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.
Anybody notice that CORR-A snuck past 1st call yesterday? Still holding my shares…
Daily humor with Pendragon…
PendragonY
ContributorPREMIUMMarketplace
Comments46652 | + Follow
@Ian Bezek
Wow, you predicted the share price of a mall REIT would head down when all mall REITs were seeing share price declines.
Comments6083 | Following
@PendragonY, If Ian’s call was so obvious why were you recommending it at $4.77 just a few weeks later on a May article? If everyone knew this as you appear to say to Ian, why didnt you wait and avoid overpaying buy 25%?
28 Jan 2020, 09:16 AM Edit/Delete Reply 0 Like
PendragonY
ContributorPREMIUMMarketplace
Comments46652 | + Follow
@Gridbird
Again, it wasn’t some great incite to predict that the price would decline. But I don’t make my recommendations on where the price is going in the short term. That is a fool’s game. I recommend a stock when its current price is a good value. And that was and is the case.
28 Jan 2020, 09:21 AM Reply 0 Like
Gridbird
Comments6083 | Following
@PendragonY, I think you mean “insight” as I doubt Ian meant his post to cause a riot as “incite” would. You convinced me you are correct. I am going to put in an order for some WPG shares at $4.77 since that was more insightful than Ian’s post was.
28 Jan 2020, 09:58 AM Edit/Delete
Stirring the Pendy pot again. Like you I read his posts for humor.
I cant help myself, Tim. He is a human punching bag. And has a jaw tougher than Ali’s, because he stands there and takes them all without falling down, ha.
Grid–I have never, ever seen anyone as argumentative as that person–no doubt he is smarter than anyone–if I was Rida I would shut him down. I figure it is going to take a good bear market to get rid of him–the heat will be intensive when all their picks are off 30%.
Tim, I totally agree. And it would be somewhat tolerable if he only argued when he was right. But he rarely is. Moron wrote he spent 200k or so on research yearly. Some of that is going to that nut. Most of them are no smarter than us. Preferred Stock Trader is a good dude a very astute preferred investor.
Their fall back modus operandi when needing a winner is touting an illiquid. Totally fool proof. The 4k lemmings bid it up then the freebee free loaders waiting on the free article jump in next.
Wanna take a bet on who is selling into the second wave of free loaders buying?
Full disclosure, I own CEQP- riding coattails of PST. I think I am going to join the team and write a pump article on SBNCM, CNIGO, CNIGP and sell out at $100 ha.
When things are going good they are honest, but watch the spin when the trouble begins. I have seen it many times.
US Government debt issues http://www.usdebtclock.org
RED AND BLUE PROBLEM – The national debt increased +86% during George W. Bush’s 8 years as president, reaching $10.63 trillion as of 1/20/09. The national debt increased +88% during Barack Obama’s 8 years as president, reaching $19.95 trillion as of 1/20/17. The national debt has increased +16% during Donald Trump’s first 3 years in the White House, reaching $23.2 trillion as of 1/20/20 (source: Treasury Department).
So you think that money is the root of all evil. Have you ever asked what is the root of all money? Ayn Rand
Nomad
uggggggh
(shakes head)
Obama’s number went through the roof because of Great Recession.
Bush spent all of his on Iraq and to a lesser extent, Afghanistan.
Trump had his with basically neither. Why do I think the next recession is going to obliterate the deficit number for one or two years, and the US may have a year with a 2 Trillion dollar deficit?
justin, none of us should look to blame; that is too trite and injudicious at this time. We The People as a country together have created the largest and most problematic financial deficit this planet has ever witnessed http://www.usdebtclock.org There is little chance of ever paying back all the principle that both parties irrationally spent. We as a country and overspending debt culture have little to show for all these enormous deficits and I urge each for you to protect you and your families for what this uncertain future will bring.
Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.”
Nomad
Picked up some AATRL under par at 47.60 yielding 5.4%..QOL lists these as BBB.
Does anyone understand whether these are truly sub debt or they are preferreds? The trust holds sub debt, so I’d assume AATRL is just debt that pays interest (and it’s not QDI) and has a maturity date of 2037. However, the rating on AATRL is BBB. That is two notches lower than their CFR which is A-. Usually two notches lower is for preferreds and only one notch lower for sub debt. So, shouldn’t AATRL be BBB+?
Here’s what Moody’s said in Dec:
“Moody’s affirmed its ratings on Affiliated Managers Group Inc., including the senior unsecured and junior subordinate debt ratings at A3 and Baa1, respectively.”
So is QOL just wrong with their rating of NF/BBB on AATRL?
LI – Here’s what S&P said a/o 10/29/19 when they confirmed the rating but placed it on negative credit watch due to continuing outflows….
Affiliated Managers Group Inc. (AMG) had almost $20 billion in net outflows during the third quarter of 2019 and a total of approximately $58 billion in net outflows during the last 12 months.
We predict that AMG’s adjusted EBITDA will experience a high-single- or low-double-digit percent decline in 2019 relative to 2018, which in turn was about 10% lower than the adjusted EBITDA exhibited at the end of 2017.
We are revising our outlook on AMG to negative and affirming our ‘A-‘ rating on the company and its senior unsecured notes, as well as the ‘BBB’ rating on AMG’s junior subordinated notes.
The negative outlook reflects our expectation that the company could continue to experience earnings pressure as a result of further net outflows, S&P Global economists’ forecast of flatter equity markets, and uncertainty regarding future performance fees. We anticipate that AMG will continue to operate with leverage between 1.5x and 2.0x during the next 18 to 24 months.
In general, there’s really not much difference between subordinated unsecured debt and preferreds is there? I own this one too but my rationale is that even if S&P reduces its rating a single step, it will still be investment grade… If they were to reduce it 2 steps to BB+, given 47.60 = 5.58% YTM (5.60% stripped and 5.41 current), look how cheap it is when compared to the below investment grade perpetuals coming out these days below 5% and this one has the benefit of a 17 year maturity vs being perpetual.
What I don’t know at this stage is what specific risks there are, if any, of this being a “Capital Trust.”
“In general, there’s really not much difference between subordinated unsecured debt and preferreds is there? ”
In my experience there is a one notch difference between preferreds and sub debt. I’m not actually aware of any sub debt that is not exactly one notch below unsecureds and one notch above preferreds. Would be interested if you or others have examples.
An important distinction between prefs and sub debt is that debt can’t be suspended without a default (unless there’s a suspension provision for the sub debt) When it comes to financials, another important distinction is preferreds are non-cumulative. Financial regulators rightfully make a big difference between the equity and debt sides of the balance sheet when looking at capital adequacy.
The 6 year chart of AMG is concerning and the asset management industry has poor fundamentals but when you have a strong balance sheet, you have a long runway to plug the holes in your business model and change course before sinking.
AATRL closed at 47. Wish it was marginable in which case I’d be more comfortable sizing up my position.
Guys these “Capital Trust” issues are basically a debt instrument put inside a trust wrapper. The reason why its not familiar is because the tax laws have changed that negated the need for these. So none are really issued anymore and most have been redeemed. A famous one myself and Inspbudget played with over the years was HE-U. You can see through Quantum it was issued like AATRL was. It got redeemed finally last year but was “HECO Capital Trust” from Hawaiian Electric.
One that still trades is KTH. It actually is a Trust wrapper “PECO Energy Capital Trust” debt that Smith Barney actually put inside a “Structured Product”. This turned it into a retail tradeable issue as PECO Capital Trust actually trades on the bond market.
So the capital trust is just a driverless vehicle. The debt rating will actually come from the underlying debt instrument inside the trust wrapper. I keep AATRL on my list but havent owned it since a mid $46 purchase and flip at $49 last fall. Im not a fan of the declining ratings, earnings, and horrific common stock movement. A philosophical question…Buy one with worse credit ratings but improving earnings, or a higher rated issue that is sliding?
I dont have an answer, but that Pitney Bowes issue had a higher rating when issued…And started sliding, and so has the baby bond price with it.
That being said I wont rule out owning it again.
Grid – thanks for the history lesson on trusts. The question that comes to my mind is whether or not there’s any way a holder of AATRL could be hurt via a call when he owns it at a discount to “par?” I know you knew something about third party issues in general where a holder could be left holding the bag for less than par due to the structure. Is that even a possibility under any circumstance (not including BK or other restructuring) as far as you would think?
2WR, The sun set so my “Sundowners” is setting in so I cant really dig into prospectus now thoroughly, so going mostly off memory. This really isnt a “3rd party Trust” at all. AMG set up the trust and owns the securities. So its not a 3rd party trust.
Since the debt is held by AMG and no broker bought bonds at different prices and inserted into trust this should be a clean deal. Meaning your purchase price doesnt matter and its off $50 including the broken convertible provision.
Grid – So you mean that once the sun goes down your brain is 20° cooler just like when you’re underneath your SunSetter retractible awning??? Hmmmmmmm? I really wasn’t trying to imply that AATRL is a 3rd party trust, though… I was merely using the history you’ve posted about the risks associated with some 3rd party trusts as a jumping off point for considering whether or not you were aware of any similarly unusual circumstances for trusts of AATRL’s ilk that might expose shareholders to being forced out of the security at a price below par, circumstance not including financial stress reasons such as bankruptcy or reorganizations of that nature.
2WR, A third party trust in itself has no issues either. Its never the shell, its the words in the prospectus that are the concern. Capital Trust and 3rd party trusts are just empty safe vessels.
Where one gets problems is the details inside prospectus. A third party trust one time paid out way less than par several years ago much to dismay of shareholders. But that was because it was a synthetic adjustable that had complicated outset counter swaps. And when the underlying bond that was viewed as non callable had a “capital event” loophole that allowed redemption the chain reaction of losses occurred.
I just scanned the issue again, and probably one needs to read deeper to make sure there isnt a possibility of conversion into common shares from other situations besides the positive one of hitting the strike price. Maybe that is why it lags the tradeable debt issue. Kind of like NYCB-U does in relation to its sister debt issue. But its not something I am going to do. There is a lot of reading there. But, it wouldnt stop me from buying again. My concern would be over the deteriorating financials over those details that are largely unreadable to us lawyer wannabee neophytes.
Grid – So you’re going to make me do my own work and go through the AATRL documents myself rather than rely on you? Shame on you! Oh, OK, I’ll do it, but have more consideration in the future, OK? lol And as far as the deteriorating financials, as I mentioned, imho, the current price on AMG issues already discounts an implied rating change I think, perhaps even one that would take it below IG, so part of the concern is already baked in – unless the quarterly on Feb 3 turns out to be a total disaster beyond what is expected.
2WR, The mental exercise will do you good and give you a sense of accomplishment. Sometimes things are just the way they are…Compare NYCB-U to NYCB-A. Its basically the identical comparison to the AMG issues. It is what it is and and will aways be. Finding out why may not be worth the effort. Doesnt mean its not a good trade or hold for you though.
I am doing lazier stuff, like today… You know how the computer programmers and market makers can screw you? Well I just used them to accomplish a trade. I sold some LANDP at 26.05 the other day and wanted some back at 25.80. Nothing was happening so I sent a sell order to myself and it got intercepted of course. So I got my 300 shares at 25.80 from someone else which was the objective.
@Grid- I would recommend you not do that. Had your order executed to yourself, it would be a wash trade and will show up in market surveillance.
MCG, I dont do it very often, only when I am getting screwed with and have a plan. Besides Im buying from separate brokerages. Been doing it for years. Never a problem.
Grid, A DIY level playing field. Love that story.
Separate brokerages doesn’t change the fact that it is illegal. Market surveillance as a whole is getting better from a regulators perspective. anyway, that is my 2c
Grid, before I knew better, I tried doing that with a non-liquid QDI preferred that I bought in my IRA but really wanted in my non-qualified account. So, I sold it to myself between accounts. However, both accounts are with the same firm. A few days later I got a courtesy “educational” call from my broker’s compliance department that “cross trades” are not allowed but they would let the trade stand this time. Given that my shares were the only shares to trade that day it stood out like a sore thumb. D’oh.
Alpha, I used to get frustrated with getting screwed with on these micro second jumps in front of me either way on these illiquid types. I learned to use them to my advantage instead them making me the jumped patsy all the time.
