I will be adding a new link titled “Sandbox” in the right hand menu.
That link will get you to this page.
I had originally set up the “Reader Initiated Alert” page for ‘alerts’. I was thinking this, for instance, might be when a preferred stock is undergoing a temporary selloff and someone wants to let the population know about it quickly. Of course we all (including me) use the ‘alert’ page for general messaging.
I am requesting that we start using the Sandbox page for all general talk, and try to preserve the ‘alerts’ page for ‘alerts’.
I have had a screen up on one of my monitors all week where I see all comments – no matter where they are posted–it is a great page and I wish everyone had a page like that–believe me we all benefit from all the knowledge being shared. I don’t want to stifle any of the exchange of knowledge, but hope to get things a bit better organized by adding the Sandbox page.
SLMNP at $850? I realize chemical companies will suffer in an economic slowdown, but this seems like opportunity at a 7+% yield. What am I missing? Thanks.
The problem here is that there are many apparent bargains. Many securities that looked cheap have fallen further. Having said that, I own SLMNP.
gadcmc, agree especially with the put option of $800. If they stay solvent it will be a great buy.
Been adding a small number of shares in dribs and drabs around $845 – $850. So far, I’ve been able to get 9 in this range
My understanding is these can be redeemed/put at any time at par ($1000).
Can you offer any additional information about the relevance of the $800 price you referenced?
Not it cant be redeemed. It in essence is a permanently busted convertible with an owner put option at $802ish. The only thing the $1000 means now is if the company was liquidated. And if it was ever liquidated expect pennies not a $1000.
gadcmc – The put on SLMNP is not at “par” ($1000). It’s at a price of $802.674. It’s a price calculated at the time of A. Schulman being bought by LYB as a way to honor the original convertible into common clause in the prospectus that existed at the time of the purchase. LYB’s purchase essentially eliminated the common for which SLMNP was to be able to be converted into, so a price was calculated and set to “convert” at the price equivalent paid by LYB.. What I wonder now is whether or not anyone knows the mechanics of actually exercising that put if it came to it… I sure don’t….
Thanks for the clarification – I spent more than an hour looking through SEC filings last night and could not come up with this information.
Unless someone has a link, I’ll reach out to Investor Relations and see if they can provide any clarification including the mechanics of the “put”. Assuming I get a response, I’ll of course post it here.
That’d be great gadcmc… I’ll look forward to your post.
Exercising a put is very straightforward. Just call your broker and they’ll pull the details from DTCC and submit instructions to the transfer agent to get it processed. There may be a fee, depends on your broker. I just exercised the GDL-C put 🙂
mcg – Exercising a put when there’s an announced timeframe is definitely easy and GDL-C is an example of that, but SLMNP I suspect would be different because the put is essentially perpetual…. I may be wrong, but my guess is if you called up the fixed income department or the corporate actions dept of any normal broker and said you wanted to put back SLMNP shares where there’s no announced actionable put date they’d look at you cross-eyed (thru the phone of course) and go, “Say What?” BTW, I elected NOT to put GDL-C back since it still has a mandatorily redeemable date of 3/26/2025 and 4% coupon. Don’t know if I still have time to review that decision. Maybe I should..
It will still be easy for SLMNP. They may not have terms set up on their system so they’ll have to check the DTCC envelope but its straightforward to do. LYB will have updated that when the merger went effective so the info is available to the reorg department/owners of record. If you get a rep that isn’t willing to help, ask for the manager or hang up, call again 🙂
What volatility. My patience is rewarded on RLJ-A. Trade now profitable after a stomach churning session yesterday.
Good for you Retired. Maybe the volatility was simply due to forced selling by REIT Preferred ETFs and CEFs. Taking the common dividend down to 0.01 preserves cash and gives me greater comfort as a preferred shareholder.
Anyone know what’s going on with DX-B. They had a partial call over the weekend. Had about 3 weeks notice on that. Appeared to go smoothly. Now I’m getting indications in my account of another call but there’s been no public notice that I can see.
No idea, couldn’t find anything on their website yesterday or today. Fido has repeatedly changed the number of shares I own (post-call), as well as the cash in or out of my account, and sometime this morning split the remaining shares (which have increased at least twice) into 2 groups again. Rather confusing.
I’m with USAA and I have another friend with Ally and our transactions are all over the place with DX-B. Who are you with?
Here’s my theory on what happened with Dynex. USAA posts things early. So if something is happening on Monday, it happens Saturday for me. Dynex was supposed to be calling 191 shares for me. I saw it happen over the weekend and I got the cash ($25 per share).
I took that cash Monday and bought back my 191 shares and 40 more for same amount of money.
In the meantime, I think Dynex decided to increase the call. They voided my 191 share call, and made it 210.
In addition, I think they are calling more shares, as I now see another 168 listed separately which is what USAA does when shares are being called.
PS – As long as Dynex keeps giving me $25 per share while they are selling for less ($19.16 at close), I’m going to keep buying more Dynex.
Checked my USAA at 2 AM and things settled down. No more double line entry like they are taking more. In the end, it seems instead of calling 191 they called 171. And that’s the end of story.
Saw the 38.1% comment below. The original notice said 38% and that’s 171. Not sure why for 3 weeks it said 191.
I had 17 shares called of dx-b on Wed but then on Friday they were all sold back to me. This makes no sense.
Tom, they have changed the quantity to be redeemed. It is now 38.1% of the issue.
Is it possible to get a shopping list of Investment grade Issues that are yielding 6% priced at $20 or lower ?
I see EAB is one candidate you guys are tossing around, any others?
When this tumult is over, we survivors will need to rebuild our portfolios.
Our older selves in the future would thank us for this.
I haven’t logged onto my accounts since last week when I tried to swap WFC-T for another of their preferred and it wouldn’t let me b/c of a partial call suppose to be happening on Monday, March 16th. Did that happen? If so, what percent of shares were called. I have my shares at TD Ameritrade and thought I got an email for all transactions except interest/dividends,
I had 200 shares of WFC-T at Merrill Edge.
164 turned into a long string of numbers after the partial call on Feb 12.
On March 16 those disappeared and $25/share appeared shortly afterwards.
(plus I collected the dividend on the original 200).
I kept 36 from the original 200 that were not called and have been buying more below par since.
https://www.quantumonline.com/search.cfm?tickersymbol=WFC-T&sopt=symbol
I have been buying quite a bit the last few days and have now used up the cash I had accumulated. Overall my preferreds are down over 30%. At least I was able to lower my basis on IPLDP, NCZ-A, LANDP, KTN and KTH. Time will tell if I should have waited longer to buy. Hopefully, we are near the bottom.
Alan, take a look at this….
https://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Stock&symb=ktn&time=100&startdate=1%2F4%2F2008&enddate=3%2F19%2F2010&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=2&x=48&y=10&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=8
Justin, that was a near rock star performance for a preferred in 08-09. You just cant track many down as they have been long since redeemed. But…there is super rock star KTH which is my leading lady now. Based on my charting $25 was about its low point ever. But I wouldnt be surprised if cash is king…
Grid
what qualities make KTN such a rockstar ? TIA your early reply. best sc
SC, Im just referencing in terms of the chart movement. I meant it in a relevant reference to Justin’s chart showing it hitting $14 range in 08-09. I was just giving context because the strong “safe” preferreds were the ones trading in $13-$17 range in 08-09, as I did a lot of chart work on issues. The bad or at risk prefereds traded in the $3-$6 range or went kaput… When I got deep in preferreds in 2013 many of those preferreds trading in 2013 were trading in 08-09. Almost all have been redeemed or went belly up. Triple B rate BCG-B trust debt 6.2% from Baltimore Gas was trading in $15ish range too and Baltimore Gas wasnt going anywhere. Basically back then the “safe” stuff was 50% off and the high risk was 75-90% off par. It was a bad stretch during financial crisis.
A couple very rare issues didnt drop as much. But it probably had more to do with dearth of sellers than problems..
But that is even today…Does it make sense people have standing bids for UEPEN a 3.5% Baa3 $100 par now at 87.90 (that would be a 3.98% yield) when you can buy Baa3, IPLDP at $21.18 for a 6.02% yield? Pricing doesnt always reflect relative quality as much as it reflects liquidity/illiquidity buy/sell imbalances.
thanks the reply. What you are saying is that in this context the amount of discount is indicative of the amount of perceived risk. Has little to do with the intrinsic capacity of the issuer to sustain the company.An interesting take on things. thanks sc
Price of silver and gold have gone down substantially over this sell off.
I went looking for some on JMBullion’s website and almost everything is sold out.
Are they hoarding waiting for prices to go back up? Or has there truly been a run on silver and gold bars?
What good is the price of silver at $12 if there isn’t any to buy?
Mark, Consider a couple things. First off the spread is a joke. So several things could be happening. Normally the spread on 100oz Ag bar is what ? maybe a 1.00? right now they are saying its 3.00! that is the same as buying coins, so something is off Look at Eagles, they still want 24.00 each for a tube and 1,525.00 for the bar, Basically people that had panicked and bought at higher prices are gone and these metals traders are sitting on a big loss.
So either they are sold out or don’t want to sell at the lower price.
Don’t forget, all the talk of miners being protected by contracts locking in price. The refiners and traders are also locked in.
Just see what they are offering to buy any coins or bullion right now and you will see what I mean on spread.
At some point its going to break loose, JM Kitco etc. will take the loss and try to replace at the lower price. The silver is still being mined and its backing up the supply line.
All they are doing at this point is trying to get you to sign up on a buyers list. Looking for suckers. Be patience
They probably can’t buy much at these prices so lack of new inventory. I don’t understand why the paper derivatives drive the price instead of supply and demand.
Lets look on the bright side…….
at this rate, only 12 more days until DOW 0
then time to buy
RNP down yesterday in an up market, and underlying securities were up. I know the market is concerned about leverage, and it will probably be down today with the market. But…the discount is now at 14.4% as of yesterday’s close. That’s the biggest discount I can remember.
One of the more prominent writers on SA is touting ANH-C yielding 11.6%. Past call date and selling at $16 and change. This is a fixed payer and goes ex dividend on the 30th. I’m thinking of a small position. This looks like a good buy or am I missing something here?
All similar REIT preferreds are trading near that price after the recent crash. Maybe they’re all ovesold, I don’t know, buy one if you suspect so. ANH not my first choice but not my last choice either, somewhere in the middle.
SA doesn’t always have the best advice. Good food for thought, that’s all.
Thanks Martin. I don’t put a lot of faith in much on SA, but give a quick glance to see what’s being hawked. I’ll do some more reading on ANH. Would only go preferred though.
I looked up the article. CWMF is the best REIT analyst they have, good at spotting the right price, though he doesn’t seem pessimistic enough about the systemic risks. …or maybe I’m too pessimistic.
“Who can i sue?” billboards should be popping up soon.
Correct me if i’m wrong, but the gist of the selling on Reits and MReits are done by funds that need to adhere to a 200x or 300x coverage ratio?
Is that why WRB, ARR-C, PBY and others have been almost halved?
Because that would make sense in this senseless massacre.
“Well I saw it on the evening news
That stock market really had the blues
And when it closed it set an all time low
I wondered where did I go wrong?
Why did this happen to me lord?
I’ve got to get that money back, you know”
Ole Luke the Drifter
Important explanation of the discrepancy between trading price and NAV for ETF bond funds, written by a trusted ETF expert.
**************************************************************************************
At it’s simplest, all that’s going on here is that Authorized Participants — the ones who are in the business of arbitraging out precisely this kind of discrepancy have made independent assessments of the state of BND’s holdings and come to the same conclusion: the NAV is wrong. They believe that the *real* price of bonds is much lower than the advertised price in that NAV.
https://www.etftrends.com/bond-etfs-had-a-wild-day-but-did-they-break-i-think-not/
Anyone understand what is going on with Medley. Their bonds MDLX and MDLQ are now paying a crazy 30%. They did make their last payment if February. I can’t find any news that explains the extreme drop in their bond prices.
Medley was in trouble before this crisis. Probably investors afraid of high bankruptcy risk now.
Drop dead date in merger agreement is 3/31 and apparently they are still waiting on SEC approval. I don’t think a better alternative has materialized for any of the parties, so it will probably get extended.
Would like some perspective on banks’ non-cumulative feature. I’m a bargain hunter like most people, but I have difficulty in this extremely volatile market buying into bank preferreds because of their non-cumulative covenant. Does this concern any of you? If my thinking is clear (which, often, it is not), in an attempt to conserve or create liquidity banks might opt not to pay common and preferred dividends for while. As I read through GS, MS, and JPM prospectuses, the sole criterion for stopping payments on preferreds is cessation of common stock dividend payments. It seems we are far from a situation where big (and small?) banks would stop paying their common shareholders, but look at how the economy turned so quickly over the past two weeks. There seems to be abundant bargains on bank issues, but is it wise to accumulate given the non-cumulative feature? Many other bargains, outside of the banks, exist. Is it wiser to stay away from the banks? What do you think?
Oldman, My personal opinion only…There are all sorts of risks, many you cant control. But two you can is individual company risk and sector risk. For example using commons, people can talk XOM, Chevron, or BP, but bottom line they all are getting hammered so that is sector risk…Now one of the above could be stretched financially which would add more risk, so that would be company risk.
Being banks are basically leverage on leverage they have the added risk in times of trouble to not really be able to stay on top of them. Heck in 2008-09 many were profitable one quarter and the very next needing bailouts. That being said experts say they are better capitalized this time through new regs.
Also, banks and financials use preferreds more than any other sector. About 75% of preferreds in monetary value come from them. Preferreds are their life blood to access for Tier capital. So they will not screw you over just to save a buck. But, that doesnt mean suspension cant occur as it has before in bad economic times.
Credit rating agencies do not assign a lower rating to non cum preferreds as they have said there is little difference in risk. Meaning usually when a preferred goes down its game over anyways. But sometimes the cumulative clause does help.
I cant really advise on to buy banks or not, but I would suggest if you do to at least control what you can control and practice diversification amongst issues and sector.
Gridbird, thanks for the lucid dialogue which I think is right on. In a world going mad, there are many options to buy (or to watch, at least). I may dabble in a few bank non-cums, but will diversify the risk. I own several major bank senior notes, and all are way down the past week–like everything else. But, being “senior” only provides security in a bankruptcy and the major banks, in my view, are not going anywhere. So why not buy selected preferreds and book a better yield? Again, thanks.
In my office we banned face to face client appointments.
Drop-offs only.
As for the nation:
Trump may shut all non essential government services any hour now.
Airlines, trains and buses may be halted.
Will NYSE and NASDAQ be halted as well ?
Newman–I don’t think so, but certainly it could happen–never say never in this environment.
What percentage cash have you raised?
I caught a lot of falling knives in the last two weeks and am loathe to sell and loathe to buy right now even when there are such fantastic deals.
im moving cash into position
foaming at the mouth
Grid has me looking at a few securities
Amidst all of the depressing economic news I’ve seen one positive sign, shipping out of Asia to the west coast seems to be recovering.
“Port calls at China’s two main container ports are returning to the same levels seen a year ago, while the oil price war stokes up tanker markets AMID the continued spread of the coronavirus and new containment measures in Europe, the US and around the world, one of the key indicators of economic activity in the country at the epicentre of the health crisis is returning to usual seasonal levels, according to new figures from Lloyd’s List Intelligence. Calls by container-related vessels to the major hubs of Shanghai and Yangshan are at the same level now as this time last year” Additionally, blank sailings (container ships) out of Port of Oakland dropped from 5 last week to 3 this week and 1 next week, so liner service is returning to normal following Lunar New Year and China shut down. One other headline is that tanker rates are surging as Saudi is preparing to flood the market with crude. “The world’s largest exporter, which began hiring extra ships almost as soon as a pact with Russia to limit oil supplies fell apart, has now provisionally hired 25-30 giant carriers to load late this month or early next, according to six shipbrokers and executives involved in the market.”
Is this strategy feasible ?
Buy IG issues under $23 that are past call and yield at issue was 5.5% or higher.
Company may call it within a year to save money.
So, goes my theory.
Would WRB-B fit the bill?
IG yield until called under par
i like the idea
wfc-l is busted wells fargo preferred IG at the lowest price in a long time
currently 6%
Would appreciate thoughts on the SLMNP preferreds. At present LYB hit 52 week low and is yielding higher than SLMNP.
My question is would an investor be better taking the SLMNP and moving to LYB?
