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.
Since I filled out my position on METCL I have been checking it daily. Looks like it has begun it’s slow climb out of the quarterly plunge around record date. It will be interesting to see what it returns to this time compared to previous quarters. On another note I just can’t keep my eyes off Trump Media and Technology (DJT) when I check METCL, something I would never touch and no one else on this site probably would either. Watching an ongoing train wreck is fascinating though, you just don’t see something like this every day. A lesson to all is never ignore the financials………
The modern version of a pump and dump. The players and playing field have changed, but what hasn’t changed is the bag holder
New agency 3130B0XY0
6.25% 2044, call 4/22/25
JPM CD at 5.5%
rocks2stocks – those agency bonds are interesting. If I’m reading this correctly, appears call protection for an entire year! That’s a good trade off vs. the 6.50% float that is only call protected for 90 days.
The FOMC has been talking about reducing the amount of QT. That would be equivalent to introducing some measure of QE. Seems like an odd idea given current loose financial conditions and the enormous Fed balance sheet. Could be announced as soon as May 1.
QE is good for financial assets. If the Fed buys at the long end, the effect could be to cap long yields or reduce them, depending on the size and amount of market front-running. Just guessing.
All of this is to say that there might be a new buyer in the treasuries market that will affect the trend in yields.
There is a theory that the Fed interfering in the free market creates more problems than it solves. As usual there are points on both sides. But from where I sit it is being over manipulated. In particular, adjustimng rates has an indirect effect while controlling the money supply has a direct effect. Raising rates while printing money for excess spending is like running the heater and air conditioner at the same time. Has some effect but a very inefficient way to set the temperature.
“creates more problems than it solves” …oh yeah.
It would help if they were good at it.
Since money is a factor input in most economic activity, aren’t high interest rates–the cost of money–itself inflationary?
Don’t see any economist weighing in on this. Is the Fed causing inflation?
Tom,
Yes, its inflationary, but only in the real world, not in the Fed/Treasury fantasy world.
The cost of money is a concern, but the bigger problem is supply. The fed is driving some inflation with rates, but not as much as treasury having to fund the massive deficit spending Congress is driving.
Of course, I got my Economics degree before Modern Monetary Theory became the vogue.
Hopefully we can conclusively put to bed the notion that anyone can predict rates, knows what the fed will do, knows what the market will do, when they will move, which direction they will move, how much they will move or the outcome of the Olympic Curling competition in Milano-Cortina 2026.
alpha,
Making predictions is a waste of time. OTOH, taking into account relevant trends and working out plausible scenarios for rates is very useful. I did just that in a post several weeks ago when I suggested that there were reasons to expect a stock market correction accompanied by a rise in long yields. It wasn’t a prediction, but it was my reason for being patient.
Now, just maybe, that scenario is starting to play out. I need to review my reasoning to see if it still fits. (I wish I could read that post.) And, I need to start imagining where the trend might go. All fun and games.
I’m not locked into any particular outcome. I’m trying to anticipate good opportunities and not be impatient. Today Mr Market served hors d’oeuvres. I’m looking forward to dessert.
In my humble opinion, behind every action we do, even if it be inaction….there is a prediction in there somewhere. All of us are predicting something whether we like to admit or not.
I agree, Pig. I make no assertions I can accurately predict anything. But one can invest on assumptions that can mitigate some of the concerns. Thankfully ZIRP is gone, so the cash in the coffee can buried in the backyard is no longer a needed defensive option as real yield can be earned now while sitting in a more overall defensive posture. If that is ones goal, which largely is for me at present.
That makes sense Pig. Though mostly I like to focus that assumption on what I already know to be true today, and less on what “might happen” to make something work. One less step.
That’s why with credit spreads what they’ve been I haven’t bought anything since November and sold boatloads in Jan/Feb. But now everything can be bought back for a lot less. One good panic day and a few trades may trigger, but not before the target buy prices actually occur.
Grid/Alpha, certainly, experience looking for certain market conditions happening today aids us in our selections. My methods more haphazard I would say. I wouldn’t say never do anything, but I pretty much buy and sell through all market conditions. All that changes is the types of securities to buy (all are eligible to sell). Spreads being they were didn’t allow purchase in certain areas but things like specific sectors and metals were open for business. Leads me to another rule with me, my universe of possible securities is perhaps larger than some folks here who stick to the tried and true top quality stuff. For sure I’m in those as well, but I also venture out for other opportunities. Losing some battles also comes with that philosophy though. Fortunately lately I have some big winners propping up the capital fund to look for income now that it might be opening up some. But bottomline for me, I’m always buying. Just me, I can certainly appreciate other philosophies as I have been exposed to many. Pig pile Sr could actually be even more extreme conservative than the most conservative investors here, lol. Always appreciate the tips and musings of this place. Great site!!!
That was a good call R2S. I’ve found myself to be adept at identifying trends, as long as they already happened. haha.
The .vix popped again today. Could be a harbinger of opportunities on the horizon.
I’m always up for a dessert!
alpha-
Got to love those 2026 Hairdresser competitions at the top level.
I watch PFF and PFFA. Both had topping patterns, so this breakdown was a strong possibility. Three preferred etfs with expense ratios:
PFF 0.46% (less junk)
PFFA 1.4% (more junk)
PFFR 0.45% (REITs)
I’d like to add the current yields, but the dividends are not fixed.
I’m looking at PFXF. Not financial, utilities with a 7.9% and a 46 expense rate.
Over 25 alerts this morning from $25 stocks hitting new lows. Calculating current yields…
Me: “Siri, 7.25 times 25 divided by 24.3″
Siri: ” (repeats above) is approximately 7.4588″
Smart girl! Don’t tell me you’re still using a calculator.
Preferred stock sector breakdown.. on absolute basis close below 30.95 would be ominous
Hi, is there a symbol etc. to follow that price ? thx.
FXM,
I am guessing the OP is referring to PFF. It has quite a basket of preferred and follows “ICE Exchange-Listed Preferred & Hybrid Securities Index” – “ICE Exg-Lst Pd&Hyb S 4PM AllExgCl TR USD”
It is discussed here on and off. They often do things in mysterious ways hurting the ETF holders. Not sure if lazy, on purpose due to rules, or whatever but they surely do not count their pennies when dumping.
FC, thanks . I see the PFF price . Now I follow you. Yes, quite a runup this year but feeling the pain today ! I really watch the PFFD, lower fees!
FXM:
Including dividends, PFF was at one point up 6.4%+ during 2024. With the big recent selloff, it is now flat YTD.
This $14+ Billion ETF has had nearly $800M in inflows this year. If those reverse, look out below.
Kid, I hear you. I have followed the comments here about PFFD. $32.66 high this year, That is quite a hiccup ! You have to think some of these preferreds paying decent you just have to hang on and pick your spots. Of course , easier said than done ! Thanks for the reply !