My best one was a many years ago with AILNP. For a couple weeks the ask would jump immediately the second I raised my bid and then lower immediately when I did my bid. So I set my bid back lower after days of frustration and fired a sell order at my bid. And they intercepted and sold to me at bid. I repeated immediately 2 more times and forced 300 shares out of that price teasing computer bot or market maker….Whatever it was. They got what they deserved.
Grid, Excellent. You may recall the situation I had with KTBA last year. The (insert adjective) MM was audacious enough to record trades under my bid with the excuse the bid-ask range was over my bid. Uh huh. I wrote the SEC and FINRA and the order was filled 30 days later. You though were able to find a happy seller much quicker.
Alpha, I remember that. You are one determined Pit Bull. Glad you nailed them! :). I certainly appreciate MCG’s post and concern. But I wasnt selling to myself as that didnt happen. I was “convincing” the scammer to sell in a timely manner. There are ways to flush the fleecers but you have to know the issue and what is going on. Or the reverse will happen…Send a sell order out to flush and they intercept your trade on the buy side. So I only do it very rarely and when I can smell a dead fish…. A safer test signal is the opposite way. Send out a market price one share order and see how far it hits below ask. But then you have to keep buying in small tranches as you dont know how many are lurking to sell between the bid ask spread.
What I find so weird is the different performance of MGR that instead went very well. Same name, same credit with a longer duration.
Grid “Buy one with worse credit ratings but improving earnings, or a higher rated issue that is sliding?”
That’s a great question. It depends on whether AMG’s business model is becoming outdated in some way or if there are more fixable reasons for the slide. It is odd to see a major financial company with an A- balance sheet have such a bad 5 year stock chart.
What I’d really like to see them do is cut down on buybacks and allocate that capital to keeping their credit metrics stable so they don’t get a downgrade. If they want to defend that A- rating, they can. S&P has given them a warning and they have time to react.
But I think AATRL is a good value even after a downgrade. The broken convertible feature is a big plus as it makes it uncallable like WFC-L / BAC-L. Leverage is very reasonable compared to typical financial companies and their revenue streams are very diverse and international.
LI, switching gears to GSLD – being that it’s foreign, can it be held in a taxable account without incurring foreign tax witholding or does it need to be stashed in an IRA to avoid that? I have plenty of other holdings from other foreign countries but not one HQ’d in the UK.
If anyone else knows, please chime in. Would be interested in the same answer for CMRE-C. I think CMRE-C being from Greece would be subject to foreign tax witholding if memory serves me correctly.
Affinity,
GSL is incorporated in the Marshall Islands (with admin in UK) and so is CMRE. No withholding for MI corps.
I don’t think there’s withholding on any shipping company (nor is there a K1 for shippers).
Just found that on the IR page of GSL. Thanks much, LI.
Landlord, that is an excellent point. I suspect it would help if company put out a position on that. That was in part why I recently bought an extended full position of SOCGP in $29 range a little while ago. It is non callable, QDI, and they stated their intent on defending their high credit rating. If AATRL would dip in $46 range it would peak my interest again. And todays price range is fair Im sure too. But its the old game of having to sell something I like to buy issue.
The deteriorating balance sheet jeopardizes a credit rating downgrade and repeat of last May’s $2+/share gap down that could erase another 1-year’s divvies. AATRL provided a recent $3+/share gain in a couple of quick flips, though I had way too much exposure in this and was sleeping with one eye open. Now not tempting fate on this one. While not advocating catching a falling knife, “if” they can plug the holes on that balance sheet’s “long runway”, AMG’s common would offer a vastly superior upside to the preferred. We rarely mention common, though on this particular issue, with a near 5 PE, very low debt/cap and projected EPS growth for 2020 and 2021, and if they plug the holes, it appears AMG common could potentially (easily) double by the end of that period with not exact, but similar risk to AATRL. Again, not recommending it, though if holding it’s worth considering as this appears to provide a significant positive rebalancing of risk/return.
Landlord – you’re testing my old warn out brain way too far to come up with an actual example of subordinated debt not being one notch below unsecured debt and one notch above secured. It makes sense that’s the way it should be… I think what I was trying to say is that the practical difference between subordinated debt and preferred only comes into play in the end game of backruptcy and in that case, the odds of their being a major difference in distributions to subordinated debt holders (emphasis on “subordinated”) will not ordinarily be much different. Still, to generalize, I, too, would rather own subordinated debt over preferred in the worst case.
I will point out one thing you said that I bet you didn’t mean as written. You wrote “another important distinction is preferreds are non-cumulative,” implying that there is no such thing as a cumulative preferred stock. That’s not what you meant is it? RILYP, as an example, = B. Riley Financial, Inc. 6.875% Dep Shares Ser A Cumulative Perp Preferred Stock. I bet you meant preferreds CAN be non-cumulative but subordinated debt cannot be, right?
https://markets.businessinsider.com/stocks/amg-stock
It reaffirms my faith in the Moody’s Analytic score that I found on this site. The score for AMG is high risk at 7. This score is a ONE-YEAR measure. I am going with the credit rating when I have one. When I do not that I use this site to help guide me.
MGR from AMG was just assigned a credit rating of BAA1 on 3/21/2019.
“Moody’s Daily Credit Risk Score is a 1-10 score of a company’s credit risk, based on an analysis of the firm’s balance sheet and inputs from the stock market. The score provides a forward-looking, one-year measure of credit risk, allowing investors to make better decisions and streamline their work ow. Updated daily, it takes into account day-to-day movements in market value compared to a company’s liability structure”
A good example for me was the new issue from Armour Residential. It’s Moodys daily risk score was a 6 (medium but close to high risk). Tells me, as a flip it’s not too risky. This score is updated daily.
I have avoided B.Riley because (1) I don’t like their investments (2) I have no credit ratings and (3) it’s risk score on a 1-year basis is high at 8.
For the record, I brought a 40% position in AATRL. To me, the credit rating overrides the daily risk score but I did not go to a full position because of it. I think of myself as a conservative investor, so when I see a yellow flag, I do pause. If it were medium risk (6 or lower), I would have gone to 100%
I’m not sure what the daily risk score is measuring because AMG and ARR are on different planets with regards to credit worthiness (AMG is much safer).
What I don’t understand is that AMG is in the same asset management business as APO and KKR but those common stocks have soared while AMG has floundered. Not sure what they’re doing wrong. The epic bull market in everything should be good for AUM.
Whatever the moody’s daily risk score is measuring, it certainly matches Moody’s outlook change to negative for AMG. At least in my mind it does.
I agree the daily risk score is not a credit bureau rating. It is quite different. So trying to compare moodys credit rating to a daily risk score does not even work for same company as AMG proves. Going from BAA1 to a 7 high risk daily score is really night and day for the same company.
I always will use credit ratings unless I dont have one like ARR. To me, some information always is better than no information.
Yes, I do use the daily risk score to compare with daily risk scores of other companies.
Think of it this way. If I have a credit bureau rating it is 4 or 5 times more valuable than a daily risk score. So in the case of AMG’s divergence, it did not make me want to pass. I brought Thursday and today. Will I go to a full position? No. It’s a yellow flag. Same yellow flag as negative outlook. It is easier and quicker for me to find the daily risk score.
Here’s something to ponder about AATRL – why is this 5.15% Convertible Trust preferred due 10/15/2037 GUARANTEED by Affiliated Managers Group Inc., rated NR/BBB and whose only asset is a junior subordinated deferrable interest convertible debentures of Affiliated Managers Group Inc trading at a discount to par providing a 5.58% yield to maturity when MGR, which is Affiliated Managers Group, 5.875% Junior Subordinated Notes due 3/30/2059 and callable 3/30/2024 rated Baa1/BBB is trading at 27.12 which is 3.85% YTC and 5.40% YTM? Both are securities based on AMG’s junior subordinated notes and for the record, MGR can also defer interest payments just like AATRL. So one [MGR] is rated by Moody’s one [AATRL] is not, but S&P, the only agency that rates them both, rates them of equal credit quality so something seems to be out of whack.
My theory is that at the moment, AATRL is experiencing the same kind of concentrated sell dump by an institution or fund that similarly impacted SLMNP for a period of time late last year. The pattern seems to be the same where the selling seems to be concentrated at the end of the day but is not necessarily finished in a single day The important point, though, if my theory is right, is that what’s being seen now in price of AATRL is a temporary event and is specific more to the issue itself and a single sellers requirements to get out of it than it has to do credit concerns behind the issuer itself.. Were it something else, you would think MGR would/should be trading no higher than 25 1/4 or so right now at best… That’s my story and I’m sticking to it – at least for now…. I do need to do more reading though…..
2WR, I like your theory, and sure hope that it does play out the way you envisage.
I have also observed the disparity between AATRL and MGR, but did not come to the theory that you did – guess my advancing age makes it harder to think “out of the box”, LOL.
Would really love for you to proven correct.
Great comparison with MGR. That said, an OTC issue will never trade as strongly as a listed issue (see KTBA vs TBB) so I don’t expect it to trade totally in line with MGR.
Also, totally agree with your instincts that some institution is dumping like with SLMNP for reasons unrelated to company fundamentals.
2WR I share completely your view.
Thanks for posting the link to your source for Moodys Analytics Scores again… I lost my original link and wanted to examine it more closely…
Landlord – I too have more work to do, but I do not think APO and KKR are good comparisons…. AMG is a consolidator of other investment advisors running money I think.. Therefore the closer comparison would be something like BSIG
Thanks. I’m still try to wrap my head around what AMG does and why they’re losing AUM. Yes, sometimes I buy first and research later. 🙂
SteveA, When you first mentioned Moody’s Analytic some time ago I checked it out and was surprised to the upside on its usefulness. Thank you for the intro. Like you I pay attention to the rating agencies but find them a tad slow to react, especially on the way down – so valuing the short-term analytics of their platform. Not all in of course but a useful tool for confirmation or pause.
Alpha, here is an added thought. When looking at Moodys ratings, go to the ratings article. It gives you a written directional tone of where the credit profile is heading. In fact that is the more important part to me is the prose not the assigned rating or the hard numbers which may misrepresent.
One brief example off top of my head concerning SOCGP and its rating.
I know CA is a more difficult regulatory environment. But Moodys acknowledged this in the written report and stated the A3 preferred rating came about in a more scrutinized manner than other companies of an A3 profile. This means they factored this in and company preferred would more likely be A2 or A1 if in a different state.
hold AATRL in a tax deferred account and not a taxable account. It has some nasty tax consequences for US investors who hold it in taxable accounts.
Would appreciate it if you provide your reasons for that conclusion about AATRL.
It is what is known as a contingent payment debt instrument. They are fairly complicated instruments and have 2 big disadvantages.
Prospectus is here.
https://www.sec.gov/Archives/edgar/data/1004434/000104746907009976/a2181124zs-3asr.htm
Disadvantage 1: Phantom Income. The OID income far exceeds the cash paid.
The debt was sold at below market interest rates because of the convertibility feature. The tax law compensates for this by using special rules that force the issuer to tax investors as if they had purchased an non-convertible equivalent bond.
Here is the key paragraph from the prospectus.
“By acquiring the trust preferred securities, each holder of trust preferred securities agrees to accrue interest on a constant yield to maturity basis at a rate comparable to the rate at which AMG would borrow in a noncontingent, nonconvertible borrowing, 8.0%, compounded quarterly as well as to the reasonableness of this “comparable yield.” As a result, each holder generally will recognize taxable income in each year significantly in excess of distributions (whether fixed or contingent) actually received in that year. ”
Disadvantage #2
No cap gains treatment.
From Treasury Regulation 1.1275-4(b)(8)(i)
(8) Character on sale, exchange, or retirement –
(i) Gain. Any gain recognized by a holder on the sale, exchange, or retirement of a debt instrument subject to this paragraph (b) is interest income.
(though it is unlikely that you will have cap gains with the cost basis shooting to the moon with the OID accrual)
The other one that comes to mind with this setup is CCZ.
So, the place to hold this is in a tax-deferred IRA, so there is no taxable income, Is that correct? Or does this impact IRA’s in some strange manner also?
Justin, good point, and you have mentioned this before. NYCB-U is of same ilk also. I have always ignored because I buy all non QDI in tax free accounts. So I always forget about that part of the feature.