I do not understand fully the mechanics of the true safety of SLMNP. Certainly, if the economy is impacted for a quarter or two I would think LYB can withstand and recover; giving an investor not only a higher yield but a capital gain.
If LYB tanks, is SLMNP truly protected?
TNT, Preferreds are misunderstood in terms of relative protection. That is reserved at minimum starting point at the senior unsecured debt level. And that can be problematic also.
LYB is a cyclical company so we know what that means in economic recessions. As I have stated before SLMNP is not a true preferred of LYB proper. Its a preferred from subsidiary of Lyondell Advanced Polymers. They took Schulman and melted a few of their own operations into it to create Lyondell Advanced Polymers. To what degree its walled off like a virus from LYB to suspend payment I dont know. As long as LYB is viable the put at $802 should be viable at least as I interpret info, but I am no expert.
And then you can throw in volatility which can mean price drops having no effect of payment. BGE-B was never in danger of not paying in 08-09 crisis, being a solid investment grade utility, but it didnt protect it from dropping down into the $15 range for a while.
Most of the income to pay the CHS preferreds come from 2 refineries in the Midwest. Any thoughts on how the oil price wars are affecting CHS?
Thanks!
Dave, driving around at 8:00 last night and seeing light traffic on the roads and mall parking lots almost empty with stores closed early I doubt gas consumption is going to show being up for the qtr.
I am talking about suburban Portland, Don’t know what the rest of the country looks like, but its going to be a big hit to refineries bottom line.
Kitco is showing bids on Sliver down around 12.20 this morning. I repeat Gold and silver is not a safe investment in times of stress. They are good when there are hints of inflation as a investment,
You want a alternative to zero interest T-bills then consider them as a place to stash money that will not pay you any interest. Maybe for a long time.
The bad is I sat on them for 23yrs. the good is when I needed money I was able to sell and as luck would have it at a 350% profit.
But don’t bet on luck happening again. Bitcoin anyone?
Charles, bitcoin seems to be disproving the “store of value” premise as it has dropped severely the past few days and is trading in the $4600 range as I write this. That being said you could ask if it’s time to consider buying while BTC is down? Maybe for pure speculation money as the next “halving” event is due sometime in May which has always resulted in significant price gains the following 12 months. Not a recommendation, as usual.
Thank you Charles. If there is a significant reduction in energy product sales (they own gas stations in the Midwest), little income from the agricultural side, and losses from the fertilizer businesses, I sometimes wonder if there will be sufficient funds to sustain both the $42.167 million each quarter to pay the preferred dividends and funds to also pay maintenance capex/maintenance expenses at the refinery and elsewhere in the co-op.
Dave, Sounds like you follow the company and its in your area. I follow HEP and was happy when IDR’s were suspended. But not long after that they did a private placement of 500mil of preferred probably with a private equity fund.
Tells me they might of seen something was going to happen, maybe just not this severe.
oregon or maine?
fed slash rates to 0%
Starts QE4
DOW down 600 points
“Beaks, where the hell is Beaks?”
ARR Insiders (CEO and CFO )bought $ 307,000 of the common on Friday the 13th. They had previously bought $2.8 Mill. worth of stock at 17.93 last May.
That shows they have confidence in the company surviving.
ARR-C has taken a chunk out of my account as did VNO-L and CUBB.
Will raise cash on Monday even if it comes at a cost.
PSEC CEO J Barry purchased $ 5 million dollars of the stock this last week.
Those preferreds should be appealing to many and it comes with a nice rating too.
I will purchase some at the next beating.
You can check others on Insider Cow
http://www.insidercow.com/
I also own ARR-C shares and have no intention of selling them…good to know insiders are buying.
Yes, But what a mauling we ARR-C holders got Thursday!.
Insiders are better educated than we are about the company.
Also, ARR was a “Cup and Handle” breakout 3-4 weeks ago.
I may buy some more common shares as soon as the beatings continue in earnest. Hopefully i can raise cash on Monday with out wincing at my sells.
Prospect Capital is in the same boat a $5 handle and a 15% yield.
The commons may be a better buy than the Preferred’s.
ET insider bought 10 mill worth of stock 5 days ago at 7.77..it’s at 6.82 now.
In fact Insider buys are overwhelming and are in huge dollar amounts.
So, that’s a good thing.
Has anyone done any work on CNP exposure re: the ZENS securities on the balance sheet? Apparently an acquired company issued (Time Warner!) equity linked sub notes in 1999. These are footnoted in their filings and presentations. Very complicated after the T buyout. Unbelievable a ute would have done this.
Looking For Opinions:
I own both VRP ( variable rate preferreds) etf and the closed end fund FFC which holds preferreds. I’m thinking of trading in the VRP for more FFC. Beside the fact that the FFC yield is >2% greater, I think there’s not much future in holding variable rate preferreds, as I don’t expect to see any significant rate increases in my lifetime (I’m 78). Thoughts?
Dump the VRP and go with FFC or FPF, depending on which is trading at a better discount (relative to its average discount).
ETFs are not the best vessel for preferred. The fee you pay, 0.5% in the case of VRP, gets you nothing but diversification. They are index funds in truth.
CEFs that are well run give you the benefit of active management and the benefits that come with leverage cover the management fees.
Thanks bob,
I was also looking at HPF for their emphasis, though not exclusive ownership, of utility preferreds. I don’t understand how they manage a 9% yield.
Vinny – you can (and should) do a very simple screen for CEFs at cefdata.com. Input the ticker and look at NAV returns over 1, 3 and 5 year periods. You want one that is near the top for those 3 time frames.
The ability to provide a consistent return on NAV over an extended period of time is the real test of a CEF.
I sold off the VRP and replaced it with FFC.
Grid
yesterday you mentioned mortgage backed bonds and specifically EAB. Which other issuers of this class of bond would u suggest looking at. I like the idea underlying this and want to know more about them but am not sure how to identify them. Any direction you can provide would be valued. Thank you in advance for your help. best SC
SC, If not already familiar with it, a useful starting point for you might be QOL (https://www.quantumonline.com) to identify the issues you referenced. For example, search EAB, then find the tab for the “Parents Company’s Record” and you’ll see a list of the company’s issues.
Also head to your favorite company’s websites and explore the “Investors” tabs to explore options, review financials and verify all data via the prospectus (many of which are actually linked via QOL).
In addition to searching the big boards, also take a look at OTC (otcmarkets.com) where you can search out specific types of companies. I’d also suggest making good use of the credit ratings data.
alpha/ Grid
Many thanks to both of you. Best SC
SC, Yes please do what Alpha said…Im only going off memory, but I think Entergy (ticker ETR in Quantum) is the only ute outfit who issue top stack baby bonds.
alpha/ Grid
Many thanks to both of you. Best SC
Grid- not that ETR has a whole series of these preferreds issued by each of their operating firms.Tim’s baby bond list has maybe five of them each probably a bit different but all would seem to be good places to start dd. thanks to you both. best sc
Sorry I wasnt being clear.I didnt mean all were. I just remember Entergy Mississippi used to have mortgage backed bonds but they may have been redeemed. Check the details as I havent looked specifically myself.
EAB for the sock drawer ?
Someone needs to fess-up. Who scored PPWLM at $131.10?
Nice entry yesterday Tim on ENO at $24.39. Check out the bid and ask at one point this morning. Don’t see this every day:
https://ibb.co/b5rGKTB
Alpha, During 2018 rout I was loaded with illiquids. They remained with strong bids and I dumped them to buy up bigly all the thrashed quality liquids. So I really came out like a rose there scoring and staying fully invested. This year I didnt have as much in illiquids though several I have never traded. That being said, some of these illiquids now look incredibly over priced compared to liquids.
I hope some of these get thrashed to reenter them. But they got a long way to go as most are overpriced on a relative basis to liquids of same ilk.
Grid, Absolutely. They’re on the radar screen and like you mentioned focusing on increasing call protection allows for more patience. Was lured into too many past calls below accrued though in the call-protected was able to extend average call duration to 10/25/2024 so there’ s time.
And Grid the point of including the ENO link above was not about Tim’s good buy, it was that at that moment, the was Bid higher than the Ask. Makes one wonder.
Fire sale on pecious metals if anybody is a true believer. Silver near it’s low. Gold falling. Palladium down 40% from its high 2 weeks ago. Platinum off 7% for the day.
I’m suggesting conundrum corner. I have some significant amount of assets tied up in an incredibly stable issue……CBKPP. CoBank preferred.
Highly rated, thinly traded. It appears that it is now totally illiquid in that Schwab tells me that I can’t sell it. Not their fault of course, it’s the SEC.
The interesting thing is that I bought it through Schwab on their trading platform in two different accounts over a period of six months. Thoughts, ideas, help. Anyone else holding this issue with Schwab?
No sale restriction on Fidelity. Liquidity always an issue, but if there is a bidder, it can be sold. Did Schwab or the SEC explain why CBKPP can’t be sold?
Tim, Staying current, we may need a new Category on your page. Maybe titled “Whipping Post”, “Self-Loathing Corner” or “Beatings Beat”. My membership contribution: a starter position in XOM purchased on January 14 as a “value” proposition. HAHAHA. Scooped that baby up at the unbelievably low price of $68.90/share. Last tick: $38.59. Oh but I did get a .87 dividend.
In a more recent foray: Having recently traded stupidly high over $30, I was feeling quite pleased when I executed on RZB at the bargain basement price of $25.81 this morning. It promptly dropped like a rock below $25.
alpha8,
I second your suggestion about the “whipping” category! And I think I will not read (nor publish) any of the posts there….
And conversely, what about a new category titled “don’t lose hope” or “how not to panic or be depressed or become sick” or something similar, to remind us why we are here in the first place, and where we may likely be when this is over? That I will enthusiastically want to read!
This is something I would publish in the suggested “don’t lose hope” category:
Because we were at a place with so many issues overvaluated, many of us had large “unrealized gains” in our portfolio, which now we have shed.
Unless you have “panic sold” your portfolio, something that psycologicaly
helps me is to actually look at my YTD realized gain/loss summary vs. the unrealized gain/loss. Yes, like all of us, the unrealized gains do not look so nice today. Hopefully, for many of us who have just trimmed a bit, our realized g/l do not look so bad…This is like the saying: “a loss (or gain) is not relevant until you sell”.
When this passes, our unrealized will begin to grow again.
Anyone with Gallows humor?
We could use some.
Covid 1929 is what Wall Street is calling it.
“The beatings will continue till the Morale improves”.
Any others?
stag-c at $24
Grid is gonna be upset
he bought too soon
Pickle…. Based upon the past week…I have bought EVERYTHING I own too soon, ha. I have been racking my brain for a long time on how to increase my yield without buying higher risk issues…I found the solution and it was so easy…Participate in a market sell off and watch the prices of your issues drop..That increases the yield without any effort! 🙂
ha !
and now the secret is out……………..
Why, on no news, is SOHO, SOHON & SOHOO getting whacked so severely. Yes- hotels, but 20 to > 40%??
Gary, I was wondering too. Hotels are going to lose business, but enough to bankrupt them remains unclear.
Couldn’t resist a few buys over the past several days, BOKFL, VER-F, FCNCP, and SREA. Probably should have waited as Tim suggested but I have “seen the light” and will hold off, at least for today. Kind of interested in EP-C but at lower price than currently trading. As some movie quote said, “hang onto your butts!” it could start to get serious.
Curious, with some preferreds off 50%, do the sellers believe payments will be stopped? Have the odds that HMLP or GMLP stop paying really increased that much to warrant this much of a drop? I am amazed by the speed and degree of the drop. And if they are able to maintain the payments, what causes confidence to return?
For what it’s worth, bought some BRG-A at $24.66, 8.25% coupon with punitive failure-to-redeem clause (coupon increases 2% per year for every year not redeemed starting in Oct. 2022).
Good catch, Gum. I own this one but haven’t added in quite a while. That failure to redeem is quite punitive and the reason why I got in, in the first place. Seems to almost assure a redemption.
You would think, A4I….that theory’s not holding up on a lot of issues I bot under that premise right now though, including this one…
I have a ‘lowball’ bid in, which anymore is just equivalent to saying ‘to be executed tomorrow or the next day’. Pass the Dramamine, please.
This from Wall St. Breakfast on SA.
These segments of the market are volatile to invest in. There will be more companies trying to build cash.
Loading up on cash
Corporate America is attempting to bolster its liquidity, plagued by a plunge in oil prices and the global coronavirus outbreak. Exxon (NYSE:XOM) has filed for an unspecified board offering, Royal Caribbean Cruises (NYSE:RCL) increased its credit capacity by $550M and United Airlines (NASDAQ:UAL) raised an extra $2B in financing. “It’s companies loading up on cash when you can get it. They are effectively building up that war chest,” said Jeremy Swan, managing principal at accounting and tax advisory firm CohnReznick.
Can some one give me some insight into what happened with FLOT monday (down 2.75%)? MINT and PULS performed much better. Some recovery today… but drop monday seems excessive compared to available history. Could it be a discount to NAV situation? Thanks Bill
FLOT is floating rate only. Did floating rate issues take a dive? FLRN also down big.
OK thats it, float vs short term. short term much better. FLOT and FLRN performed the same.
I haven’t spent much time analyzing CEFs but wanted to know if anyone here has been buying any lately. I saw RNP mentioned recently. Are there any others that look appealing now? Thanks in advance!
rnp holds both equity and preferred. Cohen and Speers has a number of property funds with different ratios of equity to fixed rate. Most are pretty good. You can look at rqi among others.
For fixed rate if you have interest consider pci. good luck sc
CBKLP down $2.60 today. Any news?
Tim, Landlord Investor and anyone else who wants to comment…
How are you feeling about the Priority Income Fund Preferreds these days ?
I saw the 3/3 comments…
Today——–3/10/—–3:50pm
F Series 6.625% – recently issued – is trading today at $22.99, while
A 6.375% is at 23.66
B 6.25% is at 23.71
C 6.625% is at 24.28
D 7% is at 24.49
E 6.375% is at 23.00
Seems strange that F is trading at the lowest price. Maturity date perhaps ?
But call date would seem more relevant.
The NAV at 13.02 fell 3.3% from 13.47 in your last drill down discussion on 10/14/19. I’m not smart enough to figure the coverage ratio right now. Did you calculate that ? I do not see much “analysis” out there on Priorioty Income in general, probably because it is not traded. Would appreciate your thoughts and others. Thanks
Gary
And after a couple hours the market is back to living in a world without energy.
Given the violent fast moves down, this has to be a fund getting blown up or something of that sort
OKE, EPD, MMP and others just dropped off a cliff
CEQ-R under $4
maverick61–you got to know that someone on the wrong end of this market is getting blown up.
Tim, Tell me about it. I only own EP-C and I am feeling the ‘Bern just from that!
You’re not alone–I hold my taste of GMLPP with a $6/share loss–good thing I only made a (stupid) purchase of 200 shares.
Grid, is EP-C getting killed because they have heavy oil patch connection or what?
Mikeo, It is an oil market battle turmoil thing. Read AKJ post…See it all starts in the bond market… Since Friday I was looking at some pipeline senior unsecureds and many have dropped 20% in two days. EP-C has to drop because debt above it in cap stack has dropped substantially increasing yield. So EP-C has to follow in suite. KMI has all sorts of liquidity. And if you see 2016 ish this is nothing unfamiliar. KMI doesnt have the credit issues others have but its part of the sector in crisis.
Personally Im not selling. I am basically betting KMI doesnt go bankrupt before 2028 as that is the maturity. But no I am not tripling down and saying its money from heaven. 🙂
EP-C and CORR-A have been my biggest losers, most everything else has held up. CORR really got hammered, I thought it was isolated from oil prices.
Goldman is deleveraging two energy funds: https://www.bloomberg.com/news/articles/2020-03-10/goldman-deleverages-energy-funds-on-unprecedented-volatility
I bought more EPD as low as 16.39 as it cratered. That’s almost a 11% yield. What a gift, since I believe EPD will continue to pay–short of the end of the world.
JMO
Thanks Camroc. That is helpful and what I suspected, I also picked up some more EPD and MMP on this move. And snagged some CEQP under $4
My activity today consisted of selling off my WRBprB and replacing it with WRBprF in an attempt to guarantee a 5% income on these until at least 2024. The preferred B is callable. Preparing for ‘lower for longer’.