I’m short PFF and PFFA. They’re two of the very few bright spots in an otherwise week of preferred stock pain. My other short positions have not correlated well. Sigh…
Looking at PFXF 7.9% with a .46 expense . Utilities, no financials
Go, Theo! Egads! Shorting monthly payers? What are you paying for the borrow? How do you make it work?
Rocks – Generally, I don’t hold short positions long term. As for PFF, if I was fortunate enough to have a reason to stay short for another two weeks, by the 30th, I’d swap out of it into another short position.
PFFA is ex-div circa 4/20 so I’ll be out of that in the next day or two which would offer me the possibility of going back into it when I exit PFF (assuming that I want to remain ETF short). There’s really no EGADS in this.
As for borrow cost, it’s about 2.25% or so for PFF which on say a $10k position is about 62 cents a day, hardly a concern given how much it’s dropped this past week. PFFA is about a 7+ pct borrow rate. Also reasonable. Most of the time, I won’t pay more than 10%. It’s just the cost of doing business and if business is good, the borrow cost for short term positions is almost a rounding error.
Theo,
Thanks for the interesting reply and good luck!
fc -PFF is doing what index funds do ; try to match their index;
Since I’m an active trader I have a low opinion of funds like PFF. They charge a modest fee to do what you can do yourself but worst of all they make large trades on low volume stocks which drives the price against them yet the lazy fund managers continue to trade. Follow it and make a small profit trading against their nonsense.
SPPREF ~ S&P US Preferred Stock Index
Jason or any tax folks, I own MLP common and preferreds. The following statement is in the preferred prospectus: “common units and Class C Preferred Units, please consult your tax advisor with respect to determining the consequences of a guaranteed payment on your basis in your units.”
I did not realize guaranteed payments affect the common basis. Am I interpreting this correctly?
TIA!!!!!
Reporting a sale of MLP shares on TurboTax with regard to Section 199A. Section 199A is also called QBI or Qualified Business Income.
If you sold shares of an MLP and use TurboTax it does not explicitly ask for information regarding Section 199A amounts generated by the sale. If you enter K-1 values into TurboTax strictly “by the box number” you could be losing a substantial tax reduction.
A representative K-1 states:
1) The ordinary gain shown on the K-1 sales section is “considered qualifying PTP income for Sec. 199A”.
2) The number in box 20(Z) does not include Section 199A amounts related to the sale, only amounts related to present-year business operations.
Section 199A data related to the sale must be entered manually in the section that asks for additional information about your 199A income.
This information was not posted earlier as I only reviewed my tax situation this past weekend. This is due to an extension to file untill Oct 15th. Getting an extension is incredible easy on the IRS website and only requires you to pay what you estimate your tax bill will be. I always electronically send more than I think I’ll actually owe and just take any excess payment off a 1040-ES
payment later in the year.
Maybe this has already been mentioned somewhere, but I can’t find it in a search of the site. NGL is paying its remaining preferred unit arrearages:
https://www.marketwatch.com/press-release/ngl-energy-partners-lp-announces-the-payment-of-all-outstanding-distribution-arrearages-for-class-b-class-c-and-class-d-preferred-units-as-of-payment-date-april-25-2024-54c05924?mod=mw_quote_news_seemore
The back-payments go ex-div on 4/18 and will be paid on 4/25.
NGL-B closed at 27.60 on Friday and will pay an arrearage of $2.475, so the stripped price is 25.125. It pays 3ML plus 721.3 basis points.
NGL-C closed at 26.82 on Friday and will pay an arrearage of $2.186, so the stripped price is 24.634. NGL-C starts floating 4/15/2024 and will pay 3ML plus 738.4 basis points.
Of course, you will need to form your own opinion of how risky these securities are and how they might fit in your portfolio, but NGL-C has a lower stripped price for a higher yield. DYODD and all that.
*Beware: there will be UBTI issues if you hold large quantities in IRA accounts.*
Disclosure: I have flipped NGL-B twice in the last two months for 70 cents or so each time, but I don’t currently hold either issue.
NextEra Energy Capital Holdings Cusip #302570AW6, 7.631% coupon 3ML, continuously callable,10/1/66 maturity date ,Baa2,BBB (I found it is a posting by Tex)
Can anyone tell me (or tell me how to find) the 3ML libor spread and how often it can be called? Assuming it’s in the prospectus, how do I find the prospectus (the link)? Thanks.
I just did a google search of the CUSIP to find this one. NEE has a website page dedicated to these: https://www.investor.nexteraenergy.com/fixed-income-investors/download-library
https://www.sec.gov/Archives/edgar/data/753308/000095012006000523/fplfwp.htm
https://www.investor.nexteraenergy.com/~/media/Files/N/NEE-IR/fixed-income-investors/download-library/neech-prospectus/302570aw6.pdf
I will usually start with a basic internet search. If that doesn’t work, I’ll try to find the date the bond was issued by searching the CUSIP on my broker’s website. Then I’ll go to https://www.sec.gov/edgar/searchedgar/companysearch and search for the company. After selecting the issuer, I’ll click “view filings” and I’ll set the date range to the approximate time when the preferred/bond was issued. Then I’ll look for form type FWP or 424.
Dick—many thanks
This is where I’ll look for pricing and trading info:
https://www.finra.org/finra-data/fixed-income
Here’s an interesting issue. It’s from Florida Power & Light. It matures in 2071. It pays interest at the 3 month rate MINUS 0.30%.
“In no event shall the interest rate be less than 0.00%.” Gee thanks!
It appears to trade right at par. Help me understand why anyone would buy this. What am I missing?
https://www.investor.nexteraenergy.com/~/media/Files/N/NEE-IR/fixed-income-investors/download-library/fpl-prospectus/Florida%20Power%20%20Light%20Company%20Final%20Prospectus%20Supplement%20dated%20June%2011%202021.pdf
You have a billion dollars and don’t care to make another billion (seems atypical). Instead of needing to make 6%, you’re happy with 4% because you have a billion dollars. Instead of needed to continually buy new issues you want to find ones that are going to make you payments until 2071 and not lose your initial investment.
This isn’t me and never will be, but that’s the only scenario I can think of.
I noted that the prospectus references 3 month LIBOR perhaps something is going on with the SOFR comversion?
FWIW if comverted to SOFR the conversion would largely offset the -.3 sp this bond would essentiall be a SOFR bond
5/16 is next call date.. it was not available to purchase on fidelity although that is not atypical
Tim: On your “REIT Preferred” table, the symbols seem to have gotten out of whack with the names of the issuers. For example, the issuer for “AHH-A” is listed as “Ashford Hospitality Trust,” the next name in order after the real issuer of that security, Armada Hoffler. Similarly, “EFC-D” is listed as having been issued by Armada Hoffler rather than its true issuer, Ellington Financial. You might want to take a look.
Thanks for all you do,
Nimzo
Every so often I try to organize things to see what all I got and where. If one doesnt it may be worth your time to see if you are still on whatever course you want to be. It looks like I havent strayed too far from what I wanted to do this year which isnt a lot compared to years past.
