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Red Everywhere – Baby Got Tossed with the Bath Water

Wow it is red again today–I know I am in some pain–nothing new this week. Just guessing that 90% of all preferreds and baby bonds are red today–some very red. The 10 year treasury yield is lower by 2-3 basis points–but nervous nellies don’t care they just say ‘get me out now at any price’!! They say they will buy back in at the bottom–BS–that isn’t how this works because no one knows the bottom when it arrives.

I am hoping that I am down just about 1/2% but just eyeballing it could be a little worse – but since I am not going to be a ‘buy high sell low’ investor there is no use crying about it.

I did nibble again today on 3-4 issues. Usual suspects of insurers and utility issues and even a dab of an Arbor Realty Trust preferred–over 8% current yield on those issues.

I also bought another CD today with a 4% yield. I had bought one earlier in the week at 3.8%. Short term (9 months) spot for some of my ‘dry powder’.

So the close today could be interesting–will we get a giant selloff at the close? Doubt we will get a giant short covering rally–doesn’t feel like going into a weekend we will see much buying–but who knows.

54 thoughts on “Red Everywhere – Baby Got Tossed with the Bath Water”

    1. I wonder what the prospects are for Conifer to be able to roll those over or pay them off? They looked like they were going to have a new issue to do just that, but I haven’t heard anything in a long time now which makes me think the financing might have fallen through.

      There is a lot of insider buying going on though so who knows?

  1. Mr. Conservative asked for more data on how investment grade issues are off from their 2022 highs. The thought being that ones that are down the most MIGHT be attractive and expected to have large capital gains “when” interest rates fall again. There are several ways to present the data and I chose one. It might not be the best approach, but hopefully will provide something for further studies.

    Combined all preferreds/babys/terms into a single list
    Removed: convertibles, issues that IPO’ed in 2022, issues that did NOT trade within the last week, 9/23/22 closing price <=$8.00

    One other definition is important. Instead of using 2022 high and low, I used closing prices only. The reason being highs and lows might be a one-off mini flash crash kind of data point.

    Here are the worst performing five issues per each credit rating. NOTE that the issue can either be a preferred or baby or term, but I decided to combine them all together since I maintain that a long dated baby/term, say maturing in 50 years is essentially a perpetual preferred from a price standpoint in today’s market.

    Format is: Moody’s rating, ticker, coupon yield %, current yield %, last close price compared to highest 2022 close price %

    Aaa-Aa3, GDV-K, 4.25%, 5.56%, -23.96%
    Aaa-Aa3, TVE, 2.22%, 2.68%, -19.44%
    Aaa-Aa3, TVC, 2.13%, 2.47%, -17.43%
    Aaa-Aa3, GDV-H, 5.38%, 5.71%, -11.98%
    Aaa-Aa3, GJR, 3.09%, 3.25%, -4.71%

    A1, OPP-A, 4.38%, 5.79%, -23.25%
    A1, OPP-B, 4.75%, 6.07%, -22.65%
    A1, HFRO-A, 5.38%, 6.11%, -15.99%
    A1, GAB-K, 5%, 5.62%, -15.59%
    A1, GAB-G, 5%, 5.56%, -13.33%

    A2, ACP-A, 5.25%, 5.82%, -15.89%
    A2, GGT-G, 5.13%, 5.59%, -13.27%
    A2, EAI, 4.88%, 5.48%, -12.71%
    A2, ELC, 4.88%, 5.5%, -12.68%
    A2, GGT-E, 5.13%, 5.65%, -12.51%

    A3, PSA-O, 3.9%, 5.95%, -34.32%
    A3, PSA-N, 3.88%, 5.85%, -33.83%
    A3, PSA-Q, 3.95%, 5.9%, -32.46%
    A3, PSA-R, 4%, 5.9%, -32.24%
    A3, PSA-P, 4%, 5.9%, -32.1%

    Baa1, MGRD, 4.2%, 6.29%, -31.78%
    Baa1, MGRB, 4.75%, 6.42%, -29.42%
    Baa1, PFH, 4.13%, 5.25%, -24.11%
    Baa1, NMK-B, 3.6%, 4.63%, -23.81%
    Baa1, NTRSO, 4.7%, 5.7%, -23.58%