Added thought, Im pretty sure this issue also falls into the camp of owning phantom income taxes if issue ever had to go into deferral. My experience is these usually hold that provision. But Im not digging to find out.
What is going to be awesome? In all the blog sites i read… there are many individual investors sitting on cash. This usually implies “timers.” They are timing the market. As every month goes by, they are getting anxious for when is the right moment to supply and invest their cash, and seeing how much that money markets have been paying them for their cash.
What would be interesting to see is a 5% drop, and have a % of investors jump in. What if it then goes to a 10% correction? Those timers (not long term holders) will then jump and sell everything on their new 5% loss. Then after a 10% correction, is it done and you should get back in? This will create even a more frenzy as you potentially have market price dumps.
Was very fun when Dec crash of 2018 happened in a span of 1 month. But what about a multi month dumping of say 3-6 months? Fun to think about the opportunities and guessing what will occur. Sorry, I am bored after a drop of .02 % on my portfolio, and am entertaining myself on what if conditions.
Mr Lucky–you KNOW that most individuals buy high and sell low. In times of uncertainly like that I will ‘leg in’ to positions—some this month–some next month and on and on.
I have also encountered posters on various financial boards and websites stating the same thing – they are heavy in cash, awaiting the proper moment to put that cash to work.
Multiply this by thousands, maybe even millions of investors across the planet, and there could be a huge rebound from where stock markets bottom out once that sidelined cash is injected.
I myself have about 15% cash, looking to put it into VTSAX or VFIAX at the opportune time. GLTA
Looks like the market has the flu this morning, no pun intended. Maybe a bargain will show itself? Or is this a start of a more serious correction, long overdue imo. I have dry powder available as I’m 47% cash in the taxable acct. and 32% in the non-tax acct. We’ll see.
What are your thoughts?
Some Shipping preferreds have come down already to interesting levels, the usual knee-jerk reaction when oil takes a tumble
Agree, Gabrierle. I bought a starter position in CMRE-C last week and GLOP-A this morning.
Yep, bought GLOG-A and GSLD under par.
I sold a lot Friday as I did not believe the information out of china. I sold another bunch today. I figure I can buy back when this blows over. I am now 35% in cash.
TIM P
I could really use some help on my prior question of the 24TH about parts missing:
Today, I don’t see the various categories on the right hand side- Preferreds, Debt, REITs, etc–anyone else missing them?
and in a reply — (HP suggested I shrink my screen sizing):
Nope- it’s on my 24″ – just not there- all the others- Links, posted, archives, comments.
Maybe Tim will know. Switched from Safari to Firefox- same.
No luck with Chrome either.
Not sure if I am the only one, but I feel like I’m missing a lot of info –
Thanks
G
This what I see using a Windows 10 and Firefox:
Are you talking about this:
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After that comes “Archives” and then “Recent Comments”
danzeb-
Sorry to say, looks like you have the same missing sections. But why is no one complaining? Odd.
thanks
g
Hi–now that I am back from vacation I got it fixed. When the last changes were made to the site it was somehow left out.
We’ll check into that ASAP, Gary. Thanks
Gary–am checking–you are correct something seems to be missing. Maybe when Chad made changes a week or two ago.
Of income investing “interest”:
Kimbell Royalty Partners (NYSE:KRP) a leading owner of oil and natural gas mineral and royalty interests in more than 94,000 gross producing wells across 28 states, declares $0.38/share quarterly dividend, -9.5% decrease from prior dividend of $0.42. Forward yield 9.78% Payable Feb. 10; for shareholders of record Feb. 3; ex-div Jan. 31.
Kimbell’s distributions may vary based on certain factors including, but not limited to, the price of oil, natural gas and natural gas liquids and production from Kimbell’s royalty assets, as well as cash needed for debt service obligations, fixed charges and reserves for future operating or capital needs.
So you think that money is the root of all evil. Have you ever asked what is the root of all money? Ayn Rand
Nomad
Looking for opinions about the current pricing of the two “L” preferreds of BAC and WFC….as of friday close BacL is at 1539 and WfcL is at 1530…..as you know both most likely will not be called in…..the current yield on BAcL is 4.7% and WfcL is 4.9%….I see the new JPM 4.75% preferred is currently trading at a yield of around 4.6%…..I don’t want to overreact and sell my two L”s….looking at JPM if you extrapolate the L’s out to 4.6% they would trade at 1576 for BAC and 1630 for WFC….both at 4.6%….does it make any sense to look at it this way or is there some other way to bring them to what current value might look like….thanks…craig
Craig – you should look at YTC as well as nominal yield. In the case of the BAC and WFC issues the yield is the yield. YTC on JPM is 4.23%. If looking at only yield you wouldn’t buy the JPM issue.
But then the issuers are not the same. JPM pays less for good reason. If you want JPM exposure, looking at all the outstanding issues, JPM-J is what I’d be buying for a buy and hold investors.
Those that fancy themselves as good at dodging bullets would go for JPM-C’s higher nominal yield.
All at present pricing.
Is there a method of way the premium erosion happens?….For example I own CHSCL trading at around $28…the call date is 5yrs out….will that premium gradually go away or will it wait until the last 12-18 months or is there no easy answer to this…right now ytc is around 4.6%……..to me ytc doesn’t mean that much in this situation because I will not keep it until maturity….I think it’s good for 2-3 yrs from today but will be sold long before the maturity date comes up…is this flawed thinking?(alan greenspan comment)
Craig, these are a bit more problematic in guessing than the more typical high priced preferred. I would suggest you will have more of an answer in 2023 when CHSCP comes up for call date. If they renew that one AGAIN for another 10 years you may have your answer. CHSCP went past call in 2008 and didnt get a 10 year renewal protection until July of 2013.
But if you look at CHSCP chart it still had a slower descent towards par as it approached 2008. When it didnt get called it started creeping back towards $30 well before any protections were voted on. However mixed in all of that we had the 08-09 crisis and long end yield collapsing also that need to be factored in also.
Plus going forward one doesnt know CHS financial position to be generous going forward with a higher than market yield. Or if rates climb by 2025, who is to say it isnt under “par” at that point from a higher yield environment and it stays outstanding for that reason? So you take your chances…That being said though in a vanilla environment of above market yield issues, they tend to slowly descend towards redemption price a couple years out.
WFC-J was a prime example. An 8% Wells Fargo issue. Anyone buying about a couple years out from its call date ironically fared more poorly than one who bought right after approaching call date. As the issue feared the call and dropped several dollars over that time, but it actually lived on another year or so before being redeemed.
^5 Gridbird….thanks.
Grid – You say this about a CHSCP renewal review to potentially extend its call protection for another 10 years as if such a review is baked into its papers. Is it? It was such an unusual, unprecedented one off move on their part to have extended a call date back in 2013 that the only reason to even think that it could happen again is that it happened once in the past, right? There’s no mandated review? I’ve never owned this one (no surprise to you, lol) but have reviewed it because of that unusual action in 2013. On the surface, you’d think it would be more difficult for them to extend yet again should today’s interest rate environment mimic the same in 2023 rather than what they were in 2013 when rates were about 80 basis points higher on Treas..
To my original question, the point Grid was mostly making was to look at CHSCP for some sort of direction…..they have at least 3 other preferreds that mature before L….ranging from 6 7/8 to 8%…..what they do with P and the others will most likely be an indicator for L….
Got it, Craig – makes sense…. and just for the sake of some friendly b-busting, I suspect everyone “will be sold long before the maturity date comes up” on all CHS preferreds since they’re all perpetuals…. lol… I think you mean call dates, not maturities… just pulling your chain……
2WR, I was not suggesting there would be a review in 2023, just stating they did that 5 years past call last time. Nothing in prospectus provides such measure to do so. But there was no other reason for it have occurred than except to ensure helping those they wanted to help. They are a CO-OP not a C Corp. But also remember CHS was in a different place then though. The cash was flowing, they hadnt started the fertilizer plant fiasco, etc. It was just a different way to ensure a check and pat on the back to the owners of the preferred who were largely part of the patronage system it works off of got some of the spoils.
I couldnt even formulate a bad guess on what would they will do in 2023 with it. . But I sure would take my chances if I could get in on CHSCP at even $26 though (yes, Im dreaming)…A little useless history here…Remember the 08-09 crisis when most bank preferreds cratered 75-90% below “par” and even solid IG ute preferreds tumbled 25% below par? It appears that CHSCP never really fell off of par even then. Shows what strongs hands (an Inspbudget term here) will do to support an issue if people dont sell in panic.
CHS delivers the gas that heats my home…..I’ll take my chances…
Forecasting the price decay for an issue coming up to first call isn’t easy. If it was it would be a lot of free money. And free money has a way of attracting a crowd.
If it’s a game you want to play you need to have a deep understanding of the company, it’s capital structure, history of past calls, etc.
And you’re going to have to watch the markets closely. As in daily.
Look at a lot of price charts that have already come up to and gone past first call.
Do these things and you will develop a “fee” about calls. Even then you will get it wrong much of the time.
Nom
Kimbell is a good royalty trust but personally , I don’t want to own this class of assets. The reason is that their income depends on commodity prices which is beyond their control. Also as I understand it, U.S. royalty trusts are not allowed to hedge so that Kimbell depends for income on market price at the time of sales. This is not a way I want to derive my income. But of course it is different strokes for different folks. best sc
sc, I am certainly not recommending any security to anyone here; this is factual information only. I spent 24 years on Wall Street after going to Law School and retired over 4 years ago. I have been a land developer (forest land, strip centers, NNN lease properties, town homes, boat & RV storage) for many years and don’t even feel comfortable giving people advice in that area. I don’t know anyone’s risk profile reading this post (but my own), goals and time-frame to be able to counsel investors here. I occasionally post investments that only I have made. I am long KRP and continue to accumulate on dips. I highly suggest and encourage everyone do there OWN deep due diligence before investing and NEVER take anyone’s advice that may not have your best “interest” in mind.
Time flies over us but leaves it’s shadow behind, Nomad
Nom
I did not mean my post as a criticism of your post rather meant to supplement it with some detail that may not be that easy to established. As it happens ,have been thinking about Kimbell for a bit but was burned by two other royalty trusts and so far have just been unwilling to buy.
As it happens, I and many others value your timely offerings of information and sincerely hope that you will continue to make your views known. This site benefits from many among whom you are one important contributor. thanks again . SC
sc, we all are fortune that Tim created and is self funding this financial site. Hopefully, everyone reading this is interested in help each other through the maze of investing. The “average” investor has little chance, (for many reasons) as the game of money management is built to enhance and profit by those that are mega larger institutional clients. As an example, look at the 144 rules; just why should institutions be able to invest in better bonds than the “normal” investor? Why does the SEC not go after those aggressively that are pumping risky investments like penny stocks, private energy trusts, partnerships, insider trading, quant trading, corporate fallacies etc with the same vigor that they focus on civil forfeiture and stopping the public from having the same advantages as the institutions.
Sorry, rant over…
Nomad
Nomad
your rant underlines why I posted. No one talks about the inability of royalty trusts to sell options or explains that regardless of how good the trust management is, global energy prices will significantly impact their income. These are my concerns. I actually as I said, like the Kimbell management but feel that they are in a much riskier business environment than many normally realize. Have a great weekend. sc
You are right. Big players want the so-called retail investor out of the game.
I have been advising HNWI for years and it has become increasingly hard to invest in the bond market. What kind of diversification you can achieve when most of interesting new issues have minimal investments of $500k? You need billions not millions anymore.
Gabriele – you are yelling “fire” when you should be yelling “FIRE”.
You are, of course, totally right. The advantage, which has always been with the big players at the expense of individual players, is going further that way, and quickly.
Two very simple solutions: Convert the bond market from OTC to exchange traded (over Wall Street’s dead body) and get rid of Rule 144 (over the SEC’s dead body).
There is no good reason not to make both changes. Emphasis on word “good”.
Being within the E&P sector. An ongoing trend is to dump our mineral rights into these royalty corporations for shares within the royalty trust.
Changing these rights from a balance sheet drag down into an offsetting asset.
My view is you are riding a big bull which can buck you off at anytime.
Why YTC matters … an example.