Fixed perps and long duration debt 29%
Floating perps and debt 15%
2028-35 debt issuances from the bond desk 11%
TIPS/IBONDS 5%
Treasuries sub 2 yr durations 5%
CDs <1 month to 2028 durations 35%
As the CDs mature over time I will look at the landscape and decide whether to renew or go in another direction. I still trade around a bit in the fixed perps, but largely leave everything else alone for now. Income investing returns is kind of like a worker being paid on commission only. The harder you work the more you make. I aint working so hard this year, Im lazy…
Grid, here is my current snapshot:
CDs: 16%
Short to Med Term IG Corp Bonds: 14%
HY Corp Bonds: 2%
Term Preferred/Baby Bonds: 8%
Perpetual Preferred Stock: 27%
Floating Preferred Stock: 4%
TIPS : 3%
Oil, Gas, and Pipelines Stock: 5%
Utilities Stock: 2%
REITs: 4%
Equity/Market Tracking ETFs/CEFs and Stock: 5%
Canadian Bank Stock: 4%
BDC Common Stock: 3%
Misc Stock (Tiny %): MREIT, Mining, Tobacco, Medical, and Tech
Dang Pig, what has become of us? We werent like this 5 years ago were we!
Ha yeh.
Me 5 yrs ago:
Mid 19th century Railroad Preferred Stock: 25%
Boston Sand and Who?: 5%
Illiquid Utility Preferred Stock: The rest
CDs: hahahahahahahahahahahahahahahahahahahahahahahahaha
But you know I loved me some Glacier Water!!!!!!
What a difference a non-ZIRP world makes.
I’ve not calculated my allocation, but it’s something like this:
MMFs – 20%
CDs – 40%
Preferreds – 20%
Debt ETFs/Bonds 10%
Small Cap Equities/Misc 10%
Very conservative. But how does that relate to your personal timeline?
Do you need every bit of its income to live on? Are you a recent college grad, a business owner/executive with a growing family, or perhaps a long-time drawer of SS and medicare benefits?
It would be helpful if we knew; then we might be able to have a eureka moment and adapt some of what you’re doing to our own circumstances.
JMO
Hey cam,
Yes, so I’m 58 and still have a good job and could have retired a while back. I’m super tax inefficient with about 2/3 taxable and 1/3 tax-deferred. I’ve grown tired of the stock market boom and bust cycles, so am thrill with 5% CDs and MMFs and the many options with preferreds and individual bonds. I’d just rather see my account values increase each year, even after paying ridiculous taxes.
Philosophically speaking, I just think the idea of changing ones lifestyle (adaptive 4% rule) because the market pukes is ridiculous. So I give up potential upside for the less glamourous income method.
Cheers!
Yes, it’s all about income for me, too. Plus, I have the backstop of a good pension. So I can overload and if it doesn’t work out, I will still have my good wine & good food. Made some good choices half a lifetime ago and…
I love it when a plan comes together.
GL. Do what makes you sleep well.
Similar – made choice 23 years ago to start a 2nd career with NASA. Never thought I would ever be a civil servant but NASA was a nice touch having spent 20 years previously in entrepreneurial start-up situations. Fortunately, that left me with a nice pension (retired a GS-15) to fall back upon when I retired in January (age 64). Plus, having paid max to SS for almost 30 years, I decided to go ahead and take it as well instead of waiting till 66-10 or 70 and I get the max possible for my age so, that and pension, I can live off well.
The portfolio is for building and its income to provide leisure money for travel, hobbies and good vino. I am reasonably conservative with it with exception of $50K which I trade with. Usually that involves in/out stocks and selling options. That account is more of a hobby so (I have done on/off trading since 1984), if I were to lose all of it, my lifestyle would not be impacted. This year I am up $5150 so far, however. I move any + profits weekly over to my savings account.
So far, so good in retirement.
Bonds(mostly Agency bonds)-40%
CD’s-25%
Preferred stocks/BB’s-25%
Common stock-3%
CEF/ETF- 5%
Cash/MM- 2%
I am 75, so pretty conservative for the most part. My wife and I draw SS, along with that I have a small fixed pension. This portfolio provides about 30% of our yearly income. I retired last October, but I do work for the same company about 2 days a week as a trainer/consultant, most of the money from that goes into a 401K or the taxes would be a killer. I expect that this arrangement will be over in October as the companies contract will come to an end.
Hi Grid, I have recently been buying the SJI 2031 bond that you have mentioned here at about 9% YTM. Are you still comfortable with this private issue? I became more comfortable when I learned the buyer IIF, is a JP Morgan backed fund. Have you ever seen the debt of a private utility get into trouble? I also own some Store Capital bonds which is also privately owned now but is a slightly shorter maturity and was a solid public reit. Thanks
RK, It is flying blind a bit. But we know every time they buy a utility they are scrutinized by the regulators who approve the purchases. They appear to be good stewards. Also remember any debt they have is subordinate to the holdco such as SJI and even more subordinate to the regulated utilities under it. El Paso Electric has maintained their IG status since being acquired by them. It largely will be determined by how much if anything they stack onto SJI holdco for their unregulated green energy initiatives. Last summer they were actually in process of deleveraging holdco with equity infusion. That being said I can’t over commit to this being the private nature. But I won’t sell what I have. I won’t rule out a smidge more if money and situation arises, but in no hurry.
RK, I waited for the SJI 2031 to get back over 9% with my brokerage which it did today so I reentered again today. I have a larger amount of the old SJIJ though bought around 11% price yield. Cant do YTM because it cant be assumed it wont be called until after I am dead, so I just use purchase yield on it. I damn well better still be alive in 2031 though, and they damn well better not be bankrupt by 2031 either!
RK, One thing I forgot to mention about IIF buying SJI. SJI will now have easier access to capital via its parent. SJI will no longer have to tap the public market for any access to capital. They already own 5 utilities taking them private. The main cash providing regulating subsidiaries will both remain IG status. Just as long as they dont go crazy on renewables at the hold co level they will be fine.
This is their latest foray. Waste food into energy. They have joint partners though to spread out the costs.
https://www.sjindustries.com/investors/news-events/newsroom/south-jersey-industries/2024/groundbreaking-on-linden-renewable-energy-project
“SJI is incredibly proud to break ground on one of the nation’s largest food waste-to-renewable natural gas facilities in the United States,” said Mike Renna, president and CEO of SJI, during a groundbreaking ceremony attended by industry and government officials from across the state.
Do me a favor, RK, and call the CEO and tell him not to get waist deep in these goofy energy projects. Lets just keep the meat and potatoes on the plate, dont need any nasty side dishes served.
Thanks Grid, . Who knew there was that much food waste around or money to be made from it! I agree, this one seems goofy, not to mention a money pit.
Bettween the delistings and the take privates, I’m now learning to live with them, as long as they are reasonable maturities that I think I’ll live to see.
Yes, they need to stick to the basic block and tackling. That being keeping the pipes full of nat gas from the cheap sources, and bribing local officials to further encourage their companies profitable objectives.