I figured out the whole reason why the markets have crashed. You guys stopped talking about steak dinners! WTH? It’s been weeks since I remember a comment about snagging a steak dinner and so down we’ve gone. Come on guys, let’s rally the comments here and push this market back up. These steak dinners were such an economic stimulus, much more than this payroll tax reduction thrown out yesterday.
A4I, Im still clipping streak dinners. I made a couple steak dinner trades yesterday. The trouble is while I was busy making steak dinner trades, somebody has been hacking my stock accounts draining them faster than the steak dinners can replace the stolen money.
But you see my point, don’t you? I mean, I figure out what all the talking heads couldn’t on CNBC and Bloomberg. I’m a genius! So today, I mention steak dinners and voila! We’re up 800pts.
Could always be worse. You could be trading (or actually not able to) with the Robinhood platform. No steak or even TV tray dinners for those folks.
We’ve got steak dinners today!!! But only a fraction of those lost yesterday 🙁
Grid, you’re missing out on the action: * Enable Midstream Partners LP, up 84.4%
CNP might actually go up today! 🙁
A4I, I knew P hit paydirt yesterday, because it was up to 2.85 after market yesterday. Looks like your CNP is up a bit. Hopefully that will continue for you!
A4I, The bond market has just puked out the MLP debt. We are talking about 10-20% movements in senior unsecured since Friday. This is what is dragging down EP-C also.
Hi Grid, I know you owned the CEQP preferred. The common is getting crushed. What are your thoughts on the preferred?
Kapil, thats a tough one. I got out a couple weeks ago when it wasnt moving back up in price after exD. And then I read the cost to insure Chesapeake’s bonds was about 3/4 of the cost of the bond itself (CEQP has a lot of exposure to Chesapeake), oil was then starting to sag and they having a lot of Balkin exposure scared me off.
Just big picture worries not anything numbers wise that I was told. It clearly is one of those that could be in trouble or just as likely one that bounces back leaving me to say “Why was I so chicken and not buy at 12% yield?”. And it could just be that…
I mean some just got pummeled. Look at the beat down NuStar took…Or worse…Look at the price of CNP’s majority owned Enable Midstream. It got killed it closed under $2. Its up after hours but geez its down 70% in 5 days. No wonder CNP is getting killed. You have to buy trusting its fear in general, or understand the balance sheet and counter parties enough to separate the baby and the bath water. Unfortunately I am not adept enough to do the latter, and too focused on quality to do the former.
Glop only down 16% but glop-c down 32%??
Here’s a request: i’ve only traded preferreds for a few years. with the market panic today some quality names are at better prices (power companies, t-a yielding 5% was over$26 now under $25). as a buy and hold investor i’m only interested in companies that wont suspend dividends, not really about flipping. can some of you, like Grid, who traded preferreds through the recession offer the wisdom of your experience in terms of what continued to pay and what didn’t and any insight u have? would be greatly appreciated
Franklin, my best advise comes from a credit rating agency (Moodys) not me, if concern for payment is a worry for you…Pay attention to second sentence as it is referring to payment of a preferred…Specifically here in reference to Entergy Texas.
The Preferred Stock contains equity-like features including no stated maturity and the option to skip coupon payments. Since investment-grade issuers have rarely missed coupon payments on these types of securities, we consider the cash flow stream associated with them to be similar in nature to the cash outflows associated with servicing debt. As a result, these securities receive only partial equity treatment in Moody’s calculation of debt coverage and financial leverage ratios. The Preferred Stock will receive basket “C” treatment (i.e. 50% equity and 50% debt) for the purpose of adjusting financial statements. Please refer to Moody’s cross-sector rating methodology “Hybrid Equity Credit” (September 2018) for further details.
So in general make sure you buy a preferred from a company with investment grade rated bonds…And for me more specifically utilities who have prisoners as customers and legislatures that accept campaign contributions.
Thanks Grid.
Bankruptcy risk is what to look for. Suspended dividends are often a prelude to bankruptcy. If they suspend and later resume dividends, be glad they survived.
Martin, I can assure you Franklin doesnt want to buy a preferred that has dividends suspended. 🙂
With the Russia ME oil price wars and likelihood of US drillers either renegotiating debt or going into bankruptcy, holders of CORR-A preferred may want to do their own due diligence. UPLC was marginal before the drop in oil and gas prices and Cox Oil/EGS ,as lessee for the Grand Isle Gathering System, is not interested in providing financials. The inability of either to pay timely lease payments could cause CORR to default on distributions.
Dow futures down 1073 (bloomberg), altho CNBC is screwed-up with a +1030!!
Vix up to almost 42. SPY down > 4%, Naz almost -4%
Looking for more decline in rates- happily, I’m in the mkt for a 15yr re-fi.
Energy bust will get worse. Things are looking deflationary to me.
https://www.bloomberg.com/news/articles/2020-03-07/saudi-aramco-slashes-crude-prices-kicking-off-price-war
what does this do to midstream companies like Nustar, EPD and others?
nothing. most have long term contracts 7-10yrs under take or pay arrangements.
E&P producers are under significant strain expect bankruptcies if maintained for 6-9mths.
If bankruptcy occurs the new owner will need to move volumes to market.
i don’t think that’s entirely true I think the distressed company can ask for a take or pay contract to be waived or renegotiated by the courts. Some of this is probably being done already behind the scenes to get ahead of the curve.
Someone who has more legal experience could answer this better
Also as the waive of bankruptcies hits the news expect this to affect the prices of the mid-stream companies.
Here is a report by Zacks that probably condenses EPD’s end of year financial statement. My look is just a rough interpretation.
https://www.zacks.com/stock/news/790099/why-is-enterprise-products-epd-down-12-since-last-earnings-report?cid=CS-SEEKAPH-FT-realtime_blog-790099
Look at NG segment of company, volume fell and margins fell.
The crude oil division had higher volume but lower margins ? Charging less ?
The petro chemicals business saw a decline of both volume and margins.
Then it says more cash to distribute , it did this by buying back shares.
You get a bigger share of the pot if there is less mouths to feed.
You have to realize going into energy sector it’s under transition and has been total pain trade for the last 3 yrs. Being Canadian within the industry every conceivable headwind has presented itself causing massive consolidation with almost all foreign E&P selling out. With investment dollars scarce only the largest are able to maintain production levels.
US Energy I suspect is headed down this same road will be interesting to see who the consolidator or lowest cost producer becomes.
Only buy E&P with raising dividend and are buying back 5-10% of float outstanding. If you do not see this forget about it.
Canadian Big Pipeline Operators in self sustaining mode:
TRP – TransCanada
ENB – Enbridge
US Big Pipeline Operators in self sustaining mode:
EPD
MMP
Canadian E&P
Suncore – Joint venture king able to spread asset risk around.
CNQ – Lowest cost producer the consolidator
IMO – Balance sheet made out of unobtainium
Your understanding mirrors mine and thus my personal reluctance to participate anywhere in energy but the KMI trust preferred debt. Their definitely are chain reaction events. Their possibility and future impact though are where the pencil math skills and legal framework understanding comes in. Above my paygrade.
AKJ, I don’t use Nustar and EPD in the same sentence. EPD is the king; NS is one of the jesters. With the ME in chaos & playing chicken games with Russia, things could get mighty bleak.
So, amid all this uncertainty (on top of the accelerating virus calamity), it would be EPD or nothing for me in the oil patch. I have bids in much lower than Friday’s close. I will also be trolling for more IG ute preferreds that have little or no call risk.
JMO
This quite stunning game-changer has put the writing on the wall. Oil demand is inelastic and coupled with slowing economies there is going to be pain.
Long-conjectured bankruptcies and defaults from weaker players now appear inevitable. To the degree horizontal and vertical balance sheets and income statements are cross-pollinated there will be collateral damage.
Deals will eventually be apparent, but it might be a good idea to hit the pause button and let the ball roll clear off the end of the lane instead of making predictions.
Alpha this is where people get in trouble chasing income…Rida Moron and the ‘Boys fall prey to this trap also chasing yield. They dont understand all the above dynamics in play with balance sheets, counter partys, covenant breaches, debt walls, revolver, etc. etc…Most people dont…I know many of the pieces but like most I dont quite know how they all fit into the total puzzle. And many who think they do dont, and that can sting when bad events happen. But as long as one understands and accepts the risks and proceeds, I am certainly not one to judge.
Grid, It’s only 24 hours since I replied to a comment of yours that I was in an XOM starter position as a value proposition. Based on events within the same 24 hours, that thesis has been tossed right out the window.
I have to confess a fascination in the econ-science underway. The disruptions are large and increasing in frequency and severity. There are combinations of supply surges/inelastic demand, supply dislocations/demand dislocations, and supply constants/demand surges. Increasingly these are not fiscal or monetary policy-manageable.
Seems we’ll be seeing more volatility. Apparent opportunities will be suspect though as there’s a lot of unresolved disruption in play.
Who thought a 2% UST10 in January would have been a home run trade. Or that an invisible virus could tip so many delicately balanced equations.
I can’t mention the virus without also offering best wishes to everyone’s friends and families that may affected.
Maybe some XOM $30 puts?
Bob, We’re definitely thinking along the same lines. As premiums are high I’d probably go for higher strike and shorter expiration or deep covered call and also scoop the divvies.
The Dow futures are down 1000 and oil down 25%. And you know what my main concern is? It isnt the market…Im trying to watch my beloved Blues on tv which was switched to NBC sports from Fox Midwest…And what do I have to hear? Two female announcers. Color and commentary. I am not happy at all. About to shut the volume off. Yes I am over 50 and male… But come on this is totally uncalled for and ridiculous. This is PC gone made! Throw me in jail and throw away the key, I said it!
Et al, I truly have never seen this many investors complain and whine about lower prices and great opportunities in my entire investing career; take advantage of the financial markets when securities are ON SALE. There is a distinct reason why currently Warren Buffett has the largest cash position in the history of Berkshire; because valuations were/are extremely stretched to the expensive side and Warren will just wait until bargains inevitably manifest themselves. I’m sure Berkshire is deploying some of the cash this past week as Buffett never lets a mini crises get in the way of his bargain hunting. The financial markets are not a casino, if you have been looking at quality securities and they are on sale invest while they are elcheapo and not follow the crowd in or out of the markets in a panic. I use to keep a 5’X8’ chart on my office wall showing the 90 year history of the S&P 500 and update it every few years to show and explain to clients why they should invest when the world’s markets are down hard…
https://www.macrotrends.net/2324/sp-500-historical-chart-data
Perhaps the most important investment lesson to draw from the 9/11 tragedy is that we should not sell our securities into imprudent and reckless fear. The stock market plunged in the wake of that day’s horrid attacks, and at its low 10 days later, the Dow Jones Industrial Average was nearly 15% lower than where it closed on Sept. 10. Yet the market quickly began to claw its way back, and in less than two months by Nov. 9, in fact, the Dow was higher than where it was the day before the 9-11 attacks!
We have gone through horrible tragedies: nuclear war, 9-11, the Bay of Pigs, Presidents being assassinated, Tiananmen Square, WW 1/2, the Holocaust, Pearl Harbour, the Soviet Union dissolving, unthinkably disasters etc etc etc and “somehow” the markets continue to go up. When ANYONE tells you that the financial markets are scary, are panic selling and they are afraid like they are going to throw up, it’s usually a great time to invest and enjoy the principle increases the future will hold. Stop all the doom and gloom, this “pandemic” will pass and most will look back and think just why they didn’t buy the bargains that were clearly in front of their computer screens. Do not concern yourself with having “perfect” timing as there will always be opportunities out there.
Wishing you profitable investing, Nomad
Yes to everything you said.
I think it’s just human nature is to go bonkers in a time of madness.
cheers,
Yes, buy when they are on sale after a panic. The question is Do you buy after a 13% drop mini-panic? a 25% full blown panic? or when there’s blood in the streets after a 40% drop? Nobody knows what a bottom looks like until a month after it happens.
Corona virus number will get worse before they get better. Some deterioration is already priced in. The trick is to buy just before the tide turns. I’m a pessimist, I think we have a few months before the tide turns. No major buying from me but lots of trading on the volatility.
Ah, yes, Martin. When do you pull the trigger to buy? I have never figured that out and contend that, for me at least, it’s unknowable. So it doesn’t obfuscate the matter for me.
I don’t flip and really hate to sell things unless I decide that, despite my plans, this sucker may NOT pay me forever, which at this point, is the only thing I care about.
Entonces. Since things can always get worse, I just set some points where I hope to buy and put in some GTC bids, e.g., EPD at prices yielding 8, 9, & 10%, etc.
I get what I get and move on. There’s always a great wine to uncork. 😉
JMO
Martin, I have been buying (nibbling) at most anything that is below my cost basis. With the $0 commissions, I don’t feel bad buying 10 shares of this and 5 shares of that. For me, a large purchase is about $1000, whether it be common shares or preferred shares. I just don’t have that large of a brokerage account, so my strategy is buy stuff I like and average down any chance I get. With small nibbles, hopefully I will still have cash available when we find the bottom. That way, I bought all through the cycle.
I think we are going to see another big spike downward once the U.S catches up to the testing. We are way behind the curve, I fear, and we are going to see the number of infected cases balloon in the next couple of weeks. My prediction….10,000 plus.
This article from yesterday says we have done less than 2000 tests to date.
https://www.theatlantic.com/health/archive/2020/03/how-many-americans-have-been-tested-coronavirus/607597/
As the country with “the most advanced (expensive) health care in the world”, we are doing one of the poorest jobs of evaluating and containing this crisis. Embarrassing….. 🙁
i am following the same strategy
buying with free cash flow
5 here 10 there
$0 commissions is an absolute gift
Yes, certain FDA regulations had to be waived just to get the testing we have now.
But the truth is that this thing is going to have to burn itself out. There is really nothing we can do to stop it. That is not even in the realm of possibility. We can’t take draconian measures and weld people in their apartments like in China, and it is not clear that would even work over the long haul. I think all of the experts know this but don’t want to say it because it will cause panic.
I guess the hope is that it will be like the flu and die down during the summer so we can take a run at treatments and vaccines. But a lot more rules would have to be waived to have anything ready by next winter. And in the meantime, all of the little bureaucrats will follow their playbooks. One of the reasons it took so long to find people spreading it on the West Coast is that they did not meet the criteria to be tested since they had not been overseas to catch it directly.
On the plus side, HHS was on TV the other day saying since the denominator in the mortality equation is probably many times what is actually being found and tested the real mortality rate is probably well under 1% — maybe only 3 times as lethal as a bad flu and not 20 times. Not comforting to those on the wrong end of the equation, but less likelihood of getting on the wrong end of it would be very good news.
Think the man said “buy low, sell high”. Ain’t waiting for lower or lowest. Jest low. Bingo. 5 buys this week.
CORR-A @ $24.21
MNR-C @ $24.89
Pickle,
I think This and CORR common have farther to drop yet. I owned CORR when it first started up and made money on it but got out too early. It was set up to hold energy assets and when it first started it owned a electric transmission line. Its stated objective was to buy at least one to two assertive assets a year.
To do this, they started out flipping assets. The first was the electric transmission line. After that, they went all oil related assets. The tanker farm outside Portland was another good asset with access to the Columbia river if I recall for Ocean shipping. Just couldn’t expand with all the environmental rules on the west coast. They sold that too. One other asset is dead, I think there is a water treatment plant for water reclamation for oil drillers in N. Dakota? and with oil now having broken below 50 and 42.00 a barrel is questionable asset. What is left probably covers the dividend but in energy REITS I would probably be looking at Brookfield or HASI
Oil hasn’t seen a bottom yet, so its going to affect CORR pricing I am guessing there is more downside here.
Nice post
I’ll check them out
Thanks
Talk about a canary in the filthy coal mine. OXLC’s common is yielding ~21% and that’s from Friday’s close. By the end of today, who knows what ridiculous figure that will be.
I warned about this firm, here, last Summer/Fall. Ouch.
A4I, About everything that wallet flattening Rida group is getting smashed like a bug. They deserve it.
I presume you mean that a few people are upset about the timing of the XOM call they made? 🙂 With friends like them, who needs enemies with that type of “advice”?
That was one of their better and safer ones! Im pretty excited, after circuit breaker ended I banged out 400 shares of SR-A at $25.95…I should have doubled my order darn it.