    Baa2, PSB-Z, 4.88%, 7.99%, -43.48%
    Baa2, PSB-Y, 5.2%, 7.99%, -37.43%
    Baa2, PSB-X, 5.25%, 7.95%, -36.13%
    Baa2, RNR-G, 4.2%, 6.15%, -31.76%
    Baa2, NEWEN, 6%, 5.73%, -30.86%

    Baa3, HPP-C, 4.75%, 7.28%, -36.92%
    Baa3, COF-N, 4.25%, 6.36%, -33.78%
    Baa3, COF-L, 4.38%, 6.53%, -33.66%
    Baa3, FRC-K, 4.13%, 6.13%, -32.6%
    Baa3, FRC-M, 4%, 6.12%, -32.19%

    Ba1, DHCNI, 5.6%, 13.1%, -52.17%
    Ba1, DHCNL, 6.24%, 13.88%, -51.38%
    Ba1, VNORP, 6.5%, 6.4%, -46.57%
    Ba1, VNO-O, 4.45%, 7.09%, -36.1%
    Ba1, EQH-C, 4.3%, 6.36%, -32.69%

    Ba2, BHFAM, 4.63%, 6.97%, -34.57%
    Ba2, OZKAP, 4.63%, 6.66%, -31.01%
    Ba2, QVCC, 6.24%, 8.74%, -30.88%
    Ba2, QVCD, 6.4%, 8.48%, -27.17%
    Ba2, BHFAN, 5.38%, 6.98%, -26.77%

    Ba3, SI-A, 5.38%, 8.7%, -37.83%
    Ba3, TDS-V, 6%, 8.53%, -33.53%
    Ba3, TDS-U, 6.63%, 8.56%, -29.73%
    Ba3, MS-O, 4.25%, 5.89%, -27.84%
    Ba3, FCNCO, 5.63%, 6.62%, -21.31%

    B1-B3, PCG-C, 5%, 7.35%, -39.29%
    B1-B3, PCG-I, 4.36%, 6.8%, -37.1%
    B1-B3, PCG-G, 4.8%, 7.33%, -37.08%
    B1-B3, PCG-A, 6%, 7.52%, -35.93%
    B1-B3, PCG-B, 5.5%, 6.93%, -33.58%

    NR, CDR-C, 6.5%, 18.72%, -65.87%
    NR, CDR-B, 7.25%, 19.14%, -63.34%
    NR, QRTEP, 8%, 17.58%, -56.58%
    NR, GREEL, 8.5%, 15.88%, -44.18%
    NR, IMBIL, 8.5%, 15.55%, -41.21%

    Main caveat is some of the Moody’s ratings are likely not up to date. You should also double check the numbers to make sure they are correct before you invest in any single issue. Hope you get some actionable trades from this list.

    1. Tex, thank you for taking time out of your weekend to do this. This will help continue to fuel the buys over what I hope is a great buying opportunity.

      1. Here is something a bit disheartening about IG preferreds. Cream of the crop Allstate issued ALL-C in 2013 with a 6.75% coupon. 10 year was under 3%, Libor was basically zilch, and inflation was under 2%. That issue is long gone, but none of the current Allstate fixed issues are even at 6% yet today with a 3.5% 10 year, Libor over 3.5%, and CPI inflation over 8%. Strange days indeed.

        1. Of some mitigation of the disheartening – ALL-B, of which we have previously spoken? Yes, current yield is only ~5.3%. However, it goes to float, and is callable, 1/15/2023. If it is called, YTC of 14.9% (albeit for less than 4 months). If it is not called and 3ML is where it is today (3.63%), then the yield on stripped price is 7.0%. Whatever, no mitigation of the strangeness of days.

          1. Nh, you are making a point that actually is positive for most “live floaters” in comparison with the fixed issues of same issued era. Has the market adjusted the IG fixed perpetuals enough for now current market conditions? Its really hard to know because the variables have changed. For example CMS-C has a 6% present yield, but that isnt off par, but from ~$17 range. And issues gets certain “value” from being that far below par so that skews things a bit. How much I wish I knew because I really cant abstract that data.