Like others here, I enjoy poking fun at Shrinking Alpha. Especially the HDO group. On more than a few occasions I have commented on their posts about the importance of looking at YTC, not just nominal yield. Like clockwork, this has been greeted with derision by the HDO hit-man, pendragon. And a few others. YTC doesn’t matter, I was told, just dodge the truck right before it runs you over. Easy. Until it isn’t.
Recently, someone read some common sense into those fellows and they did an entire post on the subject of YTC. Why, I almost fell out of my chair when I saw that! Perhaps PST has finally taught the boys at HDO the facts of preferred stock life.
In any event, today I put that principle into motion, selling KKR-B at a YTC under 1% with 1.64 years left on the call clock. Someone bought the issue for its 6% yield, probably not appreciating that 6% will turn into 1%.
If I did the numbers right I got paid $2.50 for $2.84 left in dividends before a certain redemption. So, I have 18 months to try to make more than 1% on my money to come out ahead on the trade.
I think I can do it.
Any thoughts on CUBB? Baby Bond issued by Customers Bancorp (CUBI, based in PA with branches in the northeast and Chicago–though most are not retail branches), in part to retire a higher rate preferred (they have 4 higher yielding preferred issues). Coupon at IPO last month looked a bit low for a low-rated security (BBB- Kroll), of 5.375%. Trading at around 25.60. Not callable until 2029, matures in 2034. Small bank may be vulnerable to a take over, in which case redemption can be accelerated. On a relative basis, this seems pretty enticing. Question really is the longer term safety of Customers, With nine years of interest payments pretty much assured, seems like a relative bargain based on recent rates. Thoughts?
OldmanBB, I had recently bought a starter position in CUBB @ $25.40.
From the prospectus, events that could trigger redemption are a Tax Event, or a Tier 2 Capital event.
Was looking for the usual ” change of control ” clause for early redemption, but there does not appear to be one.
And, of course, not forgetting the ever present interest rate risk, and credit risk.
inspbudget: You are correct. I erred. Change of control does not allow redemption (unless the change results in a Tier 2 Capital Event or in the company having to register under the Investment Company Act). Thanks for the correction.
Cubi’s common stock has been under pressure. And seeing it was new in like 2012ish and run by Sidhu well I’ll be happy if it survives.
Their preferreds have always been thinly traded, move a lot on low volume, and right now all seem to be collapsing back towards par. That they haven’t floated new issues is also telling. Most I know have scaled back to minor positions. If you get involved be sure it’s on a limit order well conceived VS calls
IUP – Are you talking about the same CUBI that on December 9th issued $74,750,00 5 3/8% notes due 2033 and also just last week reconfirmed their 2020 target earnings of $3.00/share up from $2.20 in 2019? That same CUBI? And could that “collapsing back toward par” on preferreds (something hard to confirm anyway imho) have anything to do with the preferreds’ approaching callabilities starting 6/15/2020 going thru 12/15/21 depending on series? And Sidhu’s constant harping in at least the last 5 quarterly CC’s about how anxious they are to call all series when their first calls come up? The same CUBI that’s quantified in mulitiple CCs the amount of savings that will flow to the bottom line when the preferreds are retired? That same CUBI?
Yes that cubi.
BUT I did NOT see that new issue. Nor did I hear his comments.
….. somehow I missed CUBB. That’s a good thing for cubi common. And their other pfds.
Today, I don’t see the various categories on the right hand side- Preferreds, Debt, REITs, etc–anyone else missing them?
Hi Gary
Try reducing your font size
I always have to do so one of my smaller monitors
No problem on a larger monitor
Thanks
Howard
HP
Nope- it’s on my 24″ – just not there- all the others- Links, postd, archives, comments.
Maybe Tim will know. Switched from Safari to Firefox- same.
thanks
G
Anyone know why PEI-C & D are down so much today? PEI as well, but less.
Here’s My story of a lost opportunity and a lesson learned. I own about 1,000 shares of BC-C as a sentimental holding. They make the Sea Ray boats and I own a 2003 185 Sport that has been great fun. As a leisure industry company, I think they are safe as long as the general economy is not in recession. The price spiked today by about 0.35 to 27.85. I wasn’t sure why but this seemed like a sell opportunity. I put a sell order in splitting the bid ask at 27.80 thinking I would Give it a couple of minutes to hit , if not then I could lower to the bid price. Within a minute my order got hit for 100 shares at 27.80 and the bid side lowered to 27.73. I decided that was a fair price for my remaining 900 shares and adjusted my asking price. By the time my sell order updated the bid was down to 27.50. I through up my hands and was grateful to get 100 shares at a good price. I was quibbling over pennies and it cost me dimes. I later learned that Stifle had put in a buy recommendation on the common shares as a possible reason for the spike. If not a sentimental hold and if there was something else to invest in, I would have been out at 27.00.
Can’t fret over missed opportunities if you put in a lower offer it could’ve gone the other way. One thing to consider next time, if you accept the bid price you might get price improvement which could be more than pennies on a wild move like that. I generally offer the bid price if it’s high, or just below the ask price.
I have learned (the hard way) to never be bashful about taking profits. Some of the spikes I am seeing in income securities are quite astounding. On January 2nd I initiated a 2000 share position in Brookfield Property REIT (BPR) in the $18.20 range. On the 16th it spiked up to $19.90 and on the 17th hit $20.00. As soon as I saw the $20.00 print I was out for a 15 day cap gain of about $3500. It just shocked me. Today BPR closed at $19.37. I will look at it again if it breaks $19.
Picked up some GLOPprC at $24.15 yesterday on a downgrade. Preferred is the only way I own shippers as the common is too volatile. Certainly not investment grade but good for speculation. 8.5% until 3/24 when it goes to 5.3% plus LIBOR (if that still exists ). Nice to get something at a discount and not to be concerned with the ‘yield to first call’ numbers. I just need to be concerned with company finances. They report on a 1099, a K-1 would have been a deal breaker for me.
Can anyone give me some input on a floater like BAC-E. Its been down in the lower 20s and now back up to par. Is there any reason why this or a similar issue would go above par?
I’m bearish the floaters due to the transition away from LIBOR and to SOFR. By definition SOFR is lower rate than LIBOR
MBNKP anyone have any info on it?
New BAC issue …. what it means for you.
BAC has issued a new, non-listed, $1,000 preferred with BBB- rating, 4.3% coupon, adjusting to 3mL+2.664% after 5 years. $1.1 billion worth.
The outstanding, callable, exchange-traded BAC preferred issues that have yet to reach first call have coupons ranging from 6.2% to 5.38%. At present interest rates, or lower rates, they are all gone. The first of these to become callable is BAC-C, with a 6.20% coupon, trading at 26.22 (stripped) and a YTC of 1.38%.
The post-call issues are all Libor floaters with very low spreads and minimums of 3% and 4%. In all cases, the minimums are in play. The best of the post-call issues (L excluded) is BML-J, trading at a yield 4.13% and no call risk. This is above the YTC of any of the pre-call issues.
If anyone out there is holding the pre-call issues you are implicitly betting on (not just hoping for) higher rates. So that the prices for the pre-call issues will fall, and won’t be called, and you will receive the coupon rate.
Just in case you wanted to reconsider the strategy.
Good points Bob. Thanks for the input.
The merger of BBU and TOO is supposed to close tomorrow. I’m still not sure what will happen to the TOO preferreds but I’m still holding the E shares. If anyone has any insights or information on the preferreds, I would appreciate it. It will be interesting to see what BBU does.
I’m back from Vegas.
Broke, busted, disgusted, dealers can’t be trusted.
Boy did the missus and i get shellacked, parlayed, delayed and waylaid.
The Buffet at Caesars is $55 weekdays. Yeah, i lost 3 pounds that week.
But i’m back to my trusty fishing hole here.
Hope the fishing is good
Glad to be back..
Wow. I’m old enough to remember when the rooms and dining were cheap in Vegas.
Jumbo Shrimp cocktails for $ 1.99
Rooms were comped at the end anyways.
Those were the days my friend.
Does anyone know anything about this preferred MBNKP ? Is it safe ?
Thx
Vegas not what it used to be ….too many people. rooms and food too expensive Dealers don’t know what they are doing and not friendly.
I had been going to Caesars since 1982 sucks now
Max, Im heading to Caesars in February to watch my beloved Blues take on the Golden Knights.
Well have a great time , with the baskets!
Go Blues!
For just a few more dollars try Hugo’s Cellar at the 4 queens. One of the best steak houses in Vegas.
Gundlach’s roundtable
https://www.youtube.com/watch?v=z9TWGlJPdew
I’m interested in people’s thoughts.
This is the second of three.
Tim, I periodically read of you and others buying a preferred or baby bond for your sock drawer. I assume these are your buy and hold positions. I was wondering if you would consider setting up an “Additional Links” thread for sock drawer, but and hold or something like that.
Thanks again for this great site!
Hi Alan–sure that makes some sense. Will get it kicked off in a day or two–thanks for the idea.
I’m always finding single socks after doing laundry. Thought it was because the mate got lost. But stocks pay dividends. Maybe the single sock is my dividend earned on sock drawer investments.
Type “sock draw” into to search box to find discussions.
Thanks danzeb. I tried it and found a lot of good discussion about sock drawer issues.
Thanks to Tim & many more who have provided an education on preferreds and BB. I’ve used this knowledge to move from a CEF or two to creating a portfolio of specific issues. I do this mainly with my parents (aged 70, 30% position) who are retired and living on the proverbial fixed income.
I’m still in the accumulation phase so my allocation to preferreds is much smaller. It’s centered around some QDI (7.5%) and Non-QDI in an IRA that is focused on Non-IG fixed income (preferred and BDC, 15%). I’m waiting on a pullback to buy BDCs. I decided on Friday to sell some of my Apple position to bring it back down to 3% (from 4.25%) despite realizing some hefty gains. New purchases are a few non-traditional income vehicles. In my taxable, I’ve bought TIPWX (Bluerock Total Income & Real Estate, will become 5%) and in the IRA i’ve bought NICHX (Variant Alternative Income Fund, will become 2.5%).
You might want to consider rqi or rnp both cohen and speers managed funds.This firm specializes largely in property and has a family of funds in the sector all of which have done very well. Of course each fund and investor has their own requirements so do your own dd. best sc
mrinprophet,
Would you be so kind as to explain why you purchased TIPWX rather than one of the other classes of Bluerock T-I-R-E fund, TIPW being class C with Class A, I, and L also available; Secondly, why did you purchase this fund, which has underformed other equivalent funds widely ? ( I understand it uses a very different investment approach. )
I have not purchased an ‘open’ mutual fund in over 20 years and am interested in your thinking.
Thanks
Howard
Howard,
As we all know, we are responsible for our own due diligence, but I’m happy to share mine.
I was looking for private real estate (RE), not public REITS. REITs have posted very strong returns and I’d prefer to avoid equity market sensitivity.
I was looking to keep it relatively simple and purchase one option, and not a lot of individual positions. If I learned one thing from 08/GFC, it was to be wary of asset / liability mismatches, which is particularly true with leveraged vehicles. I learned that because open-ended, core RE funds did ok following GFC, while I watched a number of open-ended, value add funds (65%+ leverage) become impaired, implode and either go to zero or turn into 10/35/50 cents on the dollar. That helped me figure out that what type of RE i wanted. NOTE… this is an interval fund, not open mutual fund. Interval funds are an interesting way to allow investment into private vehicles, while still limiting liquidity. If you aren’t familiar with interval funds, you need to do homework before investing.
In my real world job, I have exposure to a number of the underlying investments in the Bluerock fund and have met with one of two of the management teams. I also met with a few mgmt teams from funds that blew up in GFC, so take that with a grain of salt. However, this fund exhibits a number of characteristics I was looking for (<30% leverage, nationally diversified, light on retail, high occupancy rates) that would deliver Core type returns (6% focused on income returns). I chose the share class because it was the highest minimum, lowest expense ratio. Fees are high, but largely due to underlying managers.
Hope that helps.
I missed my window to edit after this came to me.. in short, I’m looking for NCREIF returns, not NAREIT. I felt this was the best way for me to get that.
Mrinprophet
I appreciate your explanation.