Here’s my mix:
50% fixed rate preferreds
33% variable rate
7% common stocks
10% CDs/money market
Of the variable rate issues, 60% float off the 3 month and 40% are 5 year resets with staggered reset dates. The 5 year resets are all issues I bought through the bond desk. The 3 month floaters are in things like USB-A, BML-J, MET-A, TFC-I, MS-A, AQNB, CKNQP as well as some bond desk issues.
We recently sold our home (purchased in 2008 and was fully paid off) and then invested in bonds maturing in 2028. We’re using the proceeds to pay rent. We plan to rent for a few years while our daughter is in college before considering purchasing again. These funds are in KTH, EP-C, TVC, and misc corporate bonds. These funds aren’t included in the percentages previously listed.
Dick—I own some 5-year $1,000 resets myself. STT-I 6.7%, NRUC 7.125%, C 7.625%, CoBank 6.45%. Which ones do you own as I’m interested in this category? Thanks
Here you go. These are listed by reset date (earliest to longest)
25746UDD8 – DOMINION ENERGY
https://www.sec.gov/Archives/edgar/data/715957/000119312519304313/d800919dfwp.htm
26441CBG9 – DUKE ENERGY
https://www.sec.gov/Archives/edgar/data/1326160/000110465919049332/a19-18327_2fwp.htm
854502AM3 – STANLEY BLACK & DECKER
https://www.sec.gov/Archives/edgar/data/93556/000119312520023095/d859870dfwp.htm
26441CBP9 – DUKE ENERGY
https://www.sec.gov/Archives/edgar/data/1326160/000110465921118760/tm2127747d2_fwp.htm
025537AU5 – AMERICAN ELECTRIC POWER
https://www.sec.gov/Archives/edgar/data/4904/000000490421000074/a11-2021aepfwp.htm
19075QAE2 – COBANK, ACB
https://www.cobank.com/corporate/news/2022/cobank-issues-400-million-of-preferred-stock
65339KCB4 – NEXTERA ENERGY
https://www.sec.gov/Archives/edgar/data/753308/000110465921148212/tm2135074d1_fwp.htm
637432PB5 – NTNL RURAL UTIL
https://www.nrucfc.coop/content/dam/nrucfc/public-tier/documents/investors/prospectus/CFC_Subordinated_Notes_Term_Sheet_May2023.pdf
857477CH4 – STATE STREET CORP
https://www.sec.gov/Archives/edgar/data/93751/000119312524014363/d726946dfwp.htm
816851BS7 – SEMPRA
https://www.sec.gov/Archives/edgar/data/1032208/000119312524064997/d761690dfwp.htm
65339KCW8 – NEXTERA ENERGY
https://www.sec.gov/Archives/edgar/data/753308/000119312524048362/d793825dfwp.htm
125896BU3 – CMS ENERGY CORP
https://www.sec.gov/Archives/edgar/data/811156/000110465920062570/a20-16797_4fwp.htm
744320BK7 – PRUDENTIAL FINL
https://www.sec.gov/Archives/edgar/data/1137774/000119312522215096/d316335dfwp.htm
Hello Dick, I thought you had some of the Jersey too?
Yes, I have SJIJ and a little of the 2031 bond as well. Both are fixed rate.
The list above is just the 5 year resets that I own.
Thanks
I responded with the list of holdings but my response said it is awaiting approval (probably because I included links to the term sheets for each).
Tim – please approve when you can. Thanks!
I like that you also gave us a bit about your personal circumstances so we can understand a little better as to why your investments look the way they do.
Earlier Grid gave his personal reasons for why his current portfolio looks as it does. Now I understand it better.
—
So, okay, about me. I am an ancient widower with no debt and no kids. Charities will inherit the majority of my life’s accumulations.
I also have a pension with COLA that meets all my needs and wants, which at this point are few–mostly good wine and good food. Living in the Aspen of Texas, I don’t even have to leave town to get most anything I want.
I invest strictly for income and believe strongly in hydrocarbons. So 80% of my holdings are midstreams, both MLPs and C-Corps.
I also have 15% in old illiquid ute preferreds, thanks to the generosity of Grid and others who share their knowledge freely about these rascals.
The rest is in a few old Ibonds I bought over 20 years ago and money market funds. I try to stay fully invested in things I believe will continue to pay me no matter what. I sleep well with my holdings and mostly just let the income compound.
Maybe the charities can do some good with it.
JMO
Camroc, I am a charity if you are so inclined, ha! I’m like you, I’m living off a pension with COLA and it is all and more than I need. The rest is helping providing for income stream for GF to retire on . Then life insurance policy if I croak so I can give the stash to my daughter so they don’t have to fight over the crumbs.
I have only got this conservative over past < 2 years. Patiently waiting for credit spreads to normalize. I can be patient…maybe ha.
Percentages put it in perspective. I told you I didn't have a lot in IBONDS. I just like them ha. Take Dick for example. He has mentioned good opps in the bond desk floating market. But his percentage isn't as high as I imagined. Mostly from recency bias on my part.
Camron
Where is the Apen of Texas?
Fredericksburg mirrors the tourist mecca aspect of Aspen, not the skiing. 😉
JMO
Grid;
‘I aint working so hard this year, Im lazy…’
I get that. I had a couple preferred issues matured recently, so having no good ideas at the moment, I bought some 20 year Agency bonds paying 6.1% callable in March 2025. I am 99% sure they will be called then and I myself will certainly be called before 20 years, so it was a lazy no brainer and I can go target shooting an extra day a week 🙂
Bill, nothing like being relaxed! Im enjoying it too.
There has been some discussion about $1k face floating/variable interest rate bonds and preferreds. Here are a few that were offered for sale today 4/12. We all know there are many moving parts on variables including what the reference interest is, how was the change from Libor handled, what is the first date the interest can change, how often can it change, ad nauseum. . . .
BLACK BOX WARNING: This list does NOT include all of the data you MUST have before deciding to purchase any of these. You absolutely, positively, MUST spend more time to make sure you understand exactly how each issue is structured. Not to mention having to guess how the company will proceed, i.e. do you forecast it will be called and when.
The data I have included is:
Company name
CUSIP
Current coupon yield, assumes price @ par
Current yield based on latest ask price, which presumably you can buy the issue at, although the minimum quantity might be up to $250, plus some are 144a’s
Base interest rate: SOFR, 3ML- 3 month LIBOR which means I did NOT trace how it has changed post Libor, ??= unknown
Margin above the base is NOT included because I am not happy with the quality of my data, although you can calculate it reasonably well based on the coupon yield.
Next call date or “continuous” which roughly means it can be called on ~ 30 day notice, i.e. it is past its first call date.
Maturity date if it is a bond, perpetual if it is a preferred which might NEVER be called
I did not attempt to make the data look pretty on this post, because it is let us say difficult. The data is setup for you to copy into a spreadsheet as a “CSV” file, then parse into columns.
The list is sorted by highest current yield, so you should roughly assume the default/non-payment risk is highest at the top and decreases down the list.