RLJ Lodging Trust $1.95 Cum. Conv. Pfd. Series A – $25.05
I had several hundred RLJ-A, sold it all earlier today. I think there is too much risk in hotel reits at this time. Coronavirus is already devastating the travel and tourism business and hotels will suffer. Additionally, a recession now seems inevitable and that’s not a good thing for the hotel sector.
The lodging area will be impacted for sure and RLJ-A will have an impact along with other hotels. Unless the virus sticks around for 2-3 years,.. Cash from ops almost 400 million. This preferred requires 25 million, debt interest is about 100 million. It is also busted, and cumulative. I bought someone’s near par to add to my holdings I have already had for a couple of years. Also if rates continue lower, many companies will be getting loans at fire sale rates. Just image, IG corporations getting 20 yr bonds at < 1%. Non IG loans loans < 4% or less? Kicking the can, paying dividends will be easy for companies in any shape. Lastly.. the Fed is stock market friendly. Any hint of any decline, rates will continue to go lower and repeating the cycle until we get to the point of entertaining negative rates… and then we have to decide to buy real assets like real estate, or hold onto cash in which we will need to pay someone to hold it for us.
CEQP preferred, another bite.
When is ex for EP-c? Td says semi-annual in June, quantum says quarterly in March?
Irish, TD, Fidelity (and maybe other platforms) appear to be reporting the next ex-date incorrectly as June 12. The correct ex-dates are around the 12th of months 3,6,9 and 12. It pays on the last day of the same months.
Irish, there is some glitch here in computerland… It has a March exD but platforms already rolled it over to June without it going ex. To be honest I am not 100% sure…They were showing March 12 as exD, but I went back to TD from last year and it shows exD around 28th of March last year and paid March 31st. So I dont know if its the 12th or late this month.
Part of the confusion with these is there is never any declarations to pay as none are needed. These older ones tend to act this way. I have had these issues before and they always pay. Its nothing to me, but I already own in time for exD no matter when it is this month.
As a worse example, I own PFX (a delisted preferred debt that fell to bond market) and nothing ever is posted…ever….Put the cash shows up on time everytime.
EP-C pays quaterly distributions per page 98 of 10-K filed on 12 Feb 2020:
Capital Trust I (Trust I), is a 100%-owned business trust that as of December 31, 2019, had 4.4 million of 4.75% trust convertible preferred securities outstanding (referred to as the Trust I Preferred Securities). Trust I exists for the sole purpose of issuing preferred securities and investing the proceeds in 4.75% convertible subordinated debentures, which are due 2028. Trust I’s sole source of income is interest earned on these debentures. This interest income is used to pay distributions on the preferred securities. We provide a full and unconditional guarantee of the Trust I Preferred Securities. There are no significant restrictions from these securities on our ability to obtain funds from our subsidiaries by distribution, dividend or loan. The Trust I Preferred Securities are non-voting (except in limited circumstances), pay quarterly distributions at an annual rate of 4.75% and carry a liquidation value of $50 per security plus accrued and unpaid distributions. The Trust I Preferred Securities outstanding as of December 31, 2019 are convertible at any time prior to the close of business on March 31, 2028, at the option of the holder, into the following mixed consideration: (i) 0.7197 of a share of our Class P common stock; and (ii) $25.18 in cash without interest. We have the right to redeem these Trust I Preferred Securities at any time
Thinking of buying some baby bond MCX. Selling at about $25 and matures Jan 2021. Yld is 6.5%. MCX is a BDC and is merging with Sierra Income Corporation and Medley Management Inc. Seems like a safe investment, but the interest rate tells me to be wary. Am I missing something?
3 Mo. Libor under 1%. EOM
With new preferred yields under 5% for quality, I reentered PPL today and started with CNP, quarter positions. Both yielding about 5%, guess this is what they talk about as being pushed further on risk for yield.
PPX is investment grade
Looks like it was a bull trap.
Can anyone explain the nuances of the conversion privilege associated with SLMNP (A Shulman)? I’ve read the prospectus and the offering materials associated with the company’s sale about a year ago to LyondellBasell. My specific question is does the conversion privilege remain? With a 5.75% yield and a 6% coupon, I have no thought of converting but I’d like to understand if the option remains after the sale of the company. Also, it seems to me that the issue is non-callable after the sale. Is this right?
Oldman, you can convert anytime per prospectus of what LYB paid for A Schulman stock price…Bottom line is you can tender and convert for about $803 cash…So no one is doing that. The purpose now is just a “put” floor on the issue if things went to heck. Its noncallable..A few people have called to confirm. However I strongly suspect this is a subsidiary preferred which means its may not have full backing from holding company parent.
With regard to subsidiary preferreds, I believe there is a benefit associated with these that many overlook. The common stock of A. Schulman is owned by LYB. LYB can’t get cash out of the subsidiary through common stock dividends until they make these preferred payments on SLMNP. The only ways to bypass this route is through intercompany loan agreements or management fee arrangements. Because many acquisitions are debt financed, there is a need to get cash out of the subsidiaries to make the required payments on the acquisition debt. It’s just another element of safety that I don’t hear mentioned much.
Tex, yes I am very familiar and love subsidiary perferreds from reason you mentioned. But from utility companies as hold co is usually a do nothing shell. It needs the cash to finance debt. But I am not as familiar with the Schulman subsidiary and it is a smaller segment of the company that can be walled off.
And this segment is very cyclical. I have no understanding of the inner relationships of hold co and Schulman. But an added positive is LYB did fold one of its operations into Schulman which would make the subsidiary more substantial.
Its a relative thing for me…I can load up on certain issues (which may not be prudent in many ways for most) and do, but here I would not.
Thanks for info. Knew the conversion was well below par. The prospectus shows four formulas for computing the conversion price. With the sale of the company, I wasn’t able to figure out which formula, if any, would work with the LYB stock.
if you have LTS-A .
you need to call broker and by 5 pm tomorrow to sell at 25.03.
it is delisted and not trading.
Walter
More likely you need to call before that deadline to submit instructions.
To be clear- It is NOT delisted and it IS still trading. At some point in the near future it will be delisted, but will continue trading OTC.
Here’s a weird question:
Is there an avenue for an individual to issue debt?
I just ran across a property in my local area (Colorado) – 7000 sq ft home on the market for $599,000. It’s been split into 3 living units with established renters – paying below market rent at the moment, bringing in $4100 a month.
I have an over 800 credit score, so getting the mortgage shouldn’t be a problem, but I am lacking the down payment. I have a current home that I owe $130K on. My garage door business grosses about $225K a year for the past 4 years. There’s lots of room to grow, but I cannot find any stable employees. I could probably double the business in a couple years if I had 1 to 2 stable employees. I have been doing doors in this area for 15 years and I know the market, the contractors, the customers. The company I was working for before the recession, we were $800K to $900K +. When they owners closed the branch, we were back to about $500K.
I’ve been looking for an additional property so that I can possibly import an employee from somewhere, but everything is waaaay too expensive. While this particular property doesn’t solve my employee issue on the front end, the income from the property would be more than the mortgage. If someone moves out, then I have that opening for an employee, or fill the space with another renter – possibly at a higher rate. Long term rentals in my area are very few and far between. It is a resort area and most of the rentals are on a nightly basis.
Just curious if anyone has any creative funding ideas.
Mark…have you considered approaching the seller directly for financing?
This approach works best if the seller is a long time owner facing the tax consequences from a large capital gain and/or the property has been on the market for an extended period of time.
Realtor said owner is selling for health reasons. So I doubt it’s an option. But, hey, never hurts to ask…. Thanks.
Bought 300 7.5% RILYZ @24.95 this morning. Should be called 5/31 or shortly afterwards. Just a place to stash short term cash at an outstanding rate for a few months.
So let me see if I have this right. At 4pm yesterday, the Dow was down almost 800 points and the world was coming to an end (again). This morning, it’s up almost 700 points and exactly what changed overnight?
Data regarding the coronavirus continued to worsen, however, the political results went a specific way that pleases the market makers.
So you tell me what the market is being traded upon? I place the odds at 60% political issues / 40% coronavirus issues, if you conveniently disregard all of the other meaningful factors involved.
More like 6% political/ 4% corona. The rest is split between all of the other reasonable factors and all of the unreasonable factors. People always grasp for a reason to explain market insanity.
I’m not sure what the ratios are, however, I think you have the two main points covered.
I am wondering that the effect of corona virus will have on 1st quarter GDP
If it comes in at something like 1.5% or anything under 2%, everyone will be stroking out about a recession.
Usually, when the market has a big up or down day there are several factors at work and no one can really say it was this or that.
But the huge bounce following Super Tuesday is the exception. The Fed decision was already made, there was no Corona virus news that changed the outlook, so it all came down to the Democrat primaries.
Biden’s chances of being the Democrat nominee went way up, and Sander’s way down. The market voted with its checkbook.
More Fidelity Nonsense. Fidelity reported my 2019 dividends from Spire preferred A (SR-A) as interest (!!!) for the first payment and non-qualified dividends for the second. After my first contact last month, I was told this would be corrected. Nothing happened, so I called and was told that “somebody dropped the ball” and they would look into it. Now, Fido says they have obtained information “directly from the investor relations portion of the Spire website” that their info is correct…interest and non-qualified dividends.
Say what??? I couldn’t find any info on the Spire website, so sent an email to the investor relations department and promptly received a reply that both dividends are qualified. I sent this email and the pertinent portion from the prospectus to Fidelity and am now waiting for a response.
Anyone else have this problem at Fidelity?
Wow.
couldn’t be clearer.
https://www.sec.gov/Archives/edgar/data/1126956/000119312519148323/d730499d424b5.htm#supptoc730499_8
Distributions constituting dividend income received by an individual in respect of the Series A Preferred Stock will generally be subject to taxation at preferential rates as qualified dividend income, provided applicable holding period requirements are met and certain other conditions are satisfied.
Retired – for what it’s worth I hold Spire pref at Vanguard. Both 2019 divi payments were reported as qualified.
Seems Fido is infected with the Schwab virus!
Does anyone use TurboTax and Ameritrade? I’m curious whether or not the process of reclaiming CDN withholdings in a taxable account is supposedly automatic when you import Ameritrade tax info into TT or do you have to do something manually to claim them???? I’m wending my way through, not finished, but thought maybe somebody here can take that one little wrinkle out of the equation… Thanks. This is my first year with CDN withholdings..
I use both and downloaded my 1099-B from TDA directly into TurboTax. I’m not completely throughwith all the forms yet but it looks like the foreign tax credit was handled correctly. You should be able to see the total amount withheld on Schedule 3, line 1. I don’t yet see form 1116 generated but I’m not sure if that’s just because I haven’t yet finished or if I don’t meet the filing requirements for that form.
thanks grichter – that’s about where I am now too….. I’ll check to see what Schedule 3, line 1 says….. I do know about the form and that’s what I was wondering as well, whether it’ll be generated for me only if needed and whether I can rely on recouping the withholding if it’s not generated.
From the Form 1116 instructions:
Election To Claim the Foreign Tax Credit Without Filing Form 1116
You may be able to claim the foreign tax credit without filing Form 1116. By making this election, the foreign tax credit limitation (lines 15 through 21 of the form) won’t apply to you. This election is available only if you meet all of the following conditions.
All of your foreign source gross income was “passive category income” (which includes most interest and dividends). See c. Passive Category Income, later. However, for this purpose, passive income also includes (a) income subject to the special rule for High-taxed income described later, and (b) certain export financing interest.
All the income and any foreign taxes paid on it were reported to you on a qualified payee statement. Qualified payee statements include Form 1099-DIV, Form 1099-INT, Schedule K-1 (Form 1041), Schedule K-1 (Form 1065), Schedule K-1 (Form 1120-S), or similar substitute statements.
Your total creditable foreign taxes aren’t more than $300 ($600 if married filing a joint return).
I think I’ve done it all right now to satisfy TurboTax… It seemed pretty simple ultimately and ended up using Form 116 which was a breeze. This is such a timewaster that I don’t even care if it’s right as long as it’s done and Big Brother won’t be asking any questions… the amount of money involved was just not worth it….. thanks to all
2wr, You might want to use schedule 3, line1 if foreign tax withheld is not more than $600. Using form 1116 in almost all cases results in a higher taxed outcome.
YEE HAW,
What a ride today. Well it was a interesting lesson. This whipsaw action showed me which of the preferred are the weak ones and which held up and are strong. If the ones that are down ever recover I will trade them out, otherwise I am going to sit tight and collect the dividends.
Lot of people here talk about dividend capture and flipping preferreds.
Anyone feeling luck ? well do you ?
I couldn’t resist the 5% on GSK so bought today 200 at 41.25 about upper limit on price of shares I buy into. I buy 1 share at 16.00 and it moves a 1.00 is more profit than a 1.00 move on a 40.00 stock. Thinking of putting together my own ETF of drug stocks. Maybe MRK next.
I was trading preferreds all day long. Sell the rally and buy back if it drops. Arbitrage opportunities between preferreds. And some sell and go away. Can’t see immediate results because of the whipsaw action drowning everything out. I just know all of those trades make a difference in the long run.
Unfortunately I have become convinced the virus outbreak is going to get much worse in the US. There are four key factors driving this forecast.
1) The virus is passing from asymptomatic people to others. So the “sick” person does NOT know they are sick.
2) The “reproductive number” aka R0 is being estimated at 2.5. R0 is an estimate of how many people an infected person will pass the infection to PER DAY. It is a standard method of modeling infectious diseases. A R0 of less than one means that an outbreak will die on its own. A R0 of greater than one means the outbreak will continue until some other action is taken, i.e. vaccine, quarantine, etc. The common flu has a R0 of about 1.28, so this virus spreads more rapidly. The problem is when you take ten or twenty “hops” from one person, the number of infected people gets pretty insane growing exponentially.
3) Current estimates are that the virus can live on a surface for 24 to 48 hours. So somebody with the virus touches the keypad at the grocery store, everybody else that touches it the next day or two will be exposed. Or a doorknob. So you do NOT have to be sneezed on to pick up the virus.
4) Nobody currently has any built in immunity to the virus, as opposed to the common cold and some versions of the flu.
Using these assumptions, the investing implications is that GDP/commerce will suffer, possibly into a negative GDP growth rate, aka a recession. We all know how stocks perform in recessions and it is not pretty.
The question for us is how will preferreds perform? Theoretically with interest rates going down, both the US Treasury 10 year and the Corporate Baa, preferreds should be going UP. Didn’t exactly work out that way last week. It takes a very small number of sellers to top the balance down because preferreds are relatively illiquid. It is NOT like these sellers have a theoretical model telling them the preferreds are MORE valuable. Then just hit the sell button. It is possible that the Fed does what the Bank of Japan does: buy securities directly. The BOJ is a major buyer of Japanese stocks, so they have the ability to put stock prices any place they want. It is less likely the Fed would do this, but not out of the question.
For some accounts, I am NOT going to take any action on the theory that prices will recover and that the income stream will remain intact. In other accounts where the pain of falling preferred prices might be too much, I am going to reduce the allocation. I will deploy those funds into cash or short term individual corporate bonds.
I hope I am wrong about this analysis, but this has become my base case.
Link to first RO paper:
https://www.ijidonline.com/article/S1201-9712(20)30091-6/fulltext
Yeah, here are some draconian measures that a FB friend posted:
Date: February 26, 2020 at 2:35:50 PM EST
Subject: What I am doing for the upcoming COVID-19 (coronavirus) pandemic.
Dear Colleagues, As some of you may recall, when I was a professor of pathology at the University of California San Diego, I was one of the first molecular virologists in the world to work on coronaviruses (the 1970s). I was the first to demonstrate the number of genes the virus contained. Since then, I have kept up with the coronavirus field and its multiple clinical transfers into the human population (e.g., SARS, MERS), from different animal sources.
The current projections for its expansion in the US are only probable, due to continued insufficient worldwide data, but it is most likely to be widespread in the US by mid to late March and April.
Here is what I have done and the precautions that I take and will take. These are the same precautions I currently use during our influenza seasons, except for the mask and gloves.:
1) NO HANDSHAKING! Use a fist bump, slight bow, elbow bump, etc.
2) Use ONLY your knuckle to touch light switches. elevator buttons, etc.. Lift the gasoline dispenser with a paper towel or use a disposable glove.
3) Open doors with your closed fist or hip – do not grasp the handle with your hand, unless there is no other way to open the door. Especially important on bathroom and post office/commercial doors.
