You can never know for sure what will happen with stocks and interest rates–the talking heads toss out lots of different opinions and that is just what they are ‘opinions’.
With Georgia going to the Dems we see the stock markets flying–oddly, and interest rates flying along with them
The near 10 basis point move in the 10 year treasury to almost 1.06% hasn’t caused major damage (of course these depends on what issues you are holding) to income issues yet, but there are sure plenty of 1% moves lower — even some 2% moves. Generally the sell off is orderly so no need to get overly excited about the move.
If I was a guessing person I would think the equity markets would give back some gains later today and follow on with a down day tomorrow–while interest rates drift back down a bit.
Of course I am not selling anything today–would more likely to be a buyer than seller, but honestly I am a ‘watcher’.
It was an UGLY three days for preferreds, particularly ones with low coupon rates. I show 97 $25 issues that lost >=2% from the Tuesday 1/5 close through the Friday 1/8 close. The ten year US Treasury went from 0.955% to 1.105% which is a major move in a short period of time. Here are the 20 that lost the most.
Ticker- Coupon Yield-Price Change from 1/5 to 1/8
SOJE 4.2% -5.02%
CMSA 5.6% -4.49%
TSCAP 6.7% -4.45%
BHFAL 6.2% -4.37%
PSA-PM 4.1% -4.19%
FTAI-PB 8.0% -4.19%
EPR-PE 9.0% -4.08%
AEFC 5.1% -4.02%
UNMA 6.3% -3.90%
USB-PP 5.5% -3.77%
CIO-PA 6.6% -3.74%
FRC-PK 4.1% -3.61%
PEB-PC 6.5% -3.58%
HMLP-PA 8.8% -3.57%
CFG-PD 6.4% -3.56%
CNO-PA 5.1% -3.55%
BAC-PN 5.0% -3.53%
T-PA 5.0% -3.48%
AFC 6.9% -3.35%
PLYM-PA 7.5% -3.33%
Note, I did NOT check to see if some of these went ex-dividend or not.
Tex we could definitely see more volatility going forward. Mine have largely stayed calm, with the higher coupon issues actually up on the week, some basically dormant, and a few down a small amount. But I dont own any low yielding liquid issues that would be the first ones exposed to climbing rates. I havent checked your list thoroughly but there have been a few various preferreds exD issues this week, as I know I have had a few.
And then you got the quirky situations that need to be looked at. I dont own it but on your list shows EPR-E down 4% since Tues with closing price today at $32.58. That looks bad on surface but in reality it has done very good. It is down from Tuesday referenced date as mentioned, but that was a crazy one day spike referenced from. On Monday the day before it closed at $31.66. So it actually is up over 80 cents for the week. It went exD 12/30 at $31.27 and closed pre exD $31.68 on 12/29. So if you bought 12/29 you would have a 56 cent divi in your pocket and be up 90 cents on top of it.
PLYM-A is down from Tuesday but up from Monday by 20 cents is another example.
This week I was (finally) able to close out two mREIT preferred positions that were held going into the pandemic crash. My basis in ARR-C and MFA-B was above par on Mar 1 2019, but thru a series of small purchases made during the sell off and beyond that basis was slowly brought down to a level where it was feasible to sell them for a small profit. There may be some additional gains to be made in those two names going forward, but someone else can have them. I’m just glad to be out, and frankly a bit surprised to be unscathed by the experience. Commercial mortgages are a ticking time bomb.
Tim .. we are buying…finally.. A – rated preferred below or at $25….
Tim, did you eliminate the spreadsheet in pfds that showed sorted biggest losers and gainers? when there is/was market volatility in these issues that was my go-to to see if there were any unusual bargains or candidates for sale? Thanx. Bea
Hi Bea–sorry–I did. The problem I find with Google quotes is that they are not totally reliable (the quotes are, but the ‘change’ part is not). If you found it helpful I can consider adding it back in–let me know.
Bea–back in
https://innovativeincomeinvestor.com/25-preferred-stock-sorted-by-share-price-loss-gain/
Thank you Tim! yes I do find it very helpful! I hope I am not the only one! lol..I know when we get those swoons like March 2020, it was my first go-to for a scan for bargains. Take care. Bea
Bea, Nah you arent. I am glad you asked. It really was the only sheet I looked at, but I wasnt going to say anything….Glad you did though, thanks also, Tim.
Thank you Tim. Much appreciated.
Is it time to sell low yield issues?
Well, with Dems will come inflation, ergo interest rates will rise. What happened today is a forecast. I remember back to the 80’s when interest rates were in the teens. Investing was a no-brainer then-money market funds were paying yields in the teens also.