Header row
Name,CUSIP,Coupon yield, current yield, Interest base, Call status, Maturity date,Moodys,S&P
AGFC Capital Trust I,00846NAA5,7.325,11.78,??,Continous,1/15/67,B1,B
Zions Bancorp NA,989701BF3,10.03,10.21,3ML,Continous,Perpetual,NR,BB+
Zions Bancorp NA,989701BD8,9.402,9.98,SOFR,Continous,Perpetual,NR,BB+
EnLink Midstream Partners LP,29336UAH0,9.701,9.75,SOFR,Continous,Perpetual,BA3,BB
Southern California Edison Co,842400FU2,9.767,9.74,SOFR,Continous,Perpetual,BAA3,BB+
Plains All American Pipeline LP,726503AE5,9.678,9.67,SOFR,Continous,Perpetual,BA2,BB+
Energy Transfer LP,29273VAH3,9.596,9.61,SOFR,Continous,Perpetual,BA2,BB+
First Citizens BancShares Inc/NC,31959XAA1,9.562,9.39,SOFR,1/4/27,Perpetual,BA1 ,NR
JPMorgan Chase & Co,46625HJQ4,9.348,9.35,SOFR,5/1/24,Perpetual,BAA2,BBB-
M&T Bank Corp,55261FAG9,9.178,9.14,3ML,5/15/24,Perpetual,BAA3,BB+
Citizens Financial Group Inc,174610AP0,8.566,9.11,3ML,,Perpetual,BAA3,BB+
Citigroup Inc,172967GR6,9.034,9,SOFR,5/15/24,Perpetual,BA1,BB+
JPMorgan Chase & Co,48126HAA8,8.868,8.87,3ML,5/1/24,Perpetual,BAA2,BBB-
Fifth Third Bancorp,316773CR9,8.692,8.86,SOFR,Continous,Perpetual,BAA3,BB+
Fifth Third Bancorp,316773CM0,8.596,8.84,SOFR,Continous,Perpetual,BAA3,BB+
JPMorgan Chase & Co,48124BAC9,8.818,8.82,SOFR,5/1/24,Perpetual,BAA2,BBB-
Bank of America Corp,060505ED2,8.734,8.7,3ML,Continous,Perpetual,BAA2,BBB-
TransCanada PipeLines Ltd,89352HAC3,7.778,8.64,SOFR,Continous,5/15/67,BAA3,BBB-
Huntington Bancshares Inc/OH,446150AL8,8.455,8.63,3ML,7/15/24,Perpetual,BAA3,BB+
Truist Financial Corp,89832QAB5,8.692,8.61,SOFR,6/15/24,Perpetual,NR,BBB-
Enterprise Products Operating LLC,29379VBM4,8.573,8.58,SOFR,Continous,8/16/77,BAA1,BBB
PNC Financial Services Group Inc/The,693475AM7,8.642,8.58,SOFR,6/1/24,Perpetual,BAA2,BBB-
Bank of Nova Scotia/The,064159KJ4,8.208,8.57,SOFR,7/12/24,Perpetual,BAA3,BBB-
Enterprise Products Operating LLC,29379VAN3,8.38,8.51,SOFR,Continous,6/1/67,BAA1,BBB
Allstate Corp/The,020002BB6,8.506,8.48,SOFR,Continous,8/15/53,BAA1,BBB-
Reinsurance Group of America Inc,759351AE9,8.255,8.47,SOFR,Continous,12/15/65,BAA3,BBB
Morgan Stanley,61745VAB9,8.75,8.45,SOFR,12/15/25,Perpetual,BAA3,BBB-
Goldman Sachs Group Inc/The,38148BAD0,8.436,8.42,SOFR,Continous,Perpetual,BA1,BB+
PPL Capital Funding Inc,69352PAC7,8.236,8.25,SOFR,Continous,3/30/67,BAA2,BBB
State Street Corp,857477BA0,8.129,8.11,SOFR,6/15/24,Perpetual,BAA1,BBB
USB Capital IX,91731KAA8,6.595,8.11,SOFR,Continous,Perpetual,BAA2,BBB
JPMorgan Chase & Co,48128BAD3,8.148,8.09,SOFR,5/1/24,Perpetual,BAA2,BBB-
NextEra Energy Capital Holdings Inc,302570AW6,7.631,7.97,3ML,Continous,10/1/66,BAA2,BBB
WEC Energy Group Inc,976657AH9,7.681,7.84,SOFR,Continous,5/15/67,BAA2,BBB
Goldman Sachs Capital IV,381427AA1,6.37,7.35,SOFR,6/1/24,Perpetual,BA1,BB+
BAC Capital Trust XIV,05518VAA3,5.99,7.19,SOFR,Continous,Perpetual,BAA2,BBB-
Mellon Capital IV,58551TAA5,6.159,7.18,SOFR,Continous,Perpetual,BAA1,BBB
Jpmorgan Chase Financial Co LLC,46646EX23,5.781,5.84,SOFR,Uncallable,11/3/45,A1,A-
Thank Tex! I have been meaning to spend more time here. These have some value as they are generally intended for institutional money but there are less institutional floating rate mandates so the bid isn’t as strong.
And of course, the qualified ones are good for taxable accounts.
How can you find out if payments are qualified? Thanks much for your work
Thank you for posting.
I have tried to locate the PPL Capital Funding prospectus for the floater that you listed. Any link to where I may find it? Thank you!
I own the PPL issue. Here you go:
https://www.sec.gov/Archives/edgar/data/922224/000089322007000745/e31666b5e424b5.htm
Here’s the statement on LIBOR too:
https://www.prnewswire.com/news-releases/ppl-capital-funding-to-replace-reference-rate-for-junior-subordinated-notes-301839214.html
Here’s the prospectus with all the numbers filled in:
https://www.sec.gov/Archives/edgar/data/922224/000089322007000812/e31666b2e424b2.htm
Thank you Dick and Retired Sailor!
I converted Tex’s excellent list to Excel spreadsheet columns by copying it from here and first using Paste Special as text into a spreadsheet. Then under Data I used Text to Columns.
R2S,
Thanks for the guidance. It worked! Before your note I gave up trying.
Thanks to R2S for outlining how to convert the data into Excel. I should have been more explicit in the post and not assumed that everyone knew how to do it. You can also do the same import into a ‘Google Sheet” which is their free version of Excel. Here is the process:
1. On your browser (Google Chrome, Firefox, etc.) open up a new tab and enter: https://docs.google.com/spreadsheets/
2. Click on “start a new spreadsheet” “Blank spreadsheet”
3. On my original post, left click starting at the Name, Cusip line going all the way to the bottom of the data. This should “highlight” all of the data
4. While the data is highlighted, click “Ctrl C” which is a shortcut for copying data
5. Go to the newly opened Google Sheet tab and click “Ctrl V” which is a shortcut for pasting data. That should put all of the data from my post into a single column A, with rows from 1 through 40
6. The A column should still be highlighted, the click on “Data” at the top which opens up a pulldown menu, select “ split text to columns”
7. The data should all be in nicely separated rows and columns with the header row containing the descriptions.
8. If you have a free Google account, you can save this into your own spreadsheet
9. The process to export into Excel is very similar and I can write-up a line by line process if anyone would like it.
having some fun with GLpD today ; feels like grabbing a cat by its tail !
not a day trader but that might work with this one ? range 13.90 -17.40
and sufficient liquidity last two days ;
Ted , I have had enough stress today having a $1000 on Tiger making the cut today. Don’t have it in me to go there.