4) Use disinfectant wipes at the stores when they are available, including wiping the handle and child seat in grocery carts.
5) Wash your hands with soap for 10-20 seconds and/or use a greater than 60% alcohol-based hand sanitizer whenever you return home from ANY activity that involves locations where other people have been.
6) Keep a bottle of sanitizer available at each of your home’s entrances. AND in your car for use after getting gas or touching other contaminated objects when you can’t immediately wash your hands.
7) If possible, cough or sneeze into a disposable tissue and discard. Use your elbow only if you have to. The clothing on your elbow will contain infectious virus that can be passed on for up to a week or more!
What I have stocked in preparation for the pandemic spread to the US:
1) Latex or nitrile latex disposable gloves for use when going shopping, using the gasoline pump, and all other outside activity when you come in contact with contaminated areas.
Note: This virus is spread in large droplets by coughing and sneezing. This means that the air will not infect you! BUT all the surfaces where these droplets land are infectious for about a week on average – everything that is associated with infected people will be contaminated and potentially infectious. The virus is on surfaces and you will not be infected unless your unprotected face is directly coughed or sneezed upon. This virus only has cell receptors for lung cells (it only infects your lungs) The only way for the virus to infect you is through your nose or mouth via your hands or an infected cough or sneeze onto or into your nose or mouth.
2) Stock up now with disposable surgical masks and use them to prevent you from touching your nose and/or mouth (We touch our nose/mouth 90X/day without knowing it!). This is the only way this virus can infect you – it is lung-specific. The mask will not prevent the virus in a direct sneeze from getting into your nose or mouth – it is only to keep you from touching your nose or mouth.
3) Stock up now with hand sanitizers and latex/nitrile gloves (get the appropriate sizes for your family). The hand sanitizers must be alcohol-based and greater than 60% alcohol to be effective.
4) Stock up now with zinc lozenges. These lozenges have been proven to be effective in blocking coronavirus (and most other viruses) from multiplying in your throat and nasopharynx. Use as directed several times each day when you begin to feel ANY “cold-like” symptoms beginning. It is best to lie down and let the lozenge dissolve in the back of your throat and nasopharynx. Cold-Eeze lozenges is one brand available, but there are other brands available.
I, as many others do, hope that this pandemic will be reasonably contained, BUT I personally do not think it will be. Humans have never seen this snake-associated virus before and have no internal defense against it. Tremendous worldwide efforts are being made to understand the molecular and clinical virology of this virus. Unbelievable molecular knowledge about the genomics, structure, and virulence of this virus has already been achieved. BUT, there will be NO drugs or vaccines available this year to protect us or limit the infection within us. Only symptomatic support is available.
I hope these personal thoughts will be helpful during this potentially catastrophic pandemic. You are welcome to share this email. Good luck to all of us! Jim
James Robb, MD FCAP
PCG and SCE preferreds are up
its almost like people are looking for yield or something, even if payouts are suspended
we are in uncharted territory for sure
Pickle, we may be nearing uncharted territory for long treasuries. But preferreds 60-70 years ago were issued with yields a lot lower than anything issued today. So they can go a lot lower yet.
I haven’t followed PCG closely, but I’ve been looking at the preferred prices recently. These appear to be priced to assumed that these payments will be resumed someday. Is that highly probable or certain?
Tex, an SA writer said the company anticipated 2022 to repay accrued dividends. But he provided no link. But there is nothing definitive. They got too much baked into the price already to interest me though.
IG is the biggest mover.
https://tme1.fra1.digitaloceanspaces.com/images/a8a1ade7955b84ef281389704e76c051
Entry point for ALP-Q ?
anyone?
FWIW: I added to my position last Friday at 25.36 and 25.41. Accrual is about two thirds of next divy.
big jump today
i missed the boat again…………….
grrrrrrrr
RNP up 6 % today. Selling half my position because….well, you have to ask why anyone would book profits in this market? Nice two day gain. Still holding a large position. Think this is still a buy if discount is above 5% or so.
Random question: When the “financial gurus” talk about asset allocation – a mix of stocks and bonds, where do preferred shares fall? And are baby bonds in the same category when they refer to “bonds”?
Would a better description be “stocks and “fixed income'”?
Preferred are literally in between. Preferred have characteristics of both stocks and bonds. Some say the best of both; others say the worst of both.
Baby bonds, by whatever name, are debt. And like other debt can range from senior secured to junior unsecured, so a wide range of risk within the category.
What you should do is some research into corporate capital structure, the so-called “capital stack.” It’s not just “stocks” and “bonds” for most companies but a half dozen to a dozen layers of the layer cake.
A 1st year B-school book on the subject could probably be had for a couple bucks on Ebay if you buy an old edition.
Mark, Bob has you covered there. Just to add color on one segment..The subordinated debt baby bonds. Most (not all as some utes have mortgage backed baby bonds which are way up the cap stack) are generally subordinated debt.
For a company that is marginal or things go wrong, you might as well consider it equity. In fact rating agencies generally will assign a certain percentage of that debt to “equity” in their ratings. Generally this debt will go down the toilet with equity. As a previously cited example, NSS, subordinated debt from NuStar. Fitch assigns its a 0-10% recovery of its assets if it went into receivership. Not much protection there…As when a company becomes stressed they pile in the senior secured or bank loans and they move right above you whenever they get those loans.
Grid – and it’s worth noting that baby bonds are a retail product, especially the subordinated issues. They are the classic “dumb money” product. Issuers can’t sell them to institutions so it’s either baby bonds or a BDC.
To do a good credit analysis on any issue you have to not only consider where on the capital stack it is but how much is in front of and behind it. In the case of an issue like NSS there is so much in front of it, and so little behind it, that it’s effectively an equity risk with a debt payout. A lot of subordinated baby bonds are similar.
I have owned a few sub notes in qualified accounts but watch them very closely. Not a risk-off product.
Caveat emptor……
The more I learn, the more I realize I don’t know anything. With all the layers of debt (bonds), it seems a little vague, and irresponsible, to tell someone they should have a mix of stocks and bonds.
Generically speaking, and I know there are many types of bonds (muni bonds, corporate bonds, government bonds, senior secured bonds, junk bonds, unsecured bonds, etc, etc…), is this what they refer to when saying I should have a mix of stocks and bonds? Or, is there some other type of “bond” out there that this equation is referring to?
I can see why they don’t just call it what it is – DEBT. Imagine listening to your financial advisor and they tell you should be in 80% stocks and 20% debt. I’m also starting to understand why they say most people would be better off buying an index fund….
Browsing eBay, there are tons of books – many over $100. Many dealing with concepts involving overseas markets. Are there particular authors, or better keywords to use? I typed in “capital stack”, “capital structure” and also “corporate finance” I guess I’m confused by what 1st year B book would be. Is that just the condition of the book?
MarK in CO. What “advisors” mean by bonds in an asset allocation isn’t even individual bonds… they are talking more about bond funds and mostly Treasury or Investment grade corporate funds. Advisors don’t like to recommend individual bonds or even stocks anymore for fear of being sued. There is very limited info on preferred or HY bond investing. Prob 1 million websites on stocks for every one on bonds (this being one of the better sources I have found in 4 years of looking). Here is a good article by Nuveen explaining what a preferred stock is https://documents.nuveen.com/Documents/Nuveen/Default.aspx?uniqueId=3E711A63-6AB7-46BA-92B6-92EEDBFAE559&subid=2%7C7
Just remember if it seems to be too good to be true it probably. Start slowly and learn with small amounts of money. Especially now with no trading fees you can buy 10 shares of a preferred to learn as you own. Also remember to put limit orders and not market orders. Good luck
To further complicate the picture is the fact that unsecured debt, even senior unsecured debt, can be subordinated if the company issues secured debt. And secured debt can be impaired by DIP precedence. That is in fact the trajectory a company might follow on the way to BK. For me, that is the canary in the coal mine when I’m watching fixed income for trouble.
I think they’re closer to bonds because of the fixed payment, which they either pay or default, nothing else. They’re only like stocks because of the way they trade, which makes them of interest to us traders because bonds aren’t worth trading.
Debt position should be a low priority when evaluating. In a bankruptcy don’t expect to get much if anything.
Martin, that feeds right in to my question. You say bonds aren’t worth trading, and yet, many on here are in and out of bonds all the time.
What are the bonds that the 80/20 stock/bond asset allocation refers to?
I should’ve made it a personal statement. I don’t trade bonds because the spreads are too big. More power to you if you can make it work.
Asset allocation theory refers mostly to buy & hold? Bonds are fine for that.
Mark, the debt being mentioned here are ETD…Exchange traded debt. By their very nature they are more volatile than “bond market” bonds. And as mentioned before most are all but capital stock anyways because they are low cap stack.
I agree with Martins interpretation of debt with a caveat. First a subordinated debt of company “A” can be significantly safer the senior unsecured of company “B”. So make sure you are aware of that. Senior debt slapped on a crap company means little…
What Martin is referring to is about “bonds are not worth trading” are bonds on the bond market. They rip you off on wide bid and spreads. You buy true bonds to hold. Anything else is lining the bond traders pockets as they are the last entity that can steal and not be in any trouble. The bond market is still the equivalent of the early 1980s stock broker when it cost you $100 to make a trade.
I still maintain history shows subordinated debt trades stronger than preferreds or equity and it looks good…Until problems begin and it craters hard right along with the other when problems begin…
For me if you are saying 80% stock 20% bonds, that 20% bonds should be real bonds…Ala, IG senior unsecured true bonds or government securities or bond fund equivalent. All other lower cap stack bonds have shown to trade more in line with equites than true IG bond market bonds.
Not disagreeing with you Grid, but the bond market’s come a long way in transparency since the 80’s…. today every trade (theoretically) has to be reported within a set time and you can then see the spread as charged…. you also have the likes of Fidelity that do not act as principal and charge a flat fee of $1/bond and I think with a cap of $50 per trade….. Just as importantly, similar to Level II, they show you the depth of the market with all quoted bids and asks and they allow you to set your own price to either attempt to do either buy or sell.. That’s a world of difference from the 80’s and has taken a great deal of the wild wild west out of attempting to trade bonds…. Still, I agree fully with your conclusion – attempting to trade true bonds, not ETD, is a tough game not worth the effort…. As an aside on bonds and commentary on how far we’ve come in such a short time I was just called out of a KLA-Tencor 4.125% bond due 11/1/21 that I bot almost exactly 1 year ago to yield 3.56%. It was called under a “make whole” provision so it was called the price that equals 1.55% ytm today… that’s astounding! Bot at a premium of 101.45 and still got called away @ 104.21…. “Make whole” calls can be a nice way to get called out!
2WR, Ok, I confess, hyperbole alert again on my previous post. But I am referring mostly to the rip off bid ask spreads they have. And that money is where the real fleecing is at, not the dollar transaction cost. One can work around that bid spread on a stock, but where I have bought bonds you got two choices. Buy it or not. Cant squeeze the spread any. Ok, end of my bond hating rant. 🙂
Aah, that’s what I’ve been trying to get at. There are bonds (ETD – thanks Grid) and then there are BONDS. Also, I do understand that the issuing company is of more importance than where the debt sits in their stack.
So, the 20% bond formula is really going to be highly rated (AAA, AA) corporate bonds, govt bonds, and bond funds? A bond fund being something like Vanguard Total Bond Fund, or similar? – which actually holds govt bonds, corporate bonds, mortgage backed securities… Typically, these are going to be lower interest paying?
When playing in sandboxes with higher interest rates, these are typically going to be more in the category of Exchange Traded Debt? So, if I buy something like RILYZ, or WRB-B, even though they are technically called ‘bonds’, I should not think of them in an asset allocation model as a “true bond’? They will behave much more like stocks if the company gets into trouble.
Am I getting the gist of it?
I sure appreciate all the hand holding. I try to research on my own, but without knowing the right questions to type in the search box, I find discussion to be a much more useful tool. Then I can do research alongside, and the anecdotal information that comes with the discussion is even that much more useful. Thanks again to all on this site for the patience, generosity, and civility.
Yes in theory you are correct in understanding. But the market can get crazy short term without one anticipating. Take utilities…Last week that was one of the WORST performing equity groups despite yields going lower. As utes are typically traded as safer harbor income plays.
As far as your two above examples go, in theory if high yield credit spread widens but IG spread doesnt RILYZ should drop more than WRB-B as the latter is investment grade…But that is just in theory and there are other variables (just beside the obvious buy sell imbalance dump that can happen to any issue). Such as duration risk. RILYZ is of poorer quality, but it has a considerable shorter duration. It has a shorter period of time to blow up before its redeemed. WRB-B has a maximum 25 year longer duration to have something go wrong. So long duration debt is also more sensitive to interest rate spikes. So there are other variables in play.
And guessing rates is fools errand. You should read all the real true bond experts and their opinions on where the 10 year was going in late 2018…Lets just say they didnt put any food on their table with those predictions, ha.
You eliminate one risk on any purchase you sacrifice a risk to another variable.
Take RILYM, you grab the higher yield it has and your exposure to default (in theory) increases, though you mitigate it some with shorter duration. You buy an Ameren Illinois 2047 senior First Mortgage bond that is A1 rated you pick up significant safety…But at the expense of yield (2.9%) and duration risk (doesnt mature for 27 more years) which exposes you to capital losses if you sell prior to 2047 maturity.
That is where you have to decide your risk level and needs, and how to allocate your money on these types based on your comfort level.
@Mark in CO, I think you should indeed calculate ETD in the fixed income/bond allocation category. All the baby bonds belong there – they just have varying (mostly higher) degrees of credit and interest rate risk.
In my asset allocation models I classify them as medium-term debt, since their value fluctuates based on the interest rate environment and credit rating of the issuer.
Mark, there are two important distinctions between “Real” bonds and “Baby” bonds that I do not think have been mentioned yet. If a company does NOT pay a “Real” bond payment, they immediately are considered in default with many negative ramifications. The interest rate they pay on any kind of bank loan or new borrowing will go up significantly. Bond interest payments are made “automatically” by companies as opposed to baby bond interest payments.
The board of directors has to vote to approve each and every baby bond payment whereas they do NOT have to vote to make a bond payment. If the board does NOT authorize a baby bond payment, the company is NOT considered in default. The first thing that will happen is that baby bond owners will be unhappy. Some baby bonds have a feature that after typically 2 years of payments are missed, a majority of baby bond holders can add a member to the board of directors. That still does NOT guarantee that interest payments will resume.
Bottom lines:
1) As others have stated, baby bonds are lower quality, aka lower in the debt stack, than real bonds. They are a combination of equity and bonds. They have higher interest rates than real bonds because of this lower quality.
2) Also have others have stated, baby bonds are NOT what advisors talk about when mentioning 60/40, 80/20 type allocations. Those bond allocations are: US treasury bonds, high grade corporate bonds or a “total” bond market which might include some international. You can easily buy an ETF or a mutual fund for your bond allocation. It is generally impractical to make your bond allocation buying individual bonds with less than say $ 500K. I can tell you from personal experience, it is a full time job to manage just this bond portfolio. Bonds are always maturing and being called or being downgraded by the credit rating agencies. So you constantly have to be replenishing these individual bonds. NOT recommended for the vast majority of investors.
Good luck. . .
Thanks. Frankly I supposed that not paying a coupon on a baby bond was technically a default.
I have always used standard bonds but the brilliant idea of upping the minimum investment to sky-high levels (from 50k we went to 250k and more) forced me to find more viable alternatives to have a decent diversification. Some clients I advise decided to buy funds or ETFs. Such a shame they are trying to push individual investors out of the bond market.
Gabriele said: “minimum investment to sky-high levels”
Gabriele, when a “Real” bond is issued, they set the minimum and increment size in the prospectus. Most corporates have a minimum of either 1 or 2, aka $1,000 or $2,000 with an increment of 1. Some bond exchanges have over written this and require 100 to 250 minimum.
Most muni bonds come with a 5 minimum and 5 increment, but occasionally you get a 100 minimum.
The rub is that bid/ask spreads are generally worse on small bond lots, like 1 or 2 corporates. Heaven help you if you want to sell 1 or 2 corporates, you might lose 1% to 2% relative to the “market price.”
Munis are worse on small lots, typically 5 “pieces.” (When trading bonds, you say “pieces” to mean $1,000 face value.) Sometimes you see 2% to 4% spreads.
Spreads get attractive when you deal with 250 pieces or more, but then it takes ~ $25 million to build a diverse portfolio. A little out of the reach for most individual investors.