    2. Tex nice list. Interestingly 54% of my and wife’s total portfolio &7% of our preferred our the first 4 listings, I added to GDV-K and new buy on TVE yesterday, none of our bank holdings made the list?thosehavebuiltingainstva’s

    3. Thank you Tex.

      And good point about the “when”. Recency bias may be at work here. It’s entirely possible we’re “normalizing” and don’t yet recognize it.

  2. I still think the fed raises rates above the core PCE, currently at 4.6%. In the past the 10y yield has usually risen above the fed funds rate before they stopped hiking. So is the yield on the 10y going to 4.5%? It looks probable.

  3. Glad I didn’t speak up too soon. Been in the black all week until today. 22 to 85.00 up a couple days, then today I blew it. I tried to cancel an order on a stock I am flipping but it filled right at open. So down 1-1/4% for the day.
    I did buy some CUBB and EQC-PD for my wife’s account and myself. This is just the first tranche as I believe there is more downside to go.
    Not sure if it was Tex2nd or someone else here who mentioned the EQC
    My rule of thumb right now is to pick up some solid preferred in the 6-1/2% range. That EP-PC hasn’t hit my price target. Just stubborn I guess, it needs to drop another 1.50 before I am interested in nibbling.
    Need to add some more diversity to my wife’s account. a Ute and a gas or oil.

    1. Charles, according to my quick calculation, yield to maturity on EP-C is now above 7%.

      1. Thank You RB,
        Just keeping an eye on it. I don’t know why I think it can drop again this time around but anything is possible. Seen it in the mid 43. Had it before but I flipped around 50 now I wish I had kept it

        1. Why wish you kept it at 50 when you can now buy it much lower?
          Any concern that El Paso has problems? Or are utes too safe from that.

      2. Thanks for the reminder, RB. I’ve been meaning to consider adding to my EP-C position but hadn’t noticed where it had closed… By way of comparison, parent company Baa2/BBB rated Kinder Morgan has 34 issues showing at Fidelity’s 1k Fixed Income bond site and their 4.30% due 3/1/2028, CUSIP 49456BAP6 is shown offered at 5.379%. Even their longest issue outstanding is 5.40% due 8/1/2052 offered at only 6.13%. 164 basis pt differential between EP-C and the comparable maturity KMI issue seems too wide, doesn’t it?

    1. What did you like about psa-n over others? I picked up p but also liked r for highest yield when I was looking at it.

      1. At the time, it was trading for the lowest price. I own several of the preferred series. Just trying to lower my overall cost.

  4. Why buy a 6/9 month CDs instead of Treasury notes of similar duration and yield? You can even trade to exit the treasury bills in the secondary market should your needs change at not much of a penalty v/s most CDs that cannot be redeemed early. Obviously Treasuries are AAA rated and even have a small extra advantage being state tax exempt for those buying it in a taxable account.

    I priced a Treasury ladder of 3/6/9/12 months (in the secondary market at Fidelity) which would yield about 3.7%-ish…

    So could you please explain what am I missing, looking at buying Treasury notes instead of CDs ?

    1. MSquare, a small part of what you might be missing is that all CD’s are salable on the secondary market IF you buy them at a brokerage. You are correct if you buy them directly from a bank, they are not salable. We only buy CD’s on the secondary market. We have bought 50 YTD and sold ZERO, even though we could if we needed to. You could sell them @ Fidelity for example.

      That said, we bought US Treasuries in many accounts yesterday in addition to a secondary market CD. Both fit different needs in the accounts.

        1. Martin is correct that CD’s trade with a larger spread than treasuries. Therein lies an opportunity. On UST’s the spreads are so tight, you cannot generally get a better price of .001, say from 99.000 to 98.999. The market just laughed at our $250k order and wouldn’t give the extra .001.

          When buying CD’s, you can do bid-backs where you offer less than the ask price. We bought a substantial CD yesterday with a bid-back.

          And we NEVER buy a CD with the intention of selling it before it matures. But sometimes stuff happens and you want to/have to sell. Which is why our buy/sell in 2022 is 50/0. In the last 10 years, we have bought A MEGA LOT of CD’s and sold precisely ZERO.