If anyone is interested in the Ramaco 9% Senior Notes with a maturity of 7/30/2026 you have a small window to get it about $.40 cheaper than it normally is due to the record date now. Normally it stays around $25.70, but drops to around $25.25 or so around the record date of the 15th of the first month of the quarter. The quarterly payment is $,563, so you will spend about half of one quarter’s payment to buy it. Check out the stock trend and you will see the drop like clockwork. I increased my holding in METCL from a half position I bought when it was issued to a full position using the proceeds from the GasLog Series A redemption as I think it is a good one to own to maturity. Ramaco is a coal company in the niche of producing a speciality coal called metallurgical coal used in steel production. It is not a large company, it’s annual revenues is around $700 million. I think it is financially sound and pretty well managed, but your own due diligence. I would be interested in your thoughts if you have more knowledge of them. Another interesting thing about Ramco. They purchased some land in Wyoming intending to develop it for coal production. However, they have found a very large deposit of Lithium on it. They company is on the process in obtaining the permits to develop it.
dj .the common METCB looks interesting as well ; nice dividend and trading near its low;
Ted, Ramaco created METCB last when they discovered the potential rare earth minerals on the Wyoming land they purchased for coal development. Its tied to the potential from developing those minerals. It could be a real winner if and when that pans out, so investing in it is outside my goals of income investing. I went for the less exciting senior notes METCL, which had a higher payment and less volatile. It is going to be very interesting to see how the discovery of lithium for Ramaco develops. It has the potential to totally change Ramaco from a small cap speciality coal company occupying a niche in the market to a major player in the electrification boom developing.
Just a couple of caveats on characteristics on METCL – Don’t forget that it’s now a 2 year note, so as it’s getting closer to maturity, there’s no reason to expect it to fully recover to its historical levels because there are fewer fat 9% dividends to be received. Also, although I forget the rationale behind believing a call prior to maturity is probably not very high, it does have an unusual provision in that it is currently callable on only 10 day’s notice, not the usual 30… Theoretically, that should also put a minor cap on price….. That being said, I’ve owned METCL since July ’21 and really don’t pay much attention to short term potential opportunities in its price movements in either direction.
Niche for C-Corp owners.
Responding to the upward trajectory in rates last year I’d set up a corp account with Fidelity to better manage and grow the sizable RE.
Maybe I’m the last dummy in the room though just a few days ago when reviewing the 1120 was “reminded” corp divvies enjoy a special 50% deduction on taxable dividends from <20% owned domestic corporations. And to my surprise – Fidelity's (and I'm guessing others) MM distributions qualify.
Now that 50% doesn't translate to a "double" but it's enough to matter. There are two variables in the translation so I'll have to confess it took a few minutes to algebra-out the solution but for any excel users here it is:
Fully Taxable Equiv Rate=(A-((A)*(1-B)*(C)))/(1-C), where:
A: dividend rate (e.g. Fidelity MM is 4.95%)
B: is the Special Dividend Deduction (in this case 50%)
C: is the Fed Corporate Tax Rate (currently 21%)
Translation: A Fidelity MM of 4.95% is equivalent to a non-div taxable (straight interest) of 5.61%. That beats anything out there (today) so I'm letting the corp ladder loaded with Treasuries, CDs and near-term bonds roll into the MM for now at an AAA-rated fully taxable equiv of 5.61%. Ultimately to be distributed via dividends as QDI.
Good luck to all.
I could be wrong about this, but it seems that TFC-I is floating, although the III Fixed-to-Float spreadsheet indicates that it doesn’t float until 12/15/2024. Schwab’s dividend payments indicate they paid $0.25 to $0.26 consistently until 12/15/2022. After that, they paid:
$0.33 on 3/15/2023
$0.34 on 6/15/2023
$0.39 on 9/15/2023
$0.39 on 12/15/2023
$0.39 on 3/15/2024
$0.39/quarter x 4 = $1.56/year = 6.2% at par. The float rate is the greater of 4% or $0.53 + 3-month Libor (I assume SOFR + 0.26%), which matches the dividend payments.
The current price is $21.67, so the current yield is about $1.56/$21.67 = 7.2%, which is not bad for a top 10 bank.
I think the III F-to-F spreadsheet needs to be updated for TFC-I.
Error. 0.53%, not $0.53 on the float rate.
goin, their website verifies this:
https://ir.truist.com/preferred-stock
TFC-I is the 1st security in the table.
1. 12/15/2024 is the 1st call date, but it currently floats.
2. The floating rate = Greater of 4.00% or [(3-month CME Term SOFR + 0.26161%) + 0.530%].
Last year, they announced the switch from 3mL to 3mS + .26161%
mbg – Thanks for the reply and for confirming that TFC-I is floating.
2 year treasuries briefly touched the 5% mark on the secondary market
I added a bit more to yesterdays buy at a yield of 4.98%
Maverick, I have been checking what seems to be all day on TDA on the 2 yrs prices, I haven’t seen it budge over 4.9%. Did it possibly surge up in a short spike? I can’t claim to have babysat this number today, but I was confident I had it covered…..but maybe not.
Every time I’ve looked at vanguard today it’s offering one at 5.06 or so
Damn. Thieves, Damn thieves at TDA
I don’t know if this is the same problem or not at TDA, but I have TNX and TYX on my watchlist on ThinkOrSwim. I reported to TOS that these two which are the 10 and 30 yr Treasuries, have not been dynamically updating like they used to….. Nobody seems to care -got the same old same old, “thanks for letting us know – I’ll report it to the right people and it’ll be fixed” blah blah blah. 4 days and nothing’s changed So maybe the problem isn’t thievery but their entire system not accurately reporting current rates on Treasuries
2WR, that’s very interesting, thanks for the info!!!
Possibly related, on SA, Bond page they have had incorrect TIPS prices for last day and a half. Last I saw correct was yesterday morning, maybe late morning.
For now you need to append :CGI to the symbols of IRX FVX TNX TYX
Pig Pile – I wasn’t watching it all day but when I checked it was right at 5% on the highest yielding 2 year treasury on their secondary market offerings. Now of course, to get that 5% the minimum was far beyond what I planned to buy so that is why my yield was 4.98% based on a seller with a low minimum number of bond requirement
Thanks Maverick, Very strange. I was never offered anywhere near that. I too have to dig down a few offers to get my minimum numbers. I think the best I saw all day was 4.9 ish. Maybe TDA wants more juice from me before the switch next month to Schwab.
For the nickel-stackers: SCCB is available at about $24.90. Matures 6/30/24, still has one dividend left, approximate IRR of 10.3% by my calculations.