Tex, Baby bonds are not declared, they are paid. It is a contractual agreement. Some have deferral clauses that can be invoked. The term baby bond has no impact on the contractual terms of a bond. Its just the vessel the bond resides in.
Grid said: “Baby bonds are not declared, they are paid.”
Grid, maybe I have over generalized and some companies do NOT declare their baby bond payments.
1) I know that some companies DO declare. For example here is Gladstone Commercial’s 1/14/20 announcement:
Gladstone Commercial Corporation (Nasdaq: GOOD) (the “Company”) announced today that its board of directors declared cash distributions for the months of January, February and March 2020, increasing distributions to common stockholders.
. . .
Cash Distributions:
. . .
Series D Preferred Stock: $0.1458333 cash distribution per share of the Company’s 7.0% Series D Preferred Stock (“Series D Preferred Stock”) for each of January, February and March 2020, payable per Table 3 below.
https://ir.gladstonecommercial.com/news-releases/news-release-details/gladstone-commercial-corporation-announces-increase-cash
2) Let’s assume you are correct that the board of directors does NOT have to vote to pay baby bond interest payments. That means that the CEO or CFO can decide to NOT make the payments WITHOUT consulting the board? I don’t think so. Seems kind of asymmetrical to me.
In any event, we agree that some baby bonds have provisions allowing them NOT to make regular payments with NO recourse. That is certainly not the standard for regular bonds which typically have a 30 extra day window to make the payment, otherwise it is considered in default.
The Gladstone announcement referenced is for preferred STOCK, not baby bonds.
Bonds – both exchange traded or “baby” bonds and “real” or non-exchange traded bonds – are debt obligations. In that sense they are of equal legal standing.
That said, it’s correct to say that institutional bonds almost always come with much stronger covenants than issues sold to retail. They have lender protections akin to those found in bank or BDC loan agreements.
Bob, I know you know this but this is where people get confused…Baby bonds is just a vessel to trade the bond. It has no determination of capital stack or covenant protections. Those are found in the prospectus. Nobody wants to read them, but that is what makes then covenant light or strong. Baby bond term is meaningless baby talk of no importance.
For example…EAB is a baby bond… But it is a First Mortgage Bond…In other words the plants back up the debt. It is way up the ol capital stack. That is why it is rated A by S&P. They dont pay you can become an owner of a gently used coal plant, lol… A little hyperbole there. 🙂
Grid, and others, ……
At the risk of beating this to death, you are 100% correct in that there is no distinction PER SE between a bond that trades over the bond desk and one that is exchange traded.
The differences resides in the covenants and the indentures, which no one ever reads.
At a practical level, putting aside the usually weaker covenants of exchange traded debt (and preferred for that matter,) the difference between the two is ease of investment. Desk-traded issues are painful for the individual investor because of how the bond market is run. It’s basically a big OTC market. Fat spreads and (often) high minimums.
The bond dealers run the bond market the way stock market used to be run. All for the benefit of the market makers and to the detriment of the investors, especially the individual investor.
The first individual stock I ever bought cost me 10% of the trade in fees and commissions. (INTC, wasn’t I lucky.) Today, I could make that same trade for almost nothing. The bond market could be the same, if someone with the muscle would force it.
For a good read, check out “Where are the Customers’ Yachts”.
PS – one difference to be aware of is that baby bonds trade “dirty” and institutional issues “clean”, as a general rule. If you’re buying individual $1,000 issues make sure you know clean or dirty. Has a big impact on yield calculations.
Bob, Unfortunately I dont think it can be beat to death. It probably needs to be mentioned weekly do to all the comers and goers. Most people especially those newer to the income scene get confused about this.
If one doesnt have a fundamental understanding of a prospectus, basic accounting back ground, and financial jargon; the terms and slang can be hard to interpret.
One really should have a basic fundamental understanding of what they invest in. But its hard if one doesnt know what to know. And many good years can go buy and it not matter, until it does.
How about those TVA baby bonds? Less risk than most sovereign issues.
Bob, you better check the reset pricing before buying as it comes yearly…And it isnt going to be pretty this year if my memory of its terms is correct. Im not checking because it is way too low and going lower.
I dare the TVE bonds to fall below par….. I’ll be sitting right there waiting for them in my Toyota Tundra…….
They would have to move a buck or two below for me. TVE will be resetting on 30 yr in 3 weeks and then throw about 84 bps on it doesnt do it for me. Especially where they are at in relation to being above par now.
Tex, your example is not a baby bond. The Gladstone issues are preferred stock. That is capital and on the other side of the ledger sheet. Bonds are liabilities, not capital. Bonds are a contractional agreement. Preferreds are declared as per guidance and blessing of the BOD.
Just to clarify in exact traditional origination…Baby bonds are not preferred stock. That have just been lazily included over the years. Baby bonds are ETD’s. Exchange traded debt….
WOW! That was really amazing everybody. This was exactly the distinction I was trying to grasp. The wealth of information on here is incredible. Thanks all.
This past week I liquidated my entire positions in muni cef’s NAD and NEV and muni etf HYD. With these sales I realized substantial capital gains mostly in HYD which was my largest single position in my portfolio.
With the proceeds I added to my positions in the following: PK, COWNZ, CORRPRA, RILYZ, AFINP, GSLPRB, AFFS, CXW, PFFA, SOHOB, MFABO, BPR, BRMK, HT, NGHCN, INNPRE, RQI, DXPRC.
I started the transition on Wednesday so probably a little early on some of these. Overall, I was able to increase my average monthly cash income by $986 per month. So far, I am comfortable with the move. Will see what the next couple of weeks holds.
@Gary A, that change was a radical shift in credit quality/risk. Have you looked at the after tax comparison on a risk-adjusted basis?
The investing world make a slight turn this last week. I decided to check the price change from the 2/21/20 close through the 2/28/20 close. High level, here were the median returns:
Long US Treasuries (TLT) 4.91%
Muni bond ETF’s 0.06%
Baby bonds -3.15%
Preferreds -4.38%
Equity REITS -6.18%
SP 500 (SPY) -11.16%
Mortgage REITS -11.43%
MLP’s -11.48%
Utilities (IDU) -12.08%
Precious metals -12.48%
BDCs -12.74%
Relatively speaking, preferreds and baby bonds held up well. Then I looked at all preferreds and babys that were down >10%. The majority of them were either hospitality or bulk shipping. I eliminated them from consideration and here is what remains. I do NOT understand the business behind all of these issues so some of them might relate back to hospitality or shipping. This is a list for further study to see if any of these have been “unfairly” punished. They are grouped by company name and I did not include issues with suspended dividend payments.
Corts 7.625 Pfd KTP -15.91%
Crown Castle International Corp CCI-PA -14.32%
DCP Midstream LP 7.875% Series DCP-PB -14.04%
DCP Midstream LP 7.95% Series C DCP-PC -10.72%
ENBRIDGE INC EBBNF -10.47%
Energizer Holdings, Inc. 7.50% ENR-PA -12.61%
FUELCELL ENERGY INC FCELB -12.86%
Hillman Group Capital Trust Pre HLM-P -17.10%
KeyCorp Depositary Shares Each KEY-PI -11.29%
Medley Capital Corporation 6.87 MDLX -13.02%
Medley Capital Corporation 7.25 MDLQ -12.27%
MS Structured Asset Corp MS Str HJV -14.29%
Nabors Industries Ltd. 6.00% Ma NBR-PA -19.04%
Newcastle Investment Corp. DS-PC -11.59%
Northstar Realty Finance Corp. CLNY-PI -10.04%
Nustar Energy L.P. 7.625% Serie NS-PB -15.16%
Nustar Energy L.P. 8.50% Series NS-PA -14.85%
Nustar Energy L.P. 9.00% Series NS-PC -13.75%
Pennsylvania R.E.I.T. PEI-PD -26.69%
Pennsylvania R.E.I.T. PEI-PC -33.78%
Pitney Bowes 6.70% Notes PBI-PB -15.35%
Preferred Plus Trust (Ser CZN) PIY -15.26%
QTS REALTY TR INC QTS-PB -10.30%
Reinsurance Group of America, I RZB -11.86%
Select Asset Inc. Select Asset JBN -13.39%
Sempra Energy 6% Mandatory Conv SRE-PA -10.55%
South Jersey Industries, Inc. C SJIU -12.18%
USA TECHNOLOGIES INC PRF CNV USATP -10.79%
Valley National Bancorp – 6.25% VLYPP -13.02%
Wintrust Financial Corporation WTFCM -11.27%
I am going to be facetious here, But I think Tim here and Jeff Miller over on SA are correct and This may just be the beginning of a downturn.
This weekend both my wife and myself drove thru ground zero (Solano County and where Travis AB is located at) to go check on our vacation home. We agreed ahead of time to get some wipes and hand sanitizer and to make as few as stops as possible.
Prior to this my wife also commented on how at work (Costco ) they have had to limit people to purchases of toilet paper to 10 packages and thermometers to 15, seems people were buying up to 500 thermometers and a lot of toilet paper.
prior to leaving my wife could not find any hand sanitizer and the only wipes she found where baby wipes with sodium chloride. Told her Jack of Bean stock fame would be proud she traded her dollars for salt water wipes.
Over in Sacramento I stopped at 2 Targets, 2 Walmart’s and 1 Winco. My wife hit a couple CVS all we were able to find was 3 two oz bottles of sanitizer and Lysol wipes. While at one Target I saw a line at the pharmacy and heard one person hacking one isle over. Made me realize I wanted to get out of the area where all the sick people are. I also stopped at a Pet Smart.
Looking around the various shopping centers I realized I had no idea who had the regular flu and who could have the new Corona flu.
Considering world wide death so far is considered between 3.5 to 7.5 for those contracting the illness as compared to Ebola up to 90%
The panic is off the charts. I blame modern media. But looking at it and comparing to what is happening on Wall street, I can say we may be in for more panic on wall Street as panic feeds on itself.
Tim, you may be right to see how early Monday goes and the rest of the week for that matter.
As a side note, lowering interest rates to combat the fall on wall st. is a joke.
Charles M : My daughter is an RN at North Bay Community Hospital in Fairfield where some of the quarantined people from Travis were taken. She is a professional and doing her job, but the jitter factor is certainly there in her area. The one lady who was found positive with no known contact was found at the North Bay Hospital East facility in Vacaville.
I was on the road all week for work so I was only able to react a little. Quadrupled my holdings of ARCC & GBDC., and bought more MPLX. For my folks I put some cash to work with DX-B, IPLDP, EP-C, VER-F, ARR-C.
FYI, corrected 1099 from Schwab moved SLMNP divs to Qualified.
Checking my portfolio activity this morning and was pleasantly surprised by the tranche of CASH that was incoming from the redemption of Old Second Bank Trust Preferred. While I will miss the steady dividends, this money will be put to good work. My immediate goal will be to buy term dated notes trading below par such as RILYG which closed Friday at $24.19.
Advice Please! I have been following Tim for about 2 years and have learned a great deal from all of you. I am a retired, almost exclusively income oriented investor, and, despite Tim’s distaste for Reits, I have believed that AGNC and NLY preferredes provided a high level of safety. I don’t expect rationality from the market, but am surprised at some of the deep drops, particularly in some NLY preferreds (exclusive of ex-d). (I think that I understand the common – lower rates, refis, lower new loan rates/income on new loans). During the “great recession” did AGNC or NLY ever miss a preferred dividend? (Did their commons?). If not, unless the current situation devolves into something as bad, or worse than the great recession is there a reason to be concerned that the preferred dividend is in any danger? (i.e., are they more leveraged, has their structured changed in some disadvantageous way, etc.?). Any knowlege, experience, or opinions you share will be greatly appreciated.
Paul, you will need more detailed advise than I can give. But in general yes some M reits went belly up in financial crisis. Of course you know what generated that crisis so the past doesnt always dictate the present or future.
When you mention leverage its all relative. As in Mreits by their very nature are a considerably leveraged product. They have to be to generate a return. They are considerably more leveraged than a physical reit. It is what it is.
There are various situations to where Mreits could fall prey to in certain scenerios, but one can make that case to any industry though.
Price action doesnt always indicate likely hood of payment. My best example is AES-C which was redeemed a couple years ago. In around 2003 ish, this 6.75%, $50 par trust debt traded all the way down to under $5. And despite management saying they would continue paying interest (it had a legal 5 yr deferment it could exercise but never did) it cratered and cratered. Long story short, it recovered fairly quickly and 15 or so years later its redeemed at par $50.
Panic is sometimes just panic, or it can be more. This is when one evaluates what they own and their confidence and knowledge in it to trust it if it craters.
I have no such confidence in these things mostly because I am too dumb to understand them. So I make no judgement on suitability for others to buy or not, as that would just expose my ignorance even more.
Thanks so much Grid. Must say, I’m not surprised that our local encyclopedic historian has a great example of any and everything preferred.
Paul: I bought NLY-G in the middle of the last plunge in December 2018 at $23.50, collected some nice dividends since then, but sold it early Feb at $25.80, long before I had any idea about what was coming, I am not that smart. I sold it along with a couple other issues mostly on advice of people here and I felt that was too much of a gain to watch it float back down to $25.00 over time. I like REIT preferreds but I look at them as more of a trading vehicle than a hold no matter what. For me investment grade Utilities and Banks are the ones I hang onto. My biggest positions right now are WFC-X and Bac-B. Those I will hold until called regardless.
Thanks Bill
PaulM–I have warmed up to some of the REIT preferreds over the years–mostly because I am forced to go there for the coupons. Right now there are some of them that are looking pretty tasty and may make the buy list in the weeks ahead.
Thanks Tim. NLY-G now well under par with tasty yield.
Thanks Tim.
I like the preferred of the stronger m-REITS. The rates are strong and they are cumulative, so the risk is bankruptcy. Don’t go overboard on the sizing and put them in a qualified account. You don’t want these babies taxed.
I might add that I view “risk” somewhat differently that the conventional measure of volatility. I don’t mind a violent ride so long as the whatever doesn’t crash and burn. I look upon the volatility in m-REIT preferred as opportunity to trade in and out between issues. I probably do more short term trades in m-REITS than anything else. I flipped almost my entire ANGN position on Friday.
Thanks Bob.
Paul, I will exaggerate slightly to make a point about MREITS. They all eventually go belly up. Broadly speaking they are banks in sheeps clothing. They borrow at short term interest rates and lend at long term rates. And they typically invest 5X to 10X of their invested capital, aka “leverage.” As long as the yield curve is steep, i.e. long term rates much higher than short term rates, all is well. The problem occurs when long term rates go below short term rates, aka “an inverted yield curve.” This means it is costing more for MREITS to borrow than they are receiving on their loans. MREITS are GREAT investments until they all blow up. When that occurs the common and preferreds are toast. If you can correctly forecast when this will occur, then more power to you. If you cannot accept this forecasting challenge, then at least under the risks.
I will be happy to show you the Mack truck tire tracks on my back sometime if you want more info!
Tex 2 – I like your characterization of m-Reits as quasi banks. Conceptually, it’s a good way to think about them.
As far as bankruptcy goes, sure, they have the potential. But so do all companies, in all industries. The list of once supremely profitable and fortress-like companies that are now gone is a long one. Probably half of the “nifty fifty” either went away completely, were bought out, or are empty shells today.
Yeah, I got burned with AGNC back when it went down to the 14 range – and even with covered calls and monthly divis I got toasted. Thanks, Tex.
REITs are so complex I don’t even pretend to know everything important. NLY and AGNC are considered by analysts to be among the safest REITs though you’ll have to take their word for it. Everything fell with the tide this week and hopefully that’s all it is. NLY-G looks like a good price for 6.5% yield but note the low floating rate. If it looks like rates remain low for a long time the low floating rate matters, so it makes sense G falls more than the other issues.
During the 2008 housing crisis most REIT prefereds fell a LOT on bankruptcy risk. Some went bust while t he good ones recovered for hefty profits. But don’t assume another housing crisis would play out the same way.
Thanks Martin.
It doesnt take a genius to figure this out, but the preferred sector that dropped the least and recovered the quickest was utility preferreds in 08-09 crisis. Shocking huh? :). The market figured out after being dumb utes will always get access to capital.
