off my winners and building cash to deploy when people start to realize what lies ahead.

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