Thanks for the heads up – converted 135 shares of SGOV for 534 shares of SCCB at $24.92! When redeemed on 6/30, I collect 8c + 44.5c = $0.525 for holding for 80 days. My return should be about 9.6% annualized. Better than I was getting for SGOV or a short term treasury.
If redeemed. They are not doing well, but they did say they either have the money or access to the money needed to redeem SCCB, we’ll find out soon. I sold my holdings in SCCB and SCCC.
Sachem Capital Corporation’s 10-K for the Fiscal Year ending 12/31/2023 can be found at https://ir.sachemcapitalcorp.com/all-sec-filings/content/0001410578-24-000381/0001410578-24-000381.pdf
On page 16, it claims that the total outstanding principal on SCCB is $23M. On page 18, it claims that the corporation has $50.4M cash and investment securities on hand. Do you have information that suggests SACH will be unable to redeem SCCB at maturity?
Retired Sailor,
No, nothing specific, just the business they are in, short term CRE loans. I just have a feeling interest rates are going to stay pretty close to where they are, not going down in a meaningful way anytime soon. I was up about $500 on both issues so I took the money and ran. However in the 2023 full year report the company said “Additionally, the company has approximately $23.7 million of notes payable coming due in June of 2024. The company believes it has, or has access to, sufficient working capital to repay these notes when due.”
I think it was the “company believes” part I wasn’t comfortable with, either you do or you don’t. Also the common is down close to -14% YTD. I held SCCB a few years, but I have sold anything I have that invests in CRE. SCCB is probably ok, but I wouldn’t hold the other issues unless interest rates were to be cut.
https://www.sachemcapitalcorp.com/news-media/press-releases/detail/135/sachem-capital-reports-full-year-2023-results
Thanks for the commentary – good info. I read the same stuff and decided that the short-term nature of SCCB makes it worth the investment. I don’t own anything else there, however. June 30 is only 79 days away so I am thinking the risk/reward for SCCB is minimal. The others? Not for me for all the points you make…we shall see.
Just adding to Bill’s comment.
I want to like the bonds but after taking a closer look, but I am nervous I would be entering a rapidly deteriorating scenario. How do folks get comfortable for the slightly enhanced yield?
they are extending a majority of their loans so who knows if they are truly valuable.
they have also expanded to new markets like Austin and Florida, and have much more Office and commercial real estate exposure than I assumed.
Lastly, they have all these low coupon bonds issued when rates were low that are coming due in a difficult market.
“More money has been lost reaching for yield than at the point of a gun.” – Raymond DeVoe Jr.
Alpha, Are you sure it wasnt Pendragon who coined that term? After all nobody has more experience in such matters than him.
That’s hilarious.
Also though, it truly pains me to think of all the good and earnest people who appear to fall prey to their click-bait. And his leader, who resembles the McDonalds Hamburglar, I believe we determined was based somewhere in eastern europe – vacuuming $$ from unknowing Americans. Didn’t we also learn SA itself was based in the mideast – and only in the last few years try to conceal this by setting-up a NY office?
So grateful to SA for blocking my random access to their site via their paywall.
We all get a little information from that website. Grid has been behaving himself and instead of attacking the authors he has been gracious in offering advice to other posters pointing out better options. Jesse who is with that crowd, has been pushing REITs for the past few years and has been saying to buy while they are down. Having CFA after his name now doesn’t make me feel his advice is any better now.
Charles they just delete the good ones I post, ha. Numbnuts Jussi thinks reits are a steal when rates are high and low. Horrible. He has learned to get posts deleted too. People have figured out what he is.
Maine;
Agreed. It is a relatively small issue at 23.7 million dollars, only half as much as the cash they say they have on hand, but then again it is a very tiny company that to me doesn’t seem to have a lot of gas in the tank.
Maybe I am too conservative, but it just didn’t seem worth hanging on for that last dividend at the end of June. This issue will probably be paid, but the other 6 BB’s down the road ? Not so sure if interest rates stay where they are or worse, go up..
Bill – did you notice who was hired as head of audit and compliance? Or all their unfunded commitments? Or their increasing overhead. All this with rising interest expense costs. Yikes.
Agree that the June bonds should be ok but after that it’s looking cloudy.
Maine;
Melissa Villano Harrington is the head of audit and compliance. The CEO is John L. Villano, hmm 🙂 Just a coincidence I am sure. Yes, the financials are too scary for me.
I noted that CEO Mr Villano is also acting CFO and has been for over 1 year now. From Linkedin, Ms Villano Harrington looks like she is old enough to be CEO’s daughter so I suspect this is the case.
There is a VP of Finance, but the C-Level slot is held by Villano.
Looking at the 10K there is clearly deterioration in the mortgage book. Loans in foreclosure have doubled on a % basis YoY and loans are being $100M in loans are being extended. Of their $491M mortgage book fully $123M was supposed to mature in 2023 or before – still on the books as of Dec 31st.
I am sure the company will survive and the June notes are likely money good, but there is a clear governance problem here coupled with what appears to be serious deterioration in the credit performance of the mortgage book.
Also – what is the 2023 August CT $10M office building purchase about? This is not a property REIT afterall.
Lastly there is a comment in the auditor’s report about the CECL policy. Not sure I understand it, but it makes comparing 2022 and 2023 difficult.
Keep in mind this high yielder is a favorite on SA, the common, preferred, and especially the baby bonds.
“During the years ended December 31, 2023 and 2022: (i) the wife of our chief executive officer was paid $-0- and $63,168, respectively, for accounting and financial reporting services provided to us. She retired in the third quarter of 2022; and (ii) the daughter of our chief executive officer was paid $192,346 and $141,652, respectively, for internal audit and compliance services provided to us.”
“During the year ended December 31, 2023, the Company expensed its investment in Sachem Acquisition Corp., a special purpose acquisition company as it no longer deemed it a viable investment. The amount was $477,047 and is reflected in general and administrative expenses in the Consolidated Statements of Comprehensive Income.”
“As of December 31, 2023, the Company had invested an aggregate of approximately $43.0 million in five limited liability companies in which it held non-controlling interests. The Company’s ownership interest in four of the limited liability companies ranges from approximately 7% to 49% and one of the partnerships is owned 100% by the Company. The Company accounts for these investments at cost because the Company does not manage the entities and thus, has no control or have significant influence over the investments. The third-party manager of the investments is a commercial real estate finance company that provides debt capital solutions to local and regional commercial real estate owners in the Northeastern United States. The Company’s withdrawal from each limited liability company may only be granted by the manager of such entity. Each limited liability company has elected to be treated as a partnership for income tax purposes.”
“All amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all Company’s assets.”
“At December 31, 2023, of the 311 mortgage loans in our portfolio, 56 were in the process of foreclosure, with an aggregate outstanding principal balance and the accrued but unpaid interest and borrower charges on these loans of approximately $68.1 million.”