  5. Well, I peeked again at my portfolio after the close and it rallied some. Now down only about 1.6% overall. MY one equity in the black, ECCC, went red, but two others in the red turned black at the close, ABR-E and MITT-A. Weird. My worst loser earlier was GMLPF. It was down over 10%, but closes down only .68%. It can have wild swings on any given day. What a day! At least I don’t have anybody who has suspended dividends YET! Let’s hope that doesn’t start, but if this keeps up it will for the vulnerable out there.

    1. I have flipped GMLPF more times than I can count this year. It can be scary though because you don’t know if one of these times it will go down and stay down. But it has been pretty easy to get a buck out of it each time through and sometimes you will get the divvy too.

      The problem is you can have shares sell well under the price you are bidding for them and your order still does not fill. There is no transparency there at all as to what is happening. This is probably my last flip of those shares as I batten down the hatches.

  6. Made a number of small buys today with lower limit orders I had previously set picking up some more

    CUBI-F
    ONBPP
    RIV-A
    WSBCP

    And nibbled more on some of the common stocks I posted about 2 days ago

    To paraphrase Apocalypse Now, I love the smell of panic in the morning

    1. Yeah, CUBI-F always seems to be trading at less than it is worth. I have a ton of it.

        1. Cubi-F is paying 8.05457% off of par

          It just changed a week or so ago so won’t change again for 3 months (unless it is called then on the Dec dividend payment date)

        2. Mark, its already set in stone, just not posted because divi hasnt been declared. Its something like 3.3% plus 4.76% spread. So its going to leak over 8% par next payment. Its past call, but can only be redeemed at quarterly payment. Maybe 2WR, will get out of the garden and come inside and post exact numbers because this is his baby. But…Its my biggest position too thanks to repeatedly listening to him about it, he wore me down! And I am pleased I finally listened earlier this year.
          Sorry, Mav, was typing when you posted. If I had known, I would have let it be!

          1. I finally took grid’s advice and swapped CUBI-E for more F. Got a 47 cent difference with CUBI-F offered at 24.94 earlier today. Now I’m drowning in F.

              1. What do folks think would be a fair value spread that would have CUBI-F priced at par even if it wasn’t callable? I’m thinking L+4% based on prices for WFC-Q and GS-J. So the L+4.76% spread for CUBIF is good but it’s borderline whether it would be worth refinancing it down to L+4%.

                1. That sounds pretty fair, LI, An improvement of 75 basis is the usual minimum improvement companies look for in refinancing an outstanding issue, isn’t it? However, perhaps, depending on CUBI’s view on interest rates in the next few years the question might be does CUBI think it’s now worthwhile to swap floating rate for fixed rate these days and come with a fixed rate perpetual or long term note. If CUBI-F is 8.05% now but staring down 8.38% for its next coupon after 12/15, could CUBI come today with a fixed rate today in the 7.50%-7.75% range and feel like swapping floating rate for fixed rate is worth while? Your 3 mo LIBOR +4 would put them immediately in the 7.75% range anyway but maybe the fixed rate approach could be the incentive to do a refinance even though still presently marginally attractive for them,… just a theory….

    2. made a couple buys today TVE & added to GDV- K don-t know if we’re at the bottom but hope its close.

      1. A certain % of people wake up every day and capitulate. They sell their investments and stuff it in their mattresses. Buy hi and sell lo. We each have our own tolerances. In the end, the house is starting to get purged. Might be more tax loss harvesting too occurring. The more that investors see red, the more fear of losing everything they have sits in. We each have to do what we need to do to sleep at night.

      2. Mr C ,
        I wrote my wife an email from work Fri. I told her something similar.
        Make a decision if you want to own a stock and why. What price your willing to pay a seller for it and put in an order. Week of red, I told her people would be selling, not wanting to go into the weekend and face Monday. I placed the orders Thursday night. Perfect setup for Friday. Now see what next week brings. Remember buy in tranches. Don’t be the person who puts all your chips in the pot

      3. Mike, the talking heads are saying that Fed is shooting for 5 to 8% unemployment. Don’t think we are there yet

  7. Bluerock preferred is now trading below par. This gets redeemed in a few weeks, correct?

    1. It also goes ex-dividend tomorrow so I picked up a bunch more that I plan to dump once the dividend is secured.

      I would have to look, but I believe this dividend will be all, or almost all of the profit remaining to be made.