Glad I restrained myself from buying any of those sub-5% preferreds of late.
Congratulation Ron I remember the 80’s also, Took today’s pop on commons before the riots in DC, to raise some cash now at 38.5% by dumping a loser and taking a 40.5% gain since July, in a retirement account. I would love to see some decent preffered’s for stability but fat chance for a long time. Manage your taxes and keep some powder dry.
I think the political comment expressed here (Dems = inflation) is unfortunate. Inflation actually accelerated in the 1970s under both Republican (Nixon/Ford) and Democratic (Carter) administrations. That inflation was finally crushed by Fed chairman Paul Volcker, a Democrat who served both Democratic and Republican administrations, with the support of Reagan, a Republican President.
Let’s continue to keep the politics out of this forum.
So why have Treasury rates doubled?
Donocash,
My thoughts exactly.
As I see it, the kindling for the inflation we experienced in the 1970s and 1980s was oil and COLAs. I can’t fix the blame on a particular party.
Consequently let’s keep politics off this forum.
@razorbackea & donocash
Wasn’t being political, just stating facts. Sorry if I gave that impression. Matter of fact, when it comes to money, I’m downright apolitical! I’ve almost always done better with Dems running things (last couple of bubble years the exception).
BTW, the inflation of the early 80s began in the late 70s.
Inflation is likely already here, just masked as higher prices for financial products, with the Fed pumping the firehose into the economy and the pandemics shutdowns are the only thing keeping a lid on prices, so the money is going into the financial markets and it will continue until the Fed Chairman shuts off the hose.
Once the vaccines start to roll out and the economy opens back up, katie bar the door on interest rate increases, because that money will start chasing things other than higher stock prices.
And the worst inflation is usually not because of a particular party in power.
it is because of war, or commodity disruptions.
Nixon’s price controls and even Eisenhower’s action in 1954, was the seed of the Iranian revolution, that decades later, caused the massive inflation that Volcker had to stamp out.
It is not a given that the economy will open back up everywhere simply because there is a vaccine. Some of these governors really enjoy the power they have and are loath to give it up.
And that is assuming there is anything to reopen. I know my business would not have survived this long a shutdown, and it was a very healthy one which let me retire at 47.
The best bet going forward would be to see which industries and companies the politicians intend to reward and invest in those. They will pick the winners and losers now so it would be a suckers bet to go against them — at least in the short run.
I can’t see interest rates going up much, everywhere in the world they are at zero. We are in the middle of a depression we will be lucky to escape deflation.
To refresh everyone’s memory, in a perfectly behaved world, preferreds with lower coupons will lose more than ones with a higher coupon. All of the recent vintage newly issued ones should fall further than older issues. And yes, all things are not equal, but this is a financial physics phenomena. If interest rates broadly rise, we are in the wrong sector at the wrong time, i.e. we might be stuck with below market coupon rates and principal losses.
A thought example would be what happens to a 3% 30 year bond if new issues are @ 4% or 5%. A lot of pain, but your 3% interest payment will remain until maturity in 30 years.
For anyone wanting to understand Tex’s comment at deeper level, check out “convexity”.
Tex, this showed exactly what you are stating in 2013 Taper Tantrum and 2016 era. This works when economy is presumed to be ok as the more credit risk (lower bond rating) companies are presumed to be able to do well.
The only concern is at this level many of the higher yielders arent as high now as they were back then.
Nothing is a panacea but I do tweak to hedge in directions. And past month or so I have bought into higher coupons, and issues that will obviously have better back side price support to lessen downturns. An example is call risk ABR-A. One gets a 50 bps free ride over sister past call ABR-B. Of course term dated ones mitigate some perpetual risk exposure. I have some old illiquid utes in 4%-5% range, but have not participated in any of the liquid and new issuance sub 5% coupon issues and dont plan on it. Another modest example at right entry point is a participating type preferred that benefits from growth. FPI-B is an example as the value of it grows as the land value increases. It is now “worth” $25.80 in cash or common stock conversion and will be revised again this August if memory serves.
When one likes safety and high credit ratings, they must realize most of these types of alternatives usually will not meet those expectations so that must be considered also…. Also not many provide any protections in a general market upheaval though.