In fact if Corona ruined the economy where no one went to work and all businesses were going bankrupt, utes would line the pockets of legislatures somehow to get a bill passed throwing everyone in jail unless they paid their ute bill. Ok, severe hyperbole alert here, but still you get the drift. 🙂
Paul,
I think one of the things you need to consider is if you buy and the share price continues to go down are you going to panic and sell ? The advice I have gotten in my past from my real estate broker and my dad (bless them ) was don’t regret you sold too soon or you bought too early, if you still got a great price or made a good profit be grateful and don’t say I wish I had done something different.
I bought AGNC-PB and am down 250.00 do I think I got in too soon and its going to go down more ? Maybe, I am not sure. So do I think I got a good price ? Yes
Am I going to panic if it keeps going down ? even if say its 2.00 or more? No, I would never get that money back trying to jump into something else.
Do some due diligence, GLTY
Others here are a great help with sharing their experiences.
Charles, you know what I think is funny? I was checking to see if any higher quality QDIs had spilled worthy of a look…And then I come upon ALL-H..Then I remembered how we were all complaining about how pitiful the IPO yield was on that thing and how they could ever get away with it. Well that was late July last year and its 5.1% issuance yield…Today after last weeks “sell off” it still trades higher than what we were bitchin’ about when it came to market, ha. Yields are lower now, and I get that, but its funny how it all works.
Thanks Charles.
Here is a useless factoid… There is a trust preferred that is past call and dropped 17% this week, and yet is STILL 18% above par redemption price. HLM-, with a 9.79% yield. Anyone feel lucky? 🙂
Similar situation is ALLY.A, I added a small amount and may buy more if it continues to sell off. Are you interested Grid?
RK, I was just in it past interest cycle buying in 25.80s and quickly selling in 26.40s. If I had waited a week I could have got 15 cents more. Everytime I say thats the last time, and yet I do it again.
But yes, I saw it drop to 25.35 or so and didnt pull trigger.
Too be honest yesterday did present itself as a good ALLy-A and NSS buy day. I used to do those all the time. Probably will regret not doing it this time. Ally gotta get called sometime one would think. That yearly Fed bank cap proposal is coming up soon again.
Grid, I also bot some NSS yesterday, but only 100 shares. You have to laugh (or maybe cry) with all the issues like this that for months we worried about call risk on past call issues and in one day they are now below or near par with very little or no call risk. Such as PPX, THGA, VER.F, OXLCO to name a few. I am looking for more like these, trying to stay with higher quality. Problem is I have taken such a beating on recent purchases and my cash reserves are running low, not to mention who knows where we are in this virus cycle. I am somewhat gun shy at this point….. a real test of one’s “cojunes”
RK, The PPX and THGA ilks you mentioned are great buys for one looking for shorter holds. Bottom line is with yields lower when volatility lightens up these could be redeemed in short order. If one is assuming lower for longer and are wanting longer duration protection, finding issues that have been hit hard but recently issued may be the better play if that is ones goals. That is something I need to evaluate as I have gotten more exposed to the past call or shorter duration to call. I may need to revisit some recently issued ones and reevaluate a bit.
RK, I would be slightly concerned about ALLY-A. Moody’s just confirmed the rating on ALLY senior unsecured bonds at Ba1 which is junk. ALLY-A is lower on the debt stack and matures in 2040. I would not make a 20 year bet on ALLY. If you buy it for shorter term that is a different story and they very well may call it earlier.
From Moody’s
Ally Financial Inc.’s Ba1 senior unsecured and Not-Prime commercial paper ratings and Ba3 (hyb) preferred stock rating for GMAC Capital Trust I are based on continuous improvement in the funding profile from sustained growth in deposits and a stabilized performance in the auto portfolio.
Ally continues to increase its deposit base at a rapid rate. This is the product of Ally Bank’s growing franchise, which has allowed the bank to transform to a primarily bank-funded model. As a result, deposits currently comprised around 75% of Ally’s funding profile, as of 31 December 2019.
Profitability has improved over the last several years, however, Moody’s expects it to continue trailing the 1.2% median return on assets for rated US regional banks.
Moody’s Link
https://www.moodys.com/research/Moodys-announces-completion-of-a-periodic-review-of-ratings-of–PR_416177
Tex, remember its all relative though. This issue was B3 just a few years ago, and they also achieved last fall BBB- on their unsecured debt from S&P, they rate the Trust issue BB+. If I knew they wouldnt redeem it shortly and waste my time, I personally would be back in nicely.
But allocation wise your concerns are warranted. This isnt a bed rock bank. They deal in all sorts of crap loans from autos. And are now getting into peddling high interest rate credit cards with people of dubious credit.
Grid, I should have disclosed that I own several ALLY bonds, BUT and it is a large BUT, they all mature in less than one year. All bought with >5% IRR’s. So I am strongly betting they will be money good. My Ally forecasting crystal ball is a little cloudy when I look out PAST the next recession, whenever that occurs. What will their balance sheet look like when all of the crap GM subprime car loans start defaulting? I don’t know but I not willing to find out. . .
Tex, your posts made me chuckle a bit upon reflection, and not directed at you in anyway. But your post as a general rule reminds me of how most of us posters are generally hunting for more conservative yield…. And how cautious as a “general rule” this group is. I don’t mean that in totality of course and cast no judgement either way.
But it is almost the direct opposite of what is written about on SA…If if isnt a double digit mall reit, mlp, or levered CEF, it isnt getting any radio airplay over there at all.
Grid, my goal is to be a legal Bernie Madoff! He was claiming something like 12% annual returns in all markets, both bull and bear. I am falling a little short in one of the accounts I manage. It is constrained to only owning FDIC insured CD’s or US treasuries. It currently holds 264 different CD’s and is the most conservative account I manage. Probably would not generate much excitement on Seeking Alpha!
Tex, for the people who followed the SA low cerebral firepower writers recommending all the mall reit stocks and tailed them the past three years….They would gladly go back in a time machine and reinvest the proceeds into CD’s. 🙂
By coincidence, grid, Hecla’s biggest asset was its Lucky Friday mine. It’s been operating since before I was born.
Are there any good utilities etfs, or is it better to buy them individually?
In my experience, you’re better of creating your own mini-ETF. Also depends on what type of ute’s you mean. For power/utility ute’s, I bought some exposure based upon geographic region of the country and the UK… i.e., NEE, SRE, D, DUK, SO, PPX, CNP, ED, IPLDP, DCUE, CNP-B, and so forth. Some commons, some pfd’s, some ETD.
My utility/infrastructure exposure comes with owning closed end funds UTF and UTG. I’ve been very happy with them.
If you want a fund approach I would push you toward CEFs rather than ETFs for many reasons. UTF and UTG, as jerseyvinney says, have been good to investors. UTF is at a good discount right now. UTG is so-so.
If you like doing individual investments it’s an easy strategy to replicate. Look at the “best” funds and see what they hold.
if you’re looking to buy preferreds or REITs, take a look at RNP. This is a well managed CEF with a great track record. Six month average discount is 2.82%. Yesterday the discount ballooned to 11.80%, and I would assume it is even somewhat higher today.
I’ve bought a full position around 21 this morning.
RNP holds both preferred and equity and has done very well as you suggested. The same manager runs rqi and rfi both of which hold about 83% common. If you look at the holdings you will see that they are largely the same issues but held in slightly different volumes. At this point in time, my own thoughts are to buy RNP which might be slightly more stable. Good luck SC
RE: RNP
Worth noting that after being overpriced for a long time RNP is now at a good entry point at a 10.3% discount to NAV. Been a strong performer over a long time horizon.
When it comes to CEFs think entry point!
Any thoughts on PMT-B and NSS, as they both dropped today. PMT-B dropped way more then the ex-dividend today and is now at $24.67. NSS is now $24.18. Thoughts appreciated.
Dropping with the tide.
I am going to hurl myself into the breach and defend our way of life.
SSO here i come at 9:31 AM.
I will hold the line an hour or two, then i head for the trenches again for safety.
Wish me luck.
Sold the SSO
I may take a look at them later but in another acct.
Rebought SSO at 119 in another acct.
I refuse to give in to Fear or it seems common sense.
In the category of useless information . . .I was just looking at a chart of the Dow and I see that it is now back to the same level it was in Jan 2018, so by that measure it has done nothing in the past two years. It’s easy to manipulate the market performance numbers depending on the time frame (and index) you choose. So many TV talking heads like to quote the great 2019 performance numbers, but if you go back only a month earlier to December 2018 you get quite a difference story, for some reason that always irks me. LOL
The last several weeks I have scoffed at the 2.5% 2 year notes from U-Haul Investors Club. Well, not the first time I have been served up humble pie….
Need some clarification. I am looking at a few preferreds where there was a partial call, still pending. OXLCO and DXpB for example. Since shares were already set aside at Schwab (OXLCO), if I buy more shares, my guess is they will not be subject to the current call. Make sense? I would prefer these issues of course versus the new, lower yielding issues. I realize there may be a future call. Thanks all.
John,
Don’t count on the shares being set aside, being all that they take. I just went thru this with VER-F. A number of shares had been set aside for a while and then on the day of actual redemption, many more were taken from me because they “re-auctioned” the redemption, I was told. Maybe this won’t happen to you, but it can. If you buy more now, they very well may be taken from you at par, so if you paid a premium – you’re SOL and will lose money if this happens to be the same scenario for you.
A4I – can you elaborate, please about VER-F? Was it the company or your broker or the redemption agent that told you about the “reauction” process? At the end of the day, what percentage of your shares got redeemed?
This may or may not be relevant but having bot OXLCO at Fidelity with a relatively short term hold in mind what I’ve noticed is they have set aside an amount that would equal the percentage call announced (33%) but only 33% of those I bot PRIOR to the actual date of the announcement of the call date. They have NOT separated out shares I bot after that call announcement date… IMHO, that’s wrong…. It’s my expectation that I will have approx 33% in total called (subject to statistical variation only), NOT the 13.51% they have set aside. Maybe that’s what’s meant by a “reauction?”
Bob,
My rep at Merrill told me about the change in shares being taken – being attributable to a “re-auction” process by Vereit. They had to talk to some folks to get this info so it wasn’t a front line soldier that told me this. I contacted Vereit IR and they requested addtl info. I responded but couldn’t get them to respond back to me.
At the end of the day, so to speak, what I had redeemed by them, was proportionate to what others here on the board had taken. But what a mess. The number bounced around like crazy. Maybe because I had bought multiple times after the redememption had been announced.
A4I – thank you for the information. I often buy partially called issues after they have been segregated. Never run into a “reauction” before. Another thing to think about I guess.
John M: Don’t assume that a partial call will end the possibility of a full call.
GJV had a partial call followed by a full call a few months later in 2019-ouch.
dx-b is below par so you won’t lose any money. worst case you tie good money up for no gain.
Strange day for the safe haven $GLD and the miners. Perhaps a liquidity issue & margin calls coming into effect.
Surprised to see the miners underperform GLD when they’re producing huge cash flows at $1600+/oz. Long quite a few positions and have performed nicely.
Still, reminder cash is king, and always worth having it on hand.
When stocks crash remember Gold is gold and gold stocks are stocks.
I didn’t see anything posted on the optional LTS-A redemption and I wanted to alert everyone, especially the newer investors. If you own LTS-A, the Laudenburg Thalmann Preferred Stock, you have the ability to redeem it for $25.0389 on 3/5/20 as long as you instruct your broker to do so by 3/4/20. If you don’t want to worry about the procedure in instructing the broker to do so, you could just sell it this week or next week at probably $24.99 to $25.02. I sold mine last week for $25 as the small haircut was worth it.
While you are not required to sell and everyone needs to make that decision on their own, here is why I did. The company states any remaining shares will be delisted but they will continue to pay the $2 annual dividend. While the dividend is good, I feel the price could drop below $23 a share right after the optional redemption date. They currently have 4 Notes with an average current yield of 8.25% and an average yield to maturity of 9.5%. Most likely this perpetual preferred stock will end up having a higher yield than these notes, which means a drop in price. If one wants to keep collecting a dividend from this company, I feel the Notes are a safer choice than the preferred stock.
Hopefully this may prevent some investors from possibly taking a $2 hit in price in the very near future.
Thank you for a heads up. Probably there may be a buying opportunity when they will be delisted (I believe they will be traded at OTC market). Just like it was with the Amtrust notes.
Will see.
Yuriy, just remember what you are buying…The acquiring company took out a 10% bond last year mostly to pay a dividend to the private shareholders. Moodys wasnt humored with it. It looks like its CCC+ paper or close to it. And this is on level standing with the LTS notes. Plus to finance this mangy merger they had to take out senior SECURED debt in 6.5% to 7% range. Geez…So one knows pecking order will know the true rating of the preferred and its true going forward yield after this Put wall expires.
Thank you Grid, your comment was very helpful. To be honest, I have not studied this company carefully yet, so I really don’t know much about them.
LTS is another Phillip Frost cluster. Some real winners in that mess.
Don,
Aren’t those dividends only payable “if declared”? I thought I saw that in a release and that is why I sold a HUUGGE position of LTS-A. They simply could stop paying the divvies after delisting and then folks will be feeling a world of hurt…
A4I, that goes for any preferred stock basically.
I own several “dark” issues but LTS-A I wouldn’t touch with the proverbial 10-foot poll.
No integrity and a lot of motivation to defease the preferred is they can do it.
I’ve been right as rain…
Red Gold: China’s Stealth Plan to Use Gold for World Domination
https://internationalman.com/articles/red-gold-china-stealth-plan-to-use-gold-for-world-domination/
Wishing you profitable investing, Nomad
What do you consider as the best way to invest in gold? Physical that I store in safe deposit box? a company that holds the gold? ETF?
For long term hold, physical. For trading, ETF.
NEE-I & NEE-J now trading around par probably due to the fears of redemption connected with their new convertible units issuance.
But as far as I understand from the prospectus NEE planning to use the proceeds for repay their short-term debt:
“NEE Capital will add the net proceeds from the sale of the NEE Capital debentures, which are expected to be approximately $2.42 billion (after deducting the underwriting discount and other offering expenses), to its general funds. NEE Capital expects to use its general funds to fund investments in energy and power projects and for other general corporate purposes, including the repayment of all or a portion of NEE Capital’s outstanding commercial paper obligations. As of February 18, 2020, NEE Capital had $2.654 billion of outstanding commercial paper obligations which had maturities of up to 70 days and which had annual interest rates ranging from 1.76% to 2.15%. NEE Capital will temporarily invest in short-term instruments any proceeds that are not immediately used for these purposes.”.
So I assume there is a very low chance for both issues to be called, am I right?
Thank you Yuriy, they are so close to par and past ex-div. date its worth it to park some money here. I doubt they will be called before next pay date so I think your correct
Please no political comments, This is just to share. Yesterday CBS news announced 2 more California cities received permission from the state to require all new construction be all electric only ,no gas. My parents built a new home in 68 in Southern Cal. and took advantage of SCE rebate for a all electric home, Told in the future it would be cheaper than gas to heat and cook. My parents regretted it even with California’s mild climate. Recently I was shopping on Amazon for a camping heater and several reviewers stated they lived in the Northeast(not just Calif. ) and their power had went out due to storms and with a all electric condo they were freezing.
Maybe it will be different this time around and all electric truly will be cheaper ?
Natural gas is of course much cheaper than electricity here in California. But, the big thing is, last summer when the temperature was high and we had strong winds, PGE turned peoples electricity off to mitigate fire danger, sometimes for 2 or 3 days in a row ! If you had a gas water heater and stove and least you could shower and cook, not so with all electric. This state is so badly mismanaged by a rank amateur governor and legislature I would not put all my eggs in any one basket. Not a political statement, just a fact. IMHO
Bill,
I was sitting tight until I woke up at 1:00 am and saw the red glow in the sky. I already had the truck loaded so grabbed the animals and waved bye to the National Guard as I left town. Thank God to the fire fighters, hardly any homes or business were lost this time.
For people who like interesting reads here is a nice article showing how the chase for yield doesnt statistically pan out. Of course the various charts involved with income safety and yield/returns dont specifically mention preferreds. But some compelling stats here in yield chasing, overall if even possibly unrelated at times to preferreds. I of course am not without sin and have some high yield and it has worked so far. But the majority is in safer preferreds and the lower I have recently went in buying the better my returns have been with them, but of course price entry points matter. Anyways here it is, for better or worse…
https://www.institutionalinvestor.com/article/b1k369v2lg69qt/High-Yield-Was-Oxy-Private-Credit-Is-Fentanyl
FFC down over 4%! A nice preferred ETF with 5.8% yield, a long good history and a long time favorite of many. Bought back in after having sold it a few months ago at a nice profit…
Blood in the streets, the fear trade Heisenberg was talking about this weekend is happening. People are selling their Preferred’s even. My AGNCP is down. Wonder if I should get more ?