Howardh
Mrinprophet-
Thank you for the explanation and understand your objectives but the price for me is too high. The interval funds which I’ve looked at were too restrictive in terms of ability to draw down funds and most had only delivered mediocre returns. Given that funds are tied up for prolonged periods ,one would expect superior returns yet this was not the case. This fact made them not a product I wanted to own.
Could I trouble you to expand a bit on what you see as the benefits of NICHX please. Neither of these funds is covered by Morningstar . Thank you in advance for your inputs. SC
PS Just to be clear. Interval funds claim that they can obtain stronger returns because they have stable capital which they can invest. Yet the interval funds which I’ve looked at ( admittedly this was six months ago) generally showed weaker returns than closed end funds in the same sector.
One might be able to say that these funds are less risky but given that most of them are closed end and as a result less open, for me this argument did not prevail.
I have always wondered who actually supported these funds and why.If the numbers made sense would be interested in them but as I’ve now said several times, they have not. Interested in the views of others. tia sc
Sorry the above poorly stated. What I meant that most of the inverval funds are not publicly listed which makes getting data on them a bit harder. This comibined with lesser returns have been reasons to pass on these opportunities. Thank you for your inputs. SC
This is a bit of a rabbit hole, but I’ll try to explain. I work in the institutional investment space, so i see (and have seen) a lot more than the average investor, and its my day job (not that it means much…lots of terrible investors have it as their day job). With that said, I believe the retail investor is better off with a simple mix of index funds (net after taxes and fees). Which means that most folks would be better off steering clear of actively managed product, including interval funds (IMO). The vast majority of my own beta exposure is through index funds. Buy beta as cheap and efficiently as possible, only spend fee dollars on things that are differentiated. I’m attracted to three areas (preferreds, MLPs, BDCs) for individual securities because it’s where institutional money largely is not, and thus I feel like I may have the ability to add some value.
The two interval funds I’ve purchased have been because I was looking for the specific exposure first, and then found the vehicle second. In both cases, i have some knowledge/insight into the management of the fund. Without that, i likely would not have pulled the trigger. The real estate exposure (NCREIF vs NAREIT) hopefully was explained above. As for Variant, I’m not looking for traditional high yield exposure. I pulled the holdings from the SEC and it is differentiated (litigation finance, music royalties, real estate debt, art financing, trade finance, etc). I’ve heard of some of the underlying managers which also gives me some comfort. It’s credit that is more about the loan than the spread. So, in both cases, I”m hoping to get truly diversifying exposures that I have not been able to find through traditional means. Hope that helps.
Mrinprophet-
Thank you for taking the time to explain your thinking. I too like diversity but not at the price of giving up too much yield. Most of the interval funds given their lack of liquidity, just don’t cut it for me. In fact to be honest, I’m offended by some of the managers who promote this product in that they are giving low yields and yet they want to hold our funds for prolonged periods. I don’t know any of them personally so this may give me a stronger reaction.
I do like several BDCs and think that they are probably more promising that MLPs because the MLPs are ultimately dependent on energy pricing which is beyond their control.
BDCs such as Newt,CWCP( probably wrong southwest capital) and ARCC are all firms which seem to be responsibly managed. I would be interested in the names you favor?
In the MLP area, I normally went for the holding company and almost each time it has not been a happy event.Finally, many people think that the U.S might become a major energy exporter but if the shift to clean energy continues many of the new LNG export facilities both built and scheduled could potentially find themselves under utilized and without significant long term contracts to protect themselves. This makes them a lot more risky than people realize. Just my thoughts.
Appreciate your openness and willingness to share. I for one do not mean to appear to be questioning your judgement. Rather, I’m trying to learn and see if my thinking is correct. Very much value your inputs. SC
I
SC,
On interval, for me it goes back to asset/liability mismatch. In both funds I’ve mentioned, I wouldn’t buy them if they weren’t interval funds. The underlying assets of the fund are relatively illiquid, and the last thing you want to be is a forced seller of these types of assets… it’s how you get really burned. Therefore, the interval structure is key in that it protects the capital in downturns, which is when typical investors want to redeem. The structure has to match the underlying asset pool. I’m not worried about yield… I am focused on total return streams that are differentiated from the traditional equity and interest rate betas already in my portfolio. High fees, low liquidity however, is something the average investor should avoid however.
On BDCs, I have list of just four that I would own. In order, they are GBDC/ARCC/TSLX/WHF. Lending is an asymmetric business. You can only make so much (interest, fees) but can lose 100% of your capital. As such, I’m again not interested in overall yield, but who does good credit work, because that’ll be what matters when things get ugly. My focus is on historical loss rates/non-accrual rates. I want my money back first, yield second. IMO, they’ve all been bid up recently to the point I wouldn’t buy more of any of them. My experience is in private debt funds where mark-to-market isn’t a daily issue. I’m waiting for the next downdraft to make significant investments here because average retail investor is likely to oversell them… currently hiding out in mostly past call preferreds pinned to LV. I have/would buy one of the CLO funds, but only as a short-term trade, not a hold.
On MlPs, Camroc might be the best source of info. My play is more about the psychological impact of the conversion from MLP to C-corp. I made money on the EEP/SEP roll-up (which I’m out of of) and my only substantive holding is KMI. I love the fact that any time a positive article is posted on KMI there are 30 people that yell about being “kindered”. Let them stay away, I’m happy to own a lot of it (2.5% position) because I’m not anchored to the past. There is also some seasonality to MLPs due to taxes. Like I mentioned earlier, I like parts of the market where individual investors are the main participants.
No worries… the beauty of this site is the free and open sharing of information. Due your own due diligence, but I’ve learned a ton here and made a few steak dinners along the way. 🙂
Mrinprophet
Thank you again for your timely reply.
l. For now I guess we agree to disagree on interval funds but your point about liquidity makes sense to me.
2.BDC- yes agree with you completely that arcc, gbdc and tslx are all first rate.I do not own gbdc or tslx but have bee tempted and will own gbdc shortly whf is not one I know a lot about.
3.See my comments above on mlps. Have owned edp,wmb and et and lost on all as I view them as long term holds. ET has a founder key exec who is not unit holder friendly. My points above still hold true as to their vulnerability to energy pricing and potentially world demand.
I’m afraid that I’m too far removed to want to even think of the cleo funds which are really a pig in a poke. You have very little idea what you are holding.Way outside my comfort risk acceptable limits. To be honest, a bit surprised that you would be comfortable with them but then you may know more about them than do I.
I’m presently traveling in Asia so a bit tricky on replies but greatly value your inputs. best SC
Anyone on here know anything about Day Trading Academy?
$944 Trillion Reasons Why The Fed Is Quietly Bailing Out Hedge Funds
https://www.zerohedge.com/markets/944-trillion-reasons-why-fed-quietly-bailing-out-hedge-funds
There is trouble on the horizon my friends. The Federal Reserve and parasitic financial system it created long ago has been a century long festival of tribulation and borderline treason. The Fed has destroyed the American currency for the benefit of few.
$23+ TRILLION of US National Debt http://www.usdebtclock.org with no real way to repay the principle except a devastating devaluation of the currency or asset confiscation in the future…
“Money is the barometer of a society’s virtue” Ayn Rand
I have no agenda and only care about protecting those that are reading my words and absolute truth, Nomad
WOW! While I could not have explained that in quite such a technical way, I’ve been saying all along that our economy is like a snow cornice – ever building and getting larger without the least bit of structure under it. The bigger it gets, the harder it falls. I wonder how long it can keep going? Into the quadrillions, quintillions…? …yesterday?
Those closest will be relatively unscathed, the rest of us will be under a billion tons of snow. Not to worry, though, I have more than a few shovels. 🙂
Thanks for sharing. That’s scary stuff to the point of wanting to sell everything on Monday, lol. Leverage is evil, even though we have all used It in our lives. Most market crashes have started because of leverage, margin calls. But 944 trillion, I can’t imagine that. I’ll share one simple idea with everyone. Bad things happen below the 200 dma. Most bear markets Spx never trades above 200. I was asked by family members years ago how to manage their 401-k money. I said for the portion you want in stocks, follow the chart of Spx weekly and when the 2ema. Is above 60ema. Be long the market. When it’s below be in cash or TLT. Hope that helps somebody. ATB
TimH, I tried reading over your last 3-4 sentences a few times. Are you typing on a cell phone? I try to not use my cell for typing too much as it tends to think it is smarter than I, and it substitutes words automatically. I then have to undo some words or force my words. I also live in MN and got done doing some more scooping earlier. I also tend to stay away from typing after shoveling… because my hands are frozen. 🙂
What question did you have?
Wondering why ARES-A has not been called. They could easily refi this 7% coupon around 5%. Trading at $27.40. Anyone have any thoughts?
First call 6/30/2021.
Oops, my bad! Had a different call date in my spreadsheet. I guess this is still slightly positive YTC.
This was a good pick by Rida
Actually 99% of all picks by any investor or any advisor have been good for the last 11 years. Everyone is looking like a genius.
Does anyone have any insight on AIRTP?
Gabriele, I have tried to understand the accounting of this holding company a few times and never could get a clear understanding. I looked hard when the shares were thrown out into market last year at the $2.5 par. I bought and sold for a dime profit back then and chickened out.
I tried to hit a 23.50 low ball first day flip this week when it reversed split to $25, but just missed out. I doubt I am a player without it being low hanging fruit.
Oooh, someone paid $37.00 for KTBA yesterday. Limit orders are your friend.
Good
or
Bad
??
https://www.marketwatch.com/story/us-treasury-says-it-will-begin-selling-new-20-year-bond-2020-01-16?mod=mw_latestnews
I kinda want some GOLD……………..no?
Fresh Fed’s balance sheet: +$26bln.
Party like there is no tomorrow…
Any feelings about CBKLP? Coupon of 6.125%, trading at about $102 on $100 par. Callable. Credit seems strong. Volume is low, fairly illiquid, as are most $100 issues.
It’s a 144A issue so most brokerages will not allow retail investors to trade it. TDA does allow it to be traded and I do have a small amount of it. I still worry about when it is going to be called.
There had been a big block of about 4000 shares for sale on the offer the past few days but that is now gone.
Thanks Tim. Fidelity seems to allow trades and, I think (correct me if I’m wrong), the 144A exception means there is no required two year holding period (though at the current yield and the credit quality, I have no intention of getting out). Most of the meager volume seems to be institutional, so if there is a “run” on the issue, it could temporarily succumb price-wise. But the 52 week range is $100 to $108, so–particularly with low rates–there is no run imminent.
144A means that they are privately placed securities traded by only institutional investors or other “accredited” investors which eliminates many retail investors.
I have not heard before that Fidelity allows this. I do know that TDA does allow CoBank issues to be traded as I mentioned. I’m not sure if it’s an oversight on their part or not.
CBKLP is a wonderful issue from a wonderful company. Just comes down to price. And possibly liquidity.
If you need liquidity in all your holdings then don’t buy it. But consider why you would need 100% liquidity in your portfolio.
There has been a persistent seller at 102.25 for the last 10 days or so. I already have double my absolute credit limit for a single issuer, or I would buy more.
Bob – do you have any insight about the potential this one would get called soon?
Tex, you have to realize the genesis of CBLKP was from a redemption of a previous preferred redeemed (Series D), so it can definitely happen. We know the credit rating and we know credit ratings of inferior ratings are getting sub 5%.
Yet, as Bob correctly mentioned Co-ops can be slow to redeem these as they are not on the same need to maximize returns like public companies do. It really becomes a risk/reward and need of secure income. I reentered again in past couple weeks at 101.75 and $102. The next divi is secure, so I am risking about 35 cents blended to steal 100 plus basis points in yield for however long it remains. Like most purchases it depends on your expectations and needs.
Thank you!
I was looking at their website and noticed that 2013 & 2017 they appear to be missing some quarterly dividends based on the table below. Does anyone have any insight about this? Is this just a typo? When I look at other sources, they appear to have paid each quarter.
https://www.cobank.com/corporate/financial
Preferred Stock Dividends Payable
2019: January | April | July | October
2018: January | April | July | October
2017: January | April
2016: January | April | July | October
2015: January | April | July | October
2014: January | April | July | October
2013: July | October
Nah, they have always paid. Wouldnt you rather own this CoBank preferred?