FPI-B is not just “revised,” Grid, but as you know, FPI-B’s “FVA amount” is recalculated each first week of August by a formula based on Federal stats released annually at that time…. The Fed site = https://release.nass.usda.gov/reports/land0820.pdf for last year’s report but will be …/land0821 when available this year. The calculation is described in detail, p s-37 of FPI-B prospectus https://www.sec.gov/Archives/edgar/data/1591670/000104746917005226/a2232996z424b2.htm#dc43701_description_of_series___dc402202 Basically they take the appreciation of land values as measured in each of the 11 states where they own farmland and then weight the results according to the percentage ownership of farmland in the portfolio for each state… It’s a good way to combine preferred interest rate income with equity type participation in the increasing value of farmland….. Also don’t forget the FVA calculations cease in 2024 when, if B hasn’t been called by then, the coupon goes to 10% and the “par” remains what it is at that time after 4 more years of FVA calcs. It also becomes callable beginning 9/30/21 at the calculated original preference amount PLUS FVA which is 25.80 today but will be adjusted once more prior to that call date.
I just wanted to complicate it up a bit for your fans, Grid, as you know I’m wont to do…
2WR, Ha you succeeded at a 100% level! Yes my word “revised” was condensed secretarial short hand for all of the important details you mentioned. Your brain is sharp and focused tonight. Can I guess its because dear wife, was distracted today and didnt in debt you with QVC purchases today? 🙂
Gridbird, I saw your cryptic (at least to me: way above my ability) you made on Trapping Value on Farmland B. I have accumulated a moderate to some meaningful position in IRA and taxable accounts, bought when Farmland common slid and the preferred B followed. I try to figure out if FPI is facing headwinds because the need to pay the FPI-A. I looked at JMPNZ (JMPZL has been partially called). I did not pull the trigger because I finally looked at the 10 Q plus Fidelity’s free analysis. Seems that JMP common has been climbing but this is a EBITDA play without earnings. Will appreciate your commend. Thanks so much, John
PS: the market seems to be kind to yield hogs these days. I thought GLOP-A, B and C could be stretched when GLOG, grandfather owner reduced GLOP common to $0.01 and contemplating a review from some outside management consultant. Of course with WTI hitting a new high. GLOP, A, B and C seem to hold and GLOG-A, should be safer still with very high coupon all stay well.
Hey, John… It was a ~$120 million liquidation value partnership issuance from a farm purchase. Basically “Entity” can redeem for cash any or all amount after March 2, 2021 and up to March 2026. So initial date is approaching.
After March 2026, Entity can redeem into common shares if they desire. The yield on this private placement is only 3% so its not costly as an expense currently. I have no info on entities desire to cash out soon or hold longer terms for a stock conversion.
Series A above is certainly cheaper and less onerous than the ~$142 million FPI-B with its appreciation factor and 6% coupon. The company just is never going to be a cash machine, but a storer of value in land assets acquired. Both of the two ag land reits common stocks have performed poorly since IPO, and it doesn’t take a genius to understand why as the model is a tough sledding one.
Grid, thanks so much. There are better non rated income names. Just the other day, I bought small amount of BFS-D, perhaps paid a little too much. Then this is a safe eRIET preferred. I recall that you like the Preferred Stock Investor (I do not recall his name), who wrote an article for Rida Morwa on JMPNZ (JMPNL. I bought some after I sold JMP NZ taking profit). While JMP common has not received any dividends for a while, the simple price chart suggest that JMP is doing okay. With such a relatively high yield, JMPNL no longer a bargain like it was, still gives you a little over 7%. Baby bond also beats preferreds. Tim’s SITC-A is another good one with SITC still not paying huge dividends to the commons. QRTEP is still a good high yield eREIT preferred.
John, we all have our degrees of what the word safe means since we dont have 5% CDs as a safe bench mark, ha.
I own the Qurate preferred and the FPI preferred in roughly equal amounts. Their “safety” (perceived strengths) are different. Qurates is its present river flood of cash flow. The question is if or when that returns to its prior pattern of needing river dredging to keep the water flowing.
FPI “strength” will always be the asset backed value of the land (somewhat assisted potentially by opportune property flips from the company) not its unimpressive cash flow.
Worthless anecdotal alert… I have a couple friends who are farmers and asked if they could borrow at 6% and make any money of that. They both basically said hell no, but they didnt research the math. They said locally any local land that becomes available local farmers just quickly overpay with cash to buy it and add to their empire. For those farmers overpaying is irrelevant as its just cash sitting around with no home anyways.
Grid, I have a few shares of QVCC and quite a few baby bonds of QVCD. Stupid me that I did not realize that both QVCC and QVCD are baby bonds by QRTEA. Hence, it is understandable that QVCC went below par with more yield (perhaps more risk, preferreds vs bond). I quickly sold my QVCC and use the proceeds to buy 140 shares of XOMAP (which I ignored when it first surfaced on the grounds that the common XOMA does not pay any dividend. On a closer look, price chart clearly shows XOMA is on the upswing.