      It looks for all the world like the deal is going through, but there doesn’t seem to be much upside to hanging around and finding out once the dividend is secured.

      1. Ooops – BRG preferreds already went x-div yesterday, the 22nd https://bluerockresidential.com/bluerock-residential-growth-reit-brg-announces-third-quarter-dividends-on-7-625-series-c-cumulative-redeemable-preferred-stock-and-7-125-series-d-cumulative-preferred-stock-and-september-dividends/

        Dividend is secured but not if you bot today or yesterday….. On the plus side, when they’re called you’ll get accrued from Oct 1, not just from last payment date of Oct 5. a couple of extra pennies.

        1. Note to self, don’t forget to account for weekends when looking at ex-dividend dates. That just totally slipped my mind. I just took the date I saw for the ex-dividend and ran with it.

          I had some before so I get the dividend for the vast bulk of what I own, but what I topped off with is going to be a pretty sad return of a few pennies.

          Oh well, I should have known better, but with everything down today I thought I had a bargain.

  8. Today’s stats so for on issues that have traded today and are >=8.00
    Preferred- 39 up>=0%, 476 down median= -1.43%

    Babys/terms- 25 up>=0%, 169 down, median= -0.95%

    Our friend TELZ is bringing the rear @ -15.2% for babys/terms

    PW-A is the biggest lose for preferreds @ -12.4%

    So a few winners, but nothing to cheer about. . .

    13 issues down GT -6.0%
    Pref AFSIM
    Pref CDR-C
    Pref CHMI-B
    Pref NILE-D
    Pref GMLPF
    Pref GNL-B
    Pref IVR-B
    Pref NGL-B
    Pref PW-A
    Baby ARBKL
    Baby MHLA
    Baby SNCRL
    Baby TELZ

    1. Tex, with your fancy queries… I would be interested in the top 20 pref and bb that are IG and have the widest gap between 52 week hi and lo. I’ll peek right now if 52 week hi and lo is in Tim’s sheet.

      1. It is not on there. My wishful thinking is that if an issue can drop $12 per share in 1 yr, it can probably gain $12 in 13 yrs. If it is IG, then the odds of it going bankrupt in 13 yrs is lower vs others. I’m not interested in for example a 6% IG preferred close to par vs a 6% further away from par. I’m interested in the long term div/interest with potential lottery winnings if called or return to low interest rates. Something tells me that folks will do whatever it takes to get the stock market going again.

  9. Wow. Just peeked at my portfolio and have never seen such a sea of red!!!! I have exactly one equity in the black, Eagle Point Credit 6.5% Preferred (ECCC). Why this is in the black I don’t have a clue. There are plenty of better equities I own than this one. Even the 5 or 6 utilities I own are dripping red. Some things are taking hits of 3 to 5%!! Overall I have taken a 2% hit today, which is a record I believe. I usually don’t look on days like this, but I did. I still have a lot of cash waiting to be used if I can get up the courage. Maybe later, just have the gut feeling there are more bad days to come……

  10. 6 month CD at Schwab from Wells Fargo

    4.04%

    Does not beat inflation, but better than losing 20% more of your portfolio, I guess.

    1. Eladio–remember an old fart like me can control ‘my’ inflation. I’m not buying a house or renting an apartment. But I would like 7%–alas no one is offering me that.

      1. Tim, I did the same, bought a 9 month CD on Schwab for 4.1 % pays monthly, not much under my personal rate of inflation and beats the heck out of just letting the cash sit there.

      2. Tim – I agree inflation rate is personal to each family / individual. Of course, the lower your income, the more it hurts and the less flexibility you have in spending.

        I’ve added two more CDs this week as well. I’m keeping 3 years of spending in CDs. (3 month to 1 year). I’m hoping to roll them over to even higher rates soon.

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