The good old days…
CoBank ACB, 11.0% Non-cumulative Perpetual Preferred Stock, Series D
Ticker Symbol: CBKAL* CUSIP: 19075Q508 Exchange: OTOTC
Security Type: Traditional Preferred Stock
* NOTE: This security is no longer trading as of 10/01/2014
Security has been Called for: Wednesday, October 1, 2014
See Grid’s comment, which would be mine. CBKLP is a call risk I will gladly take. At 102 at least.
Tex,
CoBank issued preferred stock to bolster their (already high) capital ratios but they have lost taste for third party capital as it can appear to be expensive relative to their ability to issue GSE debt in the capital markets. The primary source of capital is the coop member/owners’ retained earnings which pays a patronage (dividend) of 50 to 100 basis points on the loan balance. I don’t think CoBank will call CBKLP without issuing a new preferred because they would not want their capital ratios to appear compromised. They can probably save 100 basis points of coupon but it will cost them 2.5 to 3.0% of up front underwriting fees. With that said, any new issuance would most likely need to have the full year financial results included in an offering circular (144A prospectus). I don’t expect the full financials to be released until end of March. I would be surprised if they didn’t call and re-issue a new preferred but I think the first quarter is safe. I’ll continue to try and accumulate more CBKLP at a price below 101.75 and hold through the March ex-div then sell and buy new issue. CoBank is a great company Credit wise. An additional thought on the call likelihood: I’m pretty sure some of their dairy loans have been hammered, they’ll have to disclose any loan problems which could delay a new preferred issuance until those loan problems are resolved or risk a higher coupon on the unknown.
The first dividend is secure because they only can redeem at payment. Its largely a guessing game beyond that. In 2013 they announced a new issue in April and announced a redemption of another in May, effective July 1. The next year it flip flopped. They redeemed an issue Nov. 1 and announced a new one at end of Nov.
CoBank just a couple months ago was rated a top 50 safest bank in the world (its on it yearly), so they will get a low yield. In fact only it, AgriBank, Agfirst, and Farm Credit Bank of Texas made the world list…No Wells, JP Morgan, or US Bank, etc. on the list. They will be able to snap their fingers for low yield. The question is will they and/or when.
Grid – If this is being held by accredited investors only, why are they steadily selling at $102.25 unless they were expecting a call at the next dividend date? This looks great to me but I can’t help but wonder if the smart money is getting out for a little better than redemption price plus the next dividend payment because they know that’s all that is left. I could be totally wrong but the selling just doesn’t make sense to me.
Tex, I wouldnt get too worked up about the accredited buyers stuff. Its largely a work around to issue a circular instead of a prospectus since it isnt a SEC registered security. I own several private placed preferreds that wound up with tickers and on the pink sheets.
The selling is never a guarantee of anything. CBKLP has had dump sells in higher volumes than this since its 2018 first call date and it lived on.
OSBCP had a big dump in Nov when CEO said they were looking at redeeming. Went from 10.55 to 10.25 in a couple hours ($10 par sub 20 cent interest payment) and I loaded up on it. And guess what the redemption didnt come and it paid out and lives on and has gone back to 10.60 again.
So its just up to your risk tolerance. To me losing 25 cents or so on a call risk of a $100 issue is just an annoyance not a loss. Heck, losing a quarter may save you a bigger buck if the market drops on preferreds. :). And its not like I have my entire stash in it. I have 300 shares. So if they call, Im out about $100 and some time. If it lasts 2 dividends and then is redeemed, it suddenly became a very high yielding short term dated preferred. Its all about ones perspective on the purchase.
Tex, I have owned CBKLP since July of last year, and at that time bought it for $102.90.
As Grid says, the April 1st dividend is assured ( confirmed this from the Prospectus ), and since they can redeem only on a dividend payment date, they have to announce a call not later than March 1 for the usual 30 day advance notice.
I have noticed that sellers at $102.25 have been there for a while, I think they were selling even before the most recent dividend, so perhaps they are simply playing it safe and getting out just in case.
Extremely helpful! Thank you very much!
Tex, for a little gravy, see the list of World Safest Banks 2019 (pub. Nov 2019) – scroll down to North America safest banks:
https://www.gfmag.com/magazine/november-2018/worlds-safest-banks-2019
And 2018:
https://www.gfmag.com/magazine/november-2018/worlds-safest-banks-2018
I really appreciate all the info. I picked up a small position this morning at $102.25.
JDC – totally agree with all you said. Problem of a CBKLP redemption would be that the new issue would almost certainly be private placement. Would take time to get your hands on.
Could not buy it on Schwab. I do own CBKPP bought through Schwab.
For the NSS fans out here with me, lots of good news regarding their financial health and no mention of calling NSS as of yet. Love to see the DCF rising!
https://seekingalpha.com/article/4316841-nustar-ns-presents-2020-ubs-midstream-mlp-utilities-conference-slideshow?utm_medium=email&utm_source=seeking_alpha
This is their latest presentation.
Thanks A4I
The key slide is in the Appendix which shows that NSS was factored into their projections for 2019. That slide was originally released early last year. I expect they’ll update that slide with 2020 projections at the Q1 call.
I sold all my NSS at 26.30 due to call risk but I still have a slug of NS-A.
For the more adventuresome…Nustar common is currently yielding ~8.5% and its share price has been on the rise since a big sell off in December. If NS can hold above 28, there is a good chance it could make a move toward 35 later in the quarter. Their next earnings report due in February could be the catalyst.
Anyone familiar with the Dillards baby bond DDT? It’s been callable forever and could easily be refinanced lower given IG ratings. Going to catch folks sleeping one day with a call or a chance DDS has just decided to let this sit until closer to maturity? I think it may be widely held by DDS retirees.
I scoped that one out hard, LI, but I just cannot get past the ‘industry’ that they are in. The retail carnage continues to be reported as you well know and I think this is a yield trap – so I passed in favor of a totally different animal – ARR-B. The price action has been amazing. Ex date just passed and it shot back up to near where it was trading beforehand. Easy trade to hold for at least another month since the divvies were announced for Jan-March. After that, call risk resumes.
I’d describe DDS as mainly in the real estate industry rather than the department store industry. Their department store operations are valued at less than zero based on the value of their real estate. Low leverage at DDS and stable to improving credit metrics. I think the biggest risk here is of a call.
Hmmm…I thought DDT was IG but it doesn’t appear to be the case. Maybe it got downgraded.
Landlord–just looked and yes it is now just B+ from S&P and Ba1 from Moodys.
LI – If I remember correctly, when Eddie Lampert was thought of as a genius, wasn’t everyone in the value investor IN crowd enamored with what he was doing by combining Sears and K-Mart as being a real estate industry play too? It’s tough out there these days when the underlying real estate is a mall property underneath a department store, isn’t it? Not that I know much about Dillard’s itself but it just seems tough to differentiate them from the rest of the suffering in their space these days… I guess I’m just feeling feisty today…. lol
Thanks, Tim. With the B+ rating, call risk is not nearly as bad as I thought. Especially given such lousy industry sentiment. No underwriter is going to promise you a good price for department store debt.
2WR, I think the jury is still out on Sears as a real estate play. Eddie pretty much sold the real estate to Warren Buffet via SRG. While the results haven’t been as smooth as Warren must have planned, I’d say the verdict is still undecided. That said, my thoughts on DDS/DDT are clearly too rooted in 2017 when I was last following this closely. Back then, some thought the real estate alone was worth $200/share:
https://www.cnbc.com/2017/07/31/dillards-is-the-latest-target-by-activists-for-retailers-real-estate.html
I’d expect to see some sustained downside in DDS common before seeing DDT take any hits. One can also benchmark off of DDS unsecured debt and even Macys unsecureds for signs that credit markets are getting concerned. Nonetheless, it’s safe to say that DDT is cheap for a reason and that reason is likely the combination of the industry and call risk. So, it’s not a bargain. Weak covenants on DDT as well as they can suspend interest payments up to 5 years.
May be a good div capture play though. 26 has been solid support over the past 5 years. Goes ex tomorrow.
I own 5,000 shares of DDT. I got in around the $25.50 area and have owned it for quite a long time now. The Dillard family doesn’t seem to be in any hurry to call this issue. Its been available to call now for many years and they haven’t called it. Its a tough business that they are in but they seem to be making it ok. There are just some things that people do not want to buy online. Expensive shoes, suits, etc. I think there is still a segment of the population that actually want to try on their clothes to make sure it fits. Kinda of a hassle to buy clothing thru the mail. Yes, I know it can be done but many don’t want the hassle of sending it back when it doesn’t fit.
Any thoughts on ETP.PRE which has made a mad run from low 24’s to over $26 in the last 45 days?
I bought ETP-E at 24 and sold way too early at 25. I’d probably still prefer the ENB preferreds for fixed to floating rate MLP exposure. It’s the only IG MLP preferred and I think IG is the right place to be in the higher risk MLP space. I’d prefer other industries if I want to roll the dice on high yield preferreds.
Anyone understand what (if anything) happened to GSLD? It’s trading at 24.95 today after closing yesterday at 25.25. E-trade is showing a “previous close” of 24.70 (and trading up 25 cents today). This is consistent with what happens after an ex-div. However, I don’t believe GSLD went ex-div as the first payment date isn’t until 2/29. Any ideas?
Ex div:
Ex Date Rec Date Pay Date
Apr. 14, 2020 Apr. 15, 2020 May. 31, 2020
Jan. 14, 2020 Jan. 15, 2020 Feb. 29, 2020
Thanks! How did you find out the ex-div date? There’s no press release probably because it’s a bond and interest payments don’t have to be declared. I couldn’t find anything in the prospectus about ex-div dates either.
Odd that the ex-div is 1/14 but the pay date is 2/29. That’s a big gap!
listed here:
https://www.dividendinvestor.com/dividend-history-detail/gsld/
I assume its correct because of the price change.
Landlord–eTrade lists the ex date–
https://www.etrade.wallst.com/v1/stocks/snapshot/snapshot.asp?ChallengeUrl=https://idp.etrade.com/idp/SSO.saml2&reinitiate-handshake=0&prospectnavyear=2011&AuthnContext=prospect&env=PRD&symbol=GSLD&rsO=new&country=US
Hi Landlord–it did in fact go ex today.
Tim, LI, and libero,
ETrade and dividendinvestor.com say the ex-date is 1/14/20, but I’m still not certain. First, I don’t see any announcement on the company website. Second, the prospectus said the issue date is Nov 19 (IPO date was Nov 14). Nov 19 (or Nov 14) to Jan 14 is only ~2 months of accrual. A full quarterly dividend is $0.50, so how can the first dividend be greater than $0.50 ($0.5556) when it’s accrued for less than a full quarter?
mbg
MBG,
You may be experiencing a common event called the stub period… The first payment will not always be equal to a full quarter’s time of accrual. Quite common, actually….Consider this:
Stub period
From Wikipedia, the free encyclopedia
In finance, in particular with reference to bonds and swaps, a stub period is a length of time over which interest accrues are not equal to the usual interval between bond coupon.
These periods normally occur because the interval between coupons does not fit neatly into the period for which the bond was issued, thus sometimes a bond’s final or first coupon period may be adjusted to make the bond start and mature on the desired dates.
Thanks, Tim and A4I.
So even though the 1st coupon period was less than a full quarter, they applied the stub period to it rather than to the last period before maturity. I guess it has to do with the differences between ex-dates and payment dates.
The result is a bonus for those who get the first coupon.
mbg–companies don’t generally announce debt related dates–they are baked into the issues–they are not optional (like preferreds and common which must be ‘declared’).
The prospectus says ‘payable quarterly in arrears’ with the first payment 2/29, 2020.
This seems a bit unusual but–my assumption is that it will be a full payment plus some excess because of the stub period in Nov.
All in all looking at the ‘mark down’ on ex date it would appear that it is an instance where it was marked down on the ex date, but never traded at the lowered price–that wouldn’t be unusual.
Bought some today. I hoped to get a lower price but in this market is already hard enough to get something at par.
Has anyone here ever used JP MorganChase’s discount brokerage, ‘You Invest’? I’ve never seen it mentioned.
I have doubts that it would serve my illiquid needs, but there’s a Chase branch in my little hill country town & it would be very convenient for me should I run afoul of Schwab again when they consume TDA.
TIA for any enlightenment.