A SA article seems to suggest its recovery. Difficult to assess price/sales. Then small position could be worthwhile.
https://seekingalpha.com/article/4397277-xoma-royalty-aggregator-to-watch
BTW, I decided just to keep FPI-B for now. JMPNZ seems slightly “riskier” just on market actions.
BTW, my friend at Le Du’s old website, Chuck J seems to have found that Fake Energy Reseller SPKEP seem to get it with reducing the debt with revenue decrease. Both SPKE and SPKEP gapped up. I went in and out on SPKEP with just 260 shares in my IRA bought one Q ago @ $24.92 or so. Chuck trades both SPKE and SPKEP in and out based on technical analysis. Seems that the company and/or the market makers play games. He also bought ALTG-A. ALTG got bad rating by Schwab, who likes XOMA. LOL.
John, Technically the baby bonds are not the obligation of Qurate. They are obligations of their strongest subsidiary QVC. They actually have a bit more of protection being I read management wants to keep leverage to a specific limit. The preferred is obligation of the holding company. Like many times, the credit rating of the subsidiary is better than the parent. And it is that way with Qurate and QVC.
Grid – I”m sure you noticed yesterday’s slight dip in price for QRTEP. Undoubtedly it was caused by bots tracking our physical movements and realizing QVC was experiencing revenue impairment as dear wife was away from her TV screen while we were out running up the credit card at Kroger’s yesterday, not QVC. I can assure you, though, the impairment was merely temporary and the next 1.18oz bottle of Sunday Riley Luna Sleeping Night Oil priced at $104 and certified cruelty free will be on its way out their doors asap. I mean who can be expected to be able to forego its soothing blend of blue tansy, chamomile essential oils, and blue azulene?
I thought I felt a disturbance in the Force.
Perhaps you could offer a copy of your itinerary on a subscription basis to certain select investors at III?
I had to settle for getting my wife Melatonin enriched Epsom salt at Target for less than $5 since I feared for my QVC payments. Big Tansy Oil missed out on the upgrade this time around.
On the other hand, my wife is happy with her Strategic Epsom Salts Reserve which now stands at about 30lbs, and by current usage estimates will last well into the next century ;o)
Scott – In a sense, I tried that with the loyal Vol Nation of UTenn football fans. Since their unbelievable historic football legacy immediately went into the dumpster the year we moved here, I figured I’d make a fortune by accepting the highest bribe to get me to move out of State… I’m holding out for Saban money, but so far, nobody’s stepped up…..
Agree. Bond and preferreds yielding under 5% is going to be a bad place to be when interest rates truly start to rise. As the economy (hopefully) recovers, though, the Fed has indicated it will hold rates steady for a few years. But again it all depends on YOUR strategy: if you are holding to collect interest payments, then price share almost becomes irrelevant. But if you are flipping and trying to collect “steak dinners” or upgrade to higher rates, there is going to be a lot of regret over buying these sub 5% or sub 4.5% preferreds. Probably an unpopular opinion here gut frankly there are many good yield plays in stocks right now (MPW is one i mentioned a few months ago in the REIT section that is well run, has appreciated in price and yields 5%+; I’m over 5% on other commons that are rock solid as well). The point (and yes, there is one!) i’m still in preferreds, have cut back somewhat, and I don’t want to be in any sub 5% coupons when rates really do start to rise.
Hi Tim, I dropped OPP-A for a small gain and opened a position in XME. To quote The Who, “got a feeling ‘21 is gonna be a good year.” We’ll see. And: nice photo on your Twitter feed.
Original–old pic–I can’t bear to post my ‘old’ self.
Tim M.
It’s a picture of a distinguished man.
Stay safe
So did I. Good to see the face behind this great page.
Never too late to wish you all a happy and profitable 2021
OPP-A is still a good relative value. EQH issued a split IG non-cum at 4.3% today. OPP-A is A1 with a higher coupon. Only thing I own with a coupon below 5%.
I agree, still holding 400 shares bought a little too early. Good SWAN balancing out awful eREIT such as EPR, FUN, Mall eREIT preferreds and tons of shippers.
LI, Jkc, nothing against OPP-A, cashed it out for a quick trade, got back in again today for 20 cents less, think it’s ex-d in a couple weeks, solid holding.
I have already been in and out of SDS twice this morning. Now I have to go to a dentist appointment. Darn, I will miss the fun.