I had what I thought was a low ball bid on DMLP that got filled. This is just Monday, what is in store for the rest of the week.
I bought a few small things. Less than I sold Friday 1% higher. If there’s an afternoon bounce I’m dumping some things.
It just depends what your in I guess, Charles. I just bought almost 100 more of CMS-B at 108.98 to go with my 200 at $109 I bought late last week. And somebody is bidding 2100 shares for $110.25 :)… Flipped some scrapes of Dupont to finish off $2 cap gain a share for a couple week hold. The low yielding high quality issues have just been a flipping playground lately.
Another illiquid hit this morning so I had to reshuffle IPLDP again. Sold at 25.59 and bought the shares back at 25.54, as I didnt want to lose them.
UMH-D the ballon with a hole in it. Sold a third off last week for a whooping 20 cent gain. Sold at market open another third for an 8 cent gain. The remaining 1/3 are under water a nickel including divi. What a dog! I should have sold them all right at market open.
Gee Grid. I bought 200 more UMH-D at 25.54. Also bought some PSA-X since it is now below par including the upcoming dividend. I even bought a falling knife….VIAC at 26.50. Too many good assets for continued mismanagement. I’ll get paid while I wait for a turnaround or for someone to buy them.
Retired, I can see ones interest in it. It is just not an issue I want to hold, and this was bought with flipping money. I am doing too good in other things waiting for this one to do anything. I still have a third of them, mostly as reason you sited, but I still dont like the company, the crappy reit stock portfolio, and the market area they are in. But I dont consider it unsafe, its just not my thing…Waiting for those Canadian resets to crash so I can get back in again. 🙂
Grid, you might have to go back to watching the brats in detention if some have their way… They might cramp the flipping game with some unpleasant fees – 7 of the 8 folks running for president support a tax on stock trades. I just saw that posted today as the DOW took another leg down. There is even talk of taxing each type of trades differently: bonds get one tax, common stocks another rate, etc.
A4I, And probably impose a special trading tax on pensioners like me, ha. Well if its just a few cents a trade that still may be cheaper than what I was paying last year anyways, ha.
Grid,
With the blocks you normally trade in (several hundred at a time), this could get expensive for you – IF – it ever happens. For example, your 500 block trade today might run you anywhere from $12.31 to $61.55, roughly speaking, just for the ‘tax’.
I suspect any trading tax would be less than the $4.95 we used to pay in commissions.
Some of the numbers stated have been .005%, .1%, or .5% per sale
.5% would be $50 on a $10K purchase
Quite a bit more than $4.95
A4I, In my no nothing opinion, that will happen when Medicare for all is passed also. So until they prove me wrong its a nothing burger.
Agreed good buddy…..Totally agree with that. However, it is they type of uncertainty that upsets the market participants and all of their little secret algo black boxes.
A4I, Isnt odd supposedly we are having markets hit with Corona yet the Chinese proper markets havent been hit at all really. Of course we arent much below year end numbers here either. But the preferreds have certainly rocked and held on basically during this time. Unless credit spreads widen, I imagine the search for yield will keep things fairly tight. You know we are spoiled if we start crying about 25 cent losses, lol…Hey by the way, get off your duff and check your SA inbox. I sent a message to you a couple days ago. 🙂
Collection of a specific industry tax makes sense for universal and transparent, specific responsible-person auditing; policing, known fines and penalties for failure of activities in that industry posted publicly. I would support industry specific taxes like this for every industry. That’s the way I have to live on my street, right here. Computers can do this very, very well and cheap. The next computer savvy generation is going to do this. We need this reform or govt is just plain ineffective…a failure.
If it is for general revenues then it is thought out by immature and dis-ingenuous minds and we’re back to stupid political axioms like , “Show me a revenue stream from some where Joel and I can help you” (Quote: Todd Aiken to me in his DC office).
Joel. Here is my favorite tax saying….Dont tax you. Dont tax me. Tax that fellow behind the tree!
Yeah, this UMH-D is a pig. Trying to figure if I should buy more to reduce my cost basis, but I’m already 70 cents underwater – OK, more like 38 I think after factoring in the divvy. Either way, though, if this thing isn’t going to bounce back up to near redemption, then I’m just leaving even more money in something I really don’t want. My first attempt at a divvy capture – not instilling much confidence in myself right now.
What’s the sentiment? Is this a safe hold if we see a bunch more down days in the market? Most of my other positions are holding up pretty well so far, but this one just keeps falling….
Mark–I hold an overweight position and will hold it–or buy more. It is a ‘hated’ company, but fundamentally they will be ok.
Mark, I agree with you and Tim both. But I dumped last third at 24.50 today and take my 12 cent loss (including divi) and got out. Counting the other 2/3rds shares previously sold, I might have made $50 in 3 weeks on this dog. And its my fault as I have been complaining here every since it went exD. I knew there was a problem with sentiment, and didnt accept reality then and just move on.
Tim and my viewpoint arent necessarily in disagreement, he bought with different intentions than I did with it.
Grid–I am willing to hold it as I have no were else to go and fundamentally I think they are fine–of course there is the REIT portfolio. This is kind of like the ‘hated Spark Energy”–and you have noted before–names count and this is a hated name.
Tim, yes it is not loved, but if I was buying as a long term hold, I would easily choose it over Spark any day, ha. I see nothing fundamentally alarming with UMH preferreds. I just had the mindset of it as a trade, and nothing more. So I had to move on and quit pouting.
Grid–Spark ended up ok for me–just took 6 months. I see it trading at 25.10 today.
Yes Grid, I decided to join you. I picked up 500 of UMH-B at 25.68 ended up the day down a penny. Yes I know it probably gets called in Oct. but 2 more maybe 3 div. payouts so be up .40 to .90 at call . I really bought on the off chance someone not realizing will bid it up around ex-div. date as in the past and I can flip it. Overall down 2% on my account past week.
I am eyeing a shipper in a niche market. put in a low ball bid hoping for a drop at open. Case of the baby getting thrown out with the bath water.
Am I feeling Brave? not really if its a low ball bid.
Grid, I’m sensing that you don’t love UMH-D. Isn’t the manufactured home communities sector pretty stable and relatively recession resistant? What about this company do you dislike?
Kapil, I just didnt like the way it traded pre crazy (last 2 days). I didnt buy this for a hold, only a divi play, so my attitude was from a different perspective. I dont consider it unsafe as far as payment of dividend is concerned. If UMH-B was sitting at $25, I would buy a bucket load. 🙂
I still hold it and am underwater but I’m going to stick with it and see how it reacts when the markets bounce back. The last few days sure haven’t helped.
Kapil, Nothing is wrong with this reit. It will pay you.
Anyone having log-on issues at TDAmeritrade? Seems unavailable all morning.
Also, for most of the morning III has not been available- just now popped up.
Luckily I only use Schwab, if needed.
TDA’s been fine for me all morning
They were slow getting PRYFP up, so I had to call them to get it rolling. I bought 500 for a flip, hope, prayer trade at $24.34. All of the others have cooperated and paid off. Hopefully its not one trip to the well too many.
Grid–think I am going to join you.
akj-
Thanks- I use Safari- tried diff platform & it works. Strange.
Hi everyone,
Can you direct me to a website or source where I can find all the $1000 preferreds.
Thank you!
Filip – You can sort of do that with the search engine on quantumonline. You’ll get $100 preferreds along with the $1000 ones, but here you go – https://www.quantumonline.com/ScreenedTable.cfm Heck, there’s even 2 $100,000 preferreds on the list!
Hi,
for screening of non-exchange traded securities you can use bond center page in the Morningstar site: http://finra-markets.morningstar.com/BondCenter/Default.jsp
Try “advanced search”, there is a
“debt instrument type” choose “depositary preferred share” + “preferred security”.
Don’t forget to exclude 144a issues.
Been busy working these last 4 weeks, but today i managed to sell 2000 shs of ARR-C when it fetched 25.24 and more, and 1000 shs of F-C,
I had too much of ARR-C and Ford was a clunker.
Flipped some VEReit and lightened my Vnopl.
Wondering if i Should i sell out of Oxlco and buy Oxlcp.
I dumped my UMH-d..It was a painful .10 gain even if you counted the div.
Jumped back into MNR-C at 25.03 2 days ago and that’s looking good.
I am too busy to chat.
But i miss some of you guys posts.
I sold most of my ARR-C too. sold DX-C and sold some of my NRZ-C. Only newbie I kept all was AGNCP. May be too soon to cash out but I found other issues I wanted to buy and needed the money. GECCM had a big seller pushing it down to the buy range. NRZ-B dropped. and started grabbing dividend captures for next week.
sold UMH-D earlier in the week. I don’t consider 10-15 cent gain in a week to be a disappointment.
Sorry to barge into your conversation, but I’m new to III and have a question about III’s rating system. It seems that many of the issues covered are not rated by either Moody’s or S&P, which is no surprise. However, I see a III rating, many of which are “C”. Can someone point me to the page where III’s rating system is defined? Thanks.
Good for you Newman….UMH-D is a rag arse trade. Unfortunately Im still in it protecting my dime cap gain trade like a fool. I will move on from this POS next week. I have made more money trading 4% QDI perpetuals in past 2 weeks than I have holding on to this dump hole.
What’s going to happen with the Taubman TCO preferreds? Sorry if I missed discussion if already talked about. I assume they get called as soon as deal is done since Simon can get 3% money. Am I missing anything. Thanks
Taubman, as part of the merger agreement with SPG, will call the preferred at the first opportunity. The only unknown is when the merger will happen.
Straight out of the SEC filing.
Good news reported after the bell from TDS, MBIN, and AHH. Better earnings for some, nice common side dividend raises for others… Sounds like biz is good from the alerts I’ve seen so far.
FTR, I own TDS’s TDE, MBIN’s MBINP, and AHH’s AHH-A.
Curious if anyone has used CEF’s for a basket of preferreds……I currently own RNP which has preferreds and reits…..thanks for any comments …craig
Craig..I spent some time looking and like the Flaherty & Crumine CEF Funds. I just bought small positions in DEC to understand them more. They have a few funds that seem to almost mirror their flagship fund FFC with less of a premium. I bought a little DFP. The price action seems to mirror each other but better yield on DFP because of lower premium.
Hi Craig,
Here is my HPI story which I posted on M*. I primarily hold individual preferreds.
In Dec 2007 I completed my position of 500 shs of HPI, a preferred stock fund from John Hancock. In 2011 they raised the dividend to .14 from .124, and it stayed at .14 until Oct 2019.
The divvy cut caused me to see how much I had collected over the years. Then I noticed the real milestone for me. My $10,285 investment has now paid over $10,699 in dividends. The market price has held up pretty well too. Today it is trading around $22.40.
I am not in love with HPI but I sure like it a lot. Preferred stocks are being replaced by much lower yielding securities. While I would like to collect another $10,000 in dividends I don’t think it will happen. Unfortunately more distribution cuts are likely. For now I will continue to hold this gift that keeps on giving, while I watch how the future plays out.
I am in the boat of folks that do not have or will not make the time to mirror a basket. HPI is a holding. I emailed them asking for the YTC as I wanted to evaluate the future yields, etc. Below is the response received:
“HPI has a number of holdings with negative yields to call (YTC). These are holdings are financially uneconomical from being called due to being held on the issuers balance sheets at a significant discount. Because of this limitation, these holdings have attractive current or yield to maturity (YTM). HPI’s yield to worst (YTW) would make for a better yield measure when comparing funds.
HPI’s yields are as such: YTM 5.32%, YTW 4.47%, and YTC -0.68%, which compares to the funds index BofAML US Preferred Hybrid YTM 5.34%, YTW 2.66%, and YTC -11.81%. “
TN (for the benefit of others here) – if you’re going to go the fund route for preferred do it through CEFs as you’ve done. Unlike an ETF, there is no forced selling by CEFs in a distressed market. And in the case of a well-run CEF, the benefit of the leverage pays the management and other fund fees. (It really does, I do the math for every fund I contemplate buying).
FFC is my favorite preferred CEF, just not at it’s present price. It’s trading at a 7% premium to NAV compared to an average premium of less than half a percent. Patience is rewarded in CEF investing.
They’re good for a passive investor who doesn’t have the time or interest to buy individual preferreds. But since there’s no more commission you can build your own basket saving the fee, tailoring it to what you want, and taking advantage of opportunity. Some of the CEF’s have charters which force them to trade at the worst possible times.
Now that I’ve shown my bias, I admit those funds have been making money. No reason to avoid them if you are not doing the work yourself.
I used to own RNP, but sold when the price increased. Waiting for price to drop to buy again. Also own FLC and JPS. FLC has had 4 small cuts to the dividend since 2016. But, still a good dividend in todays environment. JPS had one dividend increase since 2016. Both use leverage (approx 30%) to juice the dividend. I believe both are preferreds only and have a long history of good performance. Prices are currently high versus historical pricing and I have recently taken some profits from both.
CEFs are a good way to play preferred. Certainly much less labor intensive than picking them individually.
Total key is picking the right CEFs and the right price entry point.
RNP is a good fund but I would not touch it now. The assets held by the fund are overpriced (the whole pref market is) and the fund is trading at a 3% discount to NAV compared to an almost 9% discount (average) for the past 3 years. If the pref market tanks you could see RNP drop by 10% very quickly. That’s almost 2 years worth of divis.
See cefdata.com
Patience often pays off in investing, perhaps no more so than with CEFs. Wait for the good entry point.
What do you guys think of CMRE-C at this price 25.12?
Is it a risky Preferred I know its shipping , but I don’t know much about the company.
First call date was 1/21/19
Risky?
does a one legged duck swim in a circle?
If you make this play, you may look at CMRE-E instead
As I recall it has a higher inside ownership – ownership tends to dilute the common for financing so owns the preferred, not sure where I read that ( I think on S.A. article by Morwa feb 21 2019) but if you can confirm it might be the better play
Thanks guys for your help. on CMRE-C
Max,
I like it for 3 reasons:
1. It’s priced close to par (for various reasons), so this minimizes some risk
2. It’s QDI
3. Even though it’s past 1st call, I tend to think that CMRE will call in CMRE-D 1st, because it is coming up on first call in a couple months and they’re paying a higher dividend on it than on the C flavor.
I own a lot of the C flavor but am not going into it very heavy like I normally would size a position, just because I don’t favor the sector – as many of us here don’t. This is one I would sell first and ask questions later on if I even smelled something souring beyond the concerns over this coronavirus mess. But like their ships, you gotta be willing to ride the peaks and valleys of the market waves.
I also own a bit of GSLD but with this one, I like that it is on a short leash when it comes to either first call or maturation.
Fully admitting I’m totally bored and a little tired, I can’t help but comment, A4I – if GSLDs ships are riding peaks and valleys, not waves and troughs, they may be drowning on dry land…lol sorry ’bout this one……. most likely misplaced humor I’m afraid
I’m going down. My nose is in the sand
I’m going down, down, baby. My nose is in the sand
A cloud of dust just came over me
and I think I’m drowning on dry land
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Breathe deep the gathering gloom,
Watch lights fade from every room.
Bedsitter people look back and lament,
Another day’s useless energy spent.
Impassioned lovers wrestle as one,
Lonely man cries for love and has none.
New mother picks up and suckles her son,
Senior citizens wish they were young.
Cold hearted orb that rules the night,
Removes the colours from our sight.
Red is grey and yellow white.
But we decide which is right.
And which is an illusion?
Nomad
Knights in White Satin. Author, a Moody Blue, name escapes. Ahh
Justin Haywood? Please help me give credit to where it is due.
Good job bill o, I saw Justin at a restaurant and my buddy started singing one of their tunes so he and his party could hear, Justin smiled and when we went to pay he had paid out bill!
All the very best, Nomad
well been trying for a few weeks to get the AGNCP but wasn’t getting anywhere with trying to buy a 200 share allotment. Yesterday I put in a order for 50 and landed it. Not sure if it was because it was a down day for preferred’s or smaller block or both.
I got 400 shares at $24.95 yesterday no problem
I went for 24.93 will see what happens today