P.S. My TDA rep told me Friday that the takeover should happen in 2nd half 2020 and he is concerned about his job. Many of his colleagues lost theirs in the Scottrade takeover. I do hope he survives again. He and his predecessor have worked miracles for me in my consolidation at TDA and other vital concerns of my financial & personal situation. TDA has, by far, served me better than any other brokerage I’ve had in my 50 years of investing. I do hope that continues.
JMO
You Invest is primitive. You can trade but you can’t do much else. And you rarely get price improvement on your trades. Only reason to open an account is if you’re already a Chase banking customer and want to upgrade to Premium Checking you can use your You Invest balance as part of your minimum required balance.
I opened an account last year to get free trades and the $200 bonus and premium checking. Now that everybody has free trades it’s not worth it.
Thanks, MG. I don’t really need much besides trading, and hopefully less and less of that. But I do need for them to accept and trade my rather esoteric and illiquid preferreds that a lot of brokers seem to balk and choke on. For example, from my watchlist:
AWRY BAC.P.L DMRRP FIISO PPWLM PPWLO SBNCM SLMNP SOCGP WELPM WFC.P.L AILIH AILIM AILIN AILIO AILIP AILLI AILLL AILLM AILLO AILNP BURCP CNIGO CNIGP CNLPL CNTHO CNTHP CTPPO CTGSP HAWEM HAWLM HAWLN IPWLK IPWLO MSEXP NEWEN NMPWP SR.P.A UELMO UEPCN UEPCO UEPCP UEPEN UEPEO UEPEP CBKLP CBKPP CKNQP OSBCP etc. 😐
Almost half my holdings are in a lot of these rather exotic hummers. And I would like to just collect the divvies & keep adding to them as opportunities arise during my shrinking time frame…
Maybe I’ll check out You Invest as a Plan B. Thanks again for your comment.
JMO
Hi Camroc
I have had an account at TDA for many years, going back to when they were Waterhouse Securities. If I have any difficulties trading as I wish to after
the merger, I will simply open an account at another brokerage firm and put any incoming $ there. Since I have wished to trade on the TSX for years but could not do so, I expect the merger will be to my advantage. Yes, TDA is a fine firm, but none are perfect. My son has an account at ‘Fidelity’, but he trades only basics, as he works long hours and has little time to get fancy,
so he is satisfied with them.
Hopefully it will work for you. I have been with Schwab for the last 30 years or so, pretty good service for the most part. My beef with them at the moment is their website still says you can no longer contribute to your IRA after you have reached the age of 70 1/2. The Secure Retirement Act was signed by the President on December 20th, became law 02 JAN 20 and their only reply so far has been they are “aware the age restriction has been removed and they are working on the website”. They knew this was coming and the website should have been changed by Jan 2nd. Heck, they even had a retirement story on their home page posted on December 20th that said “Changes are coming in 2020”, go figure.
I do have an account with Chase. It has very basic interface and allows to trade stocks only (no bonds or options). However, there are couple of reasons I keep it (I originally opened it because of zero fees for private banking clients – it was before every broker started doing it). One, I haven’t encountered a ticker yet that they didn’t allow me to trade (I don’t use that account much though). Two, purchase of some of foreign companies at other brokers involve some kind of fees (e.g. $50 per transaction at Fidelity). Those are totally free at Chase.
Gold, gold, GOLDDDDD baby…
https://www.birchgold.com/news/central-banks-are-rushing-to-buy-gold
Gold has seen an impressive price spike in the past 18 months, and if you are wondering what the cause is, you’ll find almost everyone has a different theory. That said, certain factors in historic gold rallies tend to be ignored. For example, the mainstream financial media often hyper focuses on stimulus measures by the Federal Reserve as the cause, but I would remind people that the most recent upward trend in gold started while the Fed was tightening liquidity and raising interest rates, not stimulating. Also, many analysts suggest that precious metals absorb investment cash flows when equities are sliding, yet, for now, stocks have been rallying for the past year as gold prices also trend upward. So, what is the mainstream missing here?
Not sure what the mainstream is missing.
I’ll have to noodle on this one.
National debts reach all the way to the heavens
The US has reserve currency, one of the largest economies, we print and trade in our own dollars
The debt thing will come to a conclusion and the US may take a hit but other economies will be worse – hording gold maybe a way to keep other currencies from collapsing and beat back inflation and prop up their economies
Just my thoughts – but now i kind of want to have a few pounds in a safe
PickleNick, In 2019 the US Mint struck the fewest gold American Eagle coins in the coin’s 33 year history, only 152,500 ounces. Compare that to 985,000 oz in 2016 and 2,055,500 in 1999. Why is that splendid news? It shows that most investors are NOT buying precious metals, despite the new bull market in gold, rhodium, silver, and platinum. The majority is always wrong at reversals, so this implies that the precious metals have light years to run in this rally.
The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end there it is… REAL TRUTH
http://www.usdebtclock.org
Nomad
Exited a couple flip/divcap today ARR-B and VER-F. Also sold EBGEF, which was difficult but in line with my decision that Canadian prefs had too many moving parts for me at this point as a relative novice income investor. Maybe later.
This puts me at about 45% cash . . . OK, I’ll be looking at more PULS , TLT, or MINT.
Good idea. Just dumped VER-F at $25.80. Puts me about half cash. Something will turn
Looks like I am about the last to still hold my VER-F–looks like I should have had a GTC sell in with the 25.80 close on Friday. Am going to plan to exit Monday and hope it has a large fall on the ex-date (1/30). I reloaded the position after the last partial call and have a cost of 25.18–so like all it has been very good to me–hate to see it go.
I still hold a few hundred shares of VER-F. Cost basis of $25.13.
Since my cost basis will swing below par on XD, I am debating if I will hold on – the unknown risk is that of a call on the remaining outstanding.
I also hold a couple hundred VER-F. I have not been inclined to sell given that I think call risk is minimized for a while since they just did a partial call and if they could have done more, they would have done so. Plus I like that it is a monthly payer. I guess if the price is compelling enough I may change my mind but I haven’t yet
Mav – One could have made the same assumption with SAB and would have been quickly proven wrong… Saratoga called 2/3rd of outstanding SAB in Dec and just turned around and announced the call for the remaining 25 mil for Feb 7th… VER-F is obviously much bigger and call percentage was much smaller, but perhaps there were accounting reasons for calling some in 2019 and then starting 2020 with more… Just playing Devil’s advocate here…
I am now out of VER-F. At this price one is risking the meat on the bone profits…They have this thing in their sites, clearly…Last CC…
So, Sheila, it’s Mike. We’ve continually looked at our options on that. As you know we took $100 million of it out of the industrial partnership when we received that liquidity that we did on July 5, and we’ll continue to look at what we can do with it. Whether we’re constantly looking at where the pricing of it is, and also what the options are whether there’d be 10-year bonds, 30-year bonds and a new pref. We’ll continue to look at all of those options…..
Mike, why don’t you just touch on the debt maturities.
Mike Bartolotta
I mean, on the debt maturities I’m going to sound Frank a little bit like I answered the question for Sheila. We are working — we have a 19-bank bank group. We’re always working with them looking at our options. And we’ll continue to look at those. Obviously, we’re very aware that the ones that come to mind the best besides the prefs we’ve just talked about is that we’ve got a convert that’s coming due in 12/15 of 2020 that’s $375 million.
We’ve got a bond coming due in June of 2021 at 4.12%. And so basically — and perhaps any of those three have the potential to be accretive if we can do the right type of transaction and we’ll continue to look at those. I think if you look at our past, we’ve done a reasonably good job of being opportunistic as the market allows and we’ll continue to look at those.
Well after our discussion this weekend, I reconsidered what you guys were saying and Gridbird and 2WR you convinced me I may be wrong with my thinking. So rather than trying to squeeze the last ounce of profit out of VER-F, Sunday evening before I went to bed I put a limit order to sell my shares ( knowing I wouldn’t be around Monday to trade) It happened to trigger and execute at the open on Monday. Looks like you guys saved me enough for a casual dinner out given the drop today. Thanks
2WR – true, anything is possible. But being a former CPA, I see no accounting reason for calling some in 2019 and some in 2020. My sense is they called what they could with the funds available.
Yeah, I am not saying put it away in a lockbox. Eventually I assume they want to call more. Just thinking it doesn’t happen in the next 6 months.
But if VER-F shoots a bit higher, then I will probably reconsider
Mav – OK as a former CPA, maybe you can answer – most normally when these companies decide to call an outstanding issue they end up taking a loss on their books for the unamortized (or would it be amortized?) issuance costs they then have to declare don’t they? So in the case of a Saratoga, being of such a much smaller size than VER, couldn’t they have wanted to manage the amount of loss associated with calling their baby bonds in calendar/fiscal year 2019? Do I have that right? Then in their particular case, they had a highly profitable event or two happen right after close of the year, which would make taking a smaller loss early in 2020 essentially inconsequential…. That was my non-CPA brain’s thinking on what might possibly have been their rationale for only doing part in Dec then jumping on the rest so quickly… barking up the wrong tree am I?
2WR – Well every company has different motivations. Yes, if there are unamortized issuance costs still on the books, that would need to be written off when an issue is retired. To me, running the business, I would not have cared since it is a non-cash cost. Sure, it makes your bottom line look worse but easily explainable. In fact, my way of thinking is it is better to have this happen all at once rather than in dribs and drabs over a couple of years. Easier to explain a one time extraordinary event.
But again, it is a paper transaction with no cash flow impact of writing off that unamortized discount – and to me cash was always king in managing the business
I think the question is since they have another issue coming due the end of this year per Grid’s post, can they generate enough cash or go to market to refinance that issue – and pay off VER-F – and how soon could that happen
Hi Tim, I still have about 7,000 shares I own. I just got back from vacation – left cold MN for a bit and went to the Gulf coast. Sounds like people are letting VER-F go. I need to ponder for a bit. Investments keep climbing and climbing, and might need to take some off the table. Become fearful when others are greedy. But… it is getting to be a fun challenge to find things to invest in.
AQNB another favorite I can’t decide whether to sell or hold with no replacement in mind. Trading this AM at $28.59. Ex Date 3/12/2020.
Yup, same here. I will sell but trying to hold long enough for long-term cap gain to kick in.
VERY interesting article regarding cash sweep accounts and what your broker may be doing with YOUR cash…
https://www.wealthmanagement.com/regulation-compliance/finra-examiners-boost-scrutiny-cash-sweeps-2020?NL=WM-27&Issue=WM-27_20200110_WM-27_752&sfvc4enews=42&cl=article_1_b&utm_rid=CPG09000046682270&utm_campaign=24831&utm_medium=email&elq2=25fa8eb6c5c1436a87b9737cfd845740
—–
Of key interest to me was the last sentence from this blurb: “Brokerage firms will often take cash from a client’s investment portfolio and place it in an account (often with an affiliated bank) that will typically earn the client a low yield on interest. However, the firm increases its own revenue by keeping a percentage of the “swept” cash.”
hmmm…
They have to pay for those free trades somehow 🙂
Nothing new, they’ve always done that. One of the reasons Fidelity is my largest account, they don’t steal as much of the revenue. Your best recourse is to manage your own sweeps by buying a fund or fixed income stock and then selling when you make a trade.
Comment and a question.
Purchased METFL at open on E-trade and was charged a 6.95 commission. Inquired about the fee and response was E-Trade still charges for OTC trades. Questioned Schwab later in the day and they stated OTC trades are free (have not executed an OTC trade on Schwab since fee structure has changed). As is often the case METFL was available to trade at the open on E-trade while Schwab provided a quote but said symbol was invalid for trading.
Can anyone confirm if TD charges a fee for OTC trades.?
In most cases, No. They do charge $50 for foreign transactions including some Canada based stocks. You have to preview the trade and see if a fee is listed.
We don’t do much trading in my wife’s e*trade account. Should be renamed e*buy&hold.
Bob, TD does charge for OTC trades at $6.95 for me. My other 2 brokerages do not charge for OTC.
Hey Grid. You should get that trading fee lowered. When I moved accounts over to TD. A long time ago I got them to lower fee to 4.95. That will buy you and GF. a couple burgers off the dollar menu, lol.
Tell them that you will move money to Schwab or FIDO and they will give you free trades.
Grid, Paying TD $3.95 for OTC. Suggest calling them to get this reset. BTW: Went back to the AATRL well yesterday at $47.41 and sold today at $48.25, for two week total of $3.19/6.7%. Not going back.
Thanks for info guys. I should call. Oddly enough though now, it doesnt effect me much. My taxable TD is maxed out on Canadian resets that are just long term holds. My Roth and HSA, I generally move around in the ALLY-A, INBKL, and stuff like that which is of course free. My ALLY and Vanguard are totally free on all trades OTC, so my few trades the past week or so have been from there.
Bob
Yes, TDA does charge $6.95 each for 5 character OTC trades, buys and sells, for my account, just as they did prior to the free trades on other products.
Howard, Suggest calling them. Re-verified my recent OTC trades including 5-character issues are $3.95.
Thank you Alpha8. I will do so. Coffee money is coffee money !
Doesn’t matter for long- being merged into Schwab anyway.
I can’t say I agree or disagree with this article on the Repo crisis, because I can’t be sure I understand it well enough to take one position over the other. Some of the links were also enlightening, especially the one on Modern Monetary Theory or ‘helicopter money’. Would love to hear your opinions.
https://www.truthdig.com/articles/the-feds-latest-gamble-imperils-the-whole-economy/
Very few people understand the minuatae of the economy.
Anybody who passed 4th grade math should know why you can’t spend more than you earn or why helicopter money is inflationary. Unless they blind themselves with higher learning.
Selling a favorite …..
Sold my entire position in AHL-C today at 28.95. That’s a 1.42% YTC on an issue with 3.5 years to first call. The stripped premium to call was 3.84/share, equal to 2.6 years of divis.
Think about that …. getting 2.6 years of divis upfront on an issue almost certain to be called in 3.5 years.
When it drops below 25 I will buy it back. I may even buy it at 26.
Did the same, Bob. Liquidated the entire position at $29.00 even, for a greater than 13% gain since I purchased it. I’ve not been selling anything just to raise cash, but when I saw this one melt up and the yield drop to ~5.1%, I let ‘er go. That $ will quickly go back to work elsewhere tomorrow with something yielding a 7 handle on the percent meter.
AFINP
Bob-in-DE : I am kinda looking at one of mine, INN-E. It is about $3.00 a share more than I paid for it. However the first call is close to 3 years away. I am getting a 6.5% yield at present. The problem is I don’t see anything to replace it with
Sold all of my RNR-F today @ $27.42. Again, just wanted to book the capital gain after a nice, steady run up and will look for something else that looks undervalued. As several have noted here, that may be challenging. In the meantime, MINT.
Sock drawer issues wanted
I’m looking for some suggestions for sock drawer issues for my parents IRA account. Their portfolio is 25% preferred/bb and they’re spending roughly 3.5%. I’m looking for 4.75%+ and low risk. The majority of the holdings are issues that don’t move much (SLMNP, IPWLK which I consider sock drawer holdings), low default risk (BAC/L, WFC/L), min rate floater (MS/A) to hedge some interest rate risk, callable pegged close to LV (ARR/B, DX/B) or busted REIT (LXP/C, RLJ/A). Currently keeping my eye on IPWLO and KTBA.
Any suggestions of sock draw issues to consider, or critiques are appreciated.
While not quite as safe as some of those, I’d consider MNR-C.
I just glanced at my watch list. You can currently get WELPM for $132 and the yield will be 4.55%. It is non-callable.
Gabelli family are all around 5%. GAB-G GGN-B GGZ-A GGT-G GNT-A.
ARR-B and DX-B? I wouldn’t call high rate REIT’s sock drawer stocks. In that sector also MITT-B CMO-E and TWO-D, prices suppressed by mild call risk. NLY and AGNC preferreds are among the safest reit preferreds but with lower YTC.
Thanks for the ideas. The sock drawer issues were more the IPWLK/SLMNP/WFC-L type issues. The ARR-B/DX-B issues were just yield boosters that were interesting because they were callable which lowers their vol.
Happy to hear any other ideas you have for the sock drawer.
I like arr- b as it’s price stays around par and it pays 7-8% monthly. i do have a stop limit on it though as it is a perpetual.
ARR-B has announced dividends will be paid for Jan – March 2020, so that may make some SWAN for a few months.
I’m probably in your parents age bracket(70)…take a look at PONAX a pimco income fund very stable paying 5% on a monthly distribution….
And I am likely as old as anyone here. PONAX, given my view of interest rates, is not something I would buy right now:
About this Mutual Fund
The investment seeks to maximize current income; long-term capital appreciation is a secondary objective.The fund invests at least 65% of its total assets in a multi-sector portfolio of Fixed Income Instruments of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements. It may invest up to 50% of its total assets in high yield securities rated below investment grade by Moody’s, S&P or Fitch, or if unrated, as determined by PIMCO.
JMO
camroc – A general question based on a quick look at PONAX – why would anyone buy the A shares with an up front sales commission when there are apparently C shares among others also offered as well without? Yes, I get it, less ongoing fees, but it sure seems as though it would take a long period of time to make up the upfrontedness of the sales commission before you benefit from the lower ongoing fees.
fidelity waives any upfront fees on ponax…..pimix the other similar fund is an instatutional fund with a 1million initial investment….at fidelity…some other investment houses allow you to invest in pimix without any min…..ponax…has a good track record….great mgt and a stable price….for now….who knows about the future
Ponax is a great fund which has really strong management but take a look at
pimix which has the same management team, lower fees and slightly better delivery. sc
SOCGP might be one you want to look at. 5% yield on the current ask price of $30.
Of interest:
The split between “up” and “down” trading days for the S&P 500 over the last 50 years (i.e., 1970-2019, encompassing a total of 12,613 trading days) is 53% “up” and 47% “down.” The split during calendar year 2019 (there were 252 trading days last year) was 60/40 (source: BTN Research).
TIME IN THE MARKET – Since 1950 (i.e., 1950-2019), the S&P 500 index has been up 54% of 17,613 trading days, 60% of 840 months, 66% of 280 quarters and 73% of 70 years (source: BTN Research).
Wishing you profitable investing, Nomad
I could not find out where previous comments on EP-C were, so putting this out on Sandbox for input from the board.
EP-C shot up last week, closing at $51.87 on Friday.
This is a yield of only about 4.6%, pretty mediocre, for a preferred issue.
I sold off 75% of my holding at $51.20, and feeling that this price is not sustainable, especially since the next XD is 3 months away.
Any reason to believe it will go higher?
I will not buy here, waiting for it to swing below $51 again before I consider.
Inspy this thing trades goofy at times. I remember selling a few months ago at a bit under $51 and they sold to me at$52. Figure that out. I sold out about 50 cents below what you did so I guess you know where I stand, ha. 4.6% at par for that maturity and quality isnt bad. But its not at par, its well above it, so that has to be factored in. Plus remember it can be redeemed at any time if they so desired. KMI stock price is too far away from $40 to make the issue rise from owner conversion option. If it got back to under $50, I could see myself jumping back in for another purchase.
Gridbird
you mentioned slmnp in a previous quote but can not find the piece.Would appreciate learning more about this issue. The only reference to it on sa was a comment by alphagen. Looks interesting but not so easy to understand. Value your inputs. TIA SC
Hello SC. Fellow poster Landlord Investor wrote this below on SA recently… This issue was a convertible but since it got bought out a change of control occurred. The reference to $800 below Landlord made is the actually buyer put. In other words owner can receive cash from the terms in which LYB paid for Schulman (19.111 shares times $42 (buyout price) so the put is about $802. The company itself cannot redeem it.
This is an OTC traded preferred stock that was previously A. Schulman but was bought out by LyondellBasell (NYSE:LYB) a few years ago. LYB is a $32B market cap chemicals company (comparable to Dow Chemical) that’s based in Europe but is listed on the NYSE. They have a corporate rating of BBB+ which makes these preferreds BBB- (lowest rung of investment grade). It is uncallable and a par $1000 issue trading with a 5.86% current yield. This is well above the average BBB- rated preferred stock yield which is closer to 5%. SLMNP pays qualified income and while it is a foreign company, there is no foreign tax withholding.
Here’s the real kicker and what I really like about SLMNP. It can be convertible at any time at the holder’s option to $800 in cash. So, essentially, this preferred can be decomposed into two separate securities. An $800 security that is super-senior and secured by $800 of collateral and a $200 BBB- rated preferred stock. Fair market yield on the senior secured part of the security would probably be around 2.5-3.0% as it should have a rating above LYB’s corporate rating of BBB+. You could question how senior this obligation to convert at $800 would be in bankruptcy court as bankruptcy lawyers could find a way around the obligation but of course, you wouldn’t hold this through bankruptcy. If you saw LYB bonds start to head south and go well below 80% of par, then you could cash in your preferreds at 80%. If you wanted, you could then swap into the LYB bonds below 80. Notably, this issue didn’t trade below par value in the December selloff so your downside is very limited at 1025.
Note that this issue has very thin liquidity. There can be many days when 0 shares trade. However, in the past few weeks, there has consistently been liquidity in this name as it appears a large holder has been dumping.
Grid
Much appreciate your taking the time to provide data. Yield looks interesting and I know a bit about the plastics sector and know both the company and their main competitors. Do you hold this in your trading account or in your core i.e. how comfortable with it are you if I may ask. tia best and your inputs appreciated. best sc
SC, I know LYB acquired Schulman and then merged some of their existing subsidiaries into Schulman itself. So there definitely is a long term plan in place at LYB concerning Schulman. I played around trading some with SLMNP a while back mostly to drive my cost basis down as I over paid the first little purchase to shake the nut out of the tree. As earlier this spring it basically went 4 months without trading.
As of now I have a core 25 share hold held in taxable account to get the QDI benefit. Im just planning on holding these and let them be.
gridbird
Many thanks your clear explination. Going for several months without a trade is a bit concerning.
On another point you might want to look at the common of atax if you have not. This is an interesting firm and the gp has just been purchased by another firm which means that there could be some positive changes. I like atax and have held it for quite a while. Thanks again. best sc
sc.
i bought some today. it’s trading at 1033 and it doesn’t appear as though they
declared a divy yet but according to quantum it should go ex divy on 1/14.
you would accumulated almost $14 worth of divy. that would lower your cost to about 1019.
Woody, consistent with what you state, scroll to bottom: “Dividends & Splits” to see the expected ex-date:
https://www.otcmarkets.com/stock/SLMNP/security
aarod
thanks for the info. i’ll be using that in the future.
Inspy There are a few things to keep in mind on EP-C. First of all, it’s a 2028 maturity so it’s an unfair comparison to consider it a mediocre yield at 4.60% for a preferred issue. Secondly, it’s fully guaranteed by Kinder Morgan but I think on maybe a subordinated basis of some sort. Nevertheless, KMI has outstanding unsecured Baa2/BBB 2028 maturity debt that’s at about 2.90% YTM bid and asked, so that’s a pretty good starting point to figure out how much EP-C ought to be discounted for it being a preferred. I discount the subordinated aspect pretty much because that would only come into play in BK as it does say it is fully guaranteed but to me 170 basis point discount to KMI ’28 debt seems pretty high. HOWEVER, all this has to be discounted more by the fact that EP-C is also currently callable. So it is a pretty high premium now to a 30 day call possibility, but I would think the likelihood of them bothering to call a 4 3/4% issue is probably pretty thin. Bottom line, I can see present price being justified in one way but also suspect at the same time due to the 30 day call… BTW, that trade at 51.87 – I think I got shopped and it’s no coincidence that that trade happened a penny under me as I had a standing sell in at 51.88 all day long and that single 100 share trade just happened to have executed just under my offer.
2WR, thanks – a very informative, logical and reasonable explanation of how EP-C is positioned in the KMI capital stack.
The major risk here is call risk, and IMO only, the over par premium is high; so I’m fairly confidant there will be a decline below $51 eventually, maybe the mid to high 50’s.
I will buy back what I had sold in that area.
Today I bought back EP-C that I had sold a few days ago at $51.20.
Bought them back at $50.69, which was a little high as it turned out. Bid is at $50.50 now, ask $50.75.
Next XD in March, so plenty of time. I may flip if the price goes above $50.85.