“As a result, the mortgage foreclosure process has become lengthier and more expensive. Many factors delaying foreclosure, such as borrower lawsuits and judicial backlog and scrutiny, are outside of our control and have delayed, and will likely continue to delay, foreclosure processing in both judicial states (where foreclosures require court involvement) and non-judicial states. The extension of foreclosure timelines also increases the inventory backlog of distressed homes on the market and creates greater uncertainty about housing prices. The concerns about deficiencies in foreclosure practices of servicers and related delays in the foreclosure process may impact our loss assumptions and affect the values of, and our returns on, our mortgage loans.”
And on and on and on. It reminds me of the sub-prime crisis when the lenders pointed to their low level of historical defaults.
August – maybe there is a CPA on the forum that can explain it better, but my understanding is that the auditor called out an issue to the SACH audit committee, who were forced to address it.
This probably part of the reason SACH suddenly discovered that they have office exposure purchased near the onset of COVID. Gee, you would’ve thought that would be a factor investors would appreciate.
This stuff is so bad is practically comical. I also hope many don’t get hurt by this situation.
Hi Maine – I guess SA is Seeking Alpha? I never look at that site maybe it’s changed, but my sense is that it is mostly a bunch of paid shills that probably don’t have any positions in anything. I am sure some of it is good, but why risk it?
Most of this stuff does not bother me that much these lines of credit are typically Sr secured claims on all corporate assets (for example). Would I really care that the daughter gets paid $200K or the wife gets $60K? Not really.
Would I care that the daughter is in an audit/risk management function essentially reporting to her father who is the CEO/Chairman who is acting CFO. This while the credit quality of the mortgage book tanks? Yes – I would care about that a lot.
I think the Office building was purchased in August 2023. This does not make much sense and it raises an eyebrow at least.
I am sure that there is research to be done in the CECL but why bother? It is not like this is the only issue to be considered.
The question is what does one do about all this?
It does not make any sense to buy any of this stuff, and the common does not have enough meat on the bone to short. The options market is non existant.
Maybe the preferred could be shorted, but when the world has given the gift (slow motion car crash/dumpster fire) of B Riley I’d rather just focus on that.
I have made great money in 2024 by selling options on RILY and if it was not for this site I would have missed it!
Sure SACH is a mess but RILY is like 100X worse IMO.
August – I appreciate your opinion, and believe you make valid points. I can’t comment on B Riley as I haven’t spent much time on it. Here is what I can say.
1) the 2023 office purchase was separate. See below.
2) the common still trades at 86% of the stated book value. A) this is very expensive compared to other credit oriented mREITs and B) there is a high chance the equity/book is overstated.. with example 1 being the commercial real estate investments they carry at cost and CEO alluding to it on the call.
3) the issues with sachem are not well known (large retail base who cares about dividend) so there could be significant selling pressure once all the cascading issues happen, especially a delayed/ reduced dividend.
4) the company is a serial issuer of common, and they are in a prickly now so need to issue to stay above covenants. This works if they can issue above/near book but that ship has sailed.
5) the common is very easy to short- liquid and low cost.
6) in terms of “why it matters..” fair point- I think a short can add diversification for other MREIT long exposure AND hopefully some read this and are spurred to research further. I also have a sore spot for manipulative management.
8) lastly, I am also posting here to learn, to gain additional insight that either goes against or with my thesis.
Snips from transcript:
“With respect to our impairments, hey, look, things happen. We’re not happy. But in the case of our significant impairment this quarter and this year, we were hit with office assets that have been on our books for some time. And sadly, when leases don’t materialize, valuations drop, and there’s not a whole lot we can do about it. Our borrower cannot [ph] re-rent (00:17:07) the property, and needless to say, the pain is here. So, not a lot to be said about that.”
“The world has changed with respect to office, and lumps hurt, but we’re not the only ones taking these lumps. But we’ll continue to work them through. There might be a redevelopment plan with these buildings. We will see.”
“Well, yeah, I wish I knew, to be perfectly honest. You’ve heard me talk about appraisal risk. And we think that is a big hindrance to us moving forward. A distressed borrower who sells a property can affect all the properties around it. So, we’re cautious about that. Is it devastating? No. There’s real value. However, an impairment can be hiding real value, and – but GAAP is GAAP. Our auditors want appraisals. There could be more. I don’t want to sugarcoat any of this, but loan impairments can continue here. We don’t think they’re critical. We have a great history of working them out. And if you look at our REO, the balance continues to work its way down. We’re not saddled with a huge amount of REO. I hope that helps. But again, looking forward, it’s still very cloudy for all of us lenders.”
https://www.sec.gov/ix?doc=/Archives/edgar/data/1682220/000110465924042619/tm2410333d1_8k.htm
Maine – great points I will give it some thought as a potential short play. Certainly the kind of situation that can unravel rather quickly.
August and Maine, I want to thank both of you for your back and forth and the effort to dig into this.
I admit to not understanding a lot of this, but I have experiences I can compare to. Why so many investments in limited liability companies with no controlling interest? My friend’s father Tom was invested in a local shopping center that he regretted investing in for the exact same reason here. I think SACH is not the only investment company who is holding investments that are impaired and haven’t been marked down from full value. When the tide goes out, we will see who has been swimming naked.
When this happens the market panics it makes it difficult if not impossible to issue stock or BB or find high cost funding when the public is selling what has already been issued.
Personally I look at the amount of BB issued and the common being about $3.00 and I wonder what wound happen it they cut the dividend to save money.
Great points Charles. The $43M in LLCs are probably worthless – kind of like Goodwill. If you mark them at $0 and compute the Total Assets/Debt ratio you get a number like 157%. Realistically, however, nobody is going to write these down at all until the next 10K which wont be until April 1 2025 (if this year is any guide).
It looks like they pretty much pay the dividends by issuing common stock at this point. With the stock trading below book value this destroys value, but the shareholders don’t seem to care for some reason.
Things might come to a head sooner rather than later because to Maine’s point – their Total Assets/Total Debt ratio is 168% (that is from memory I dont have my XL in front of me so don’t quote me).
My guess is that if this ratio drops below 150% they wont file their 10-Q and they will delay filing for as long as possible. The terms on the secured debt will come into play at that point. I am thinking about spending some time looking at their line of credit covenants particularly around reporting requirements to secured creditors.
I am not against shorting SACH if it can drop materially over the next couple of quarters. Shorting SACH and putting the proceeds into something like the GDX (or even a bank loan fund) has crossed my mind. To Maine’s piont it’s worth spending more time on it.
Can someone help me understand why people are paying $25.14 for TGH-B when it will be redeemed on Monday for $25.134?
Is there some play I am missing?
A penny.
Andy Rooney use to get upset about where the 1/10 of 1 cent went when he paid 39.9 cents for a tank of gas. Someone cut 1/10 a penny off a penny and mailed both back to him glued to an index card.
In other words you’d over pay! Ahead of such events people need cash now so they sell. And are willing to take a little less or even a liitle more if someone is squaring their books. Multiply by a thousand and now we’re talking real money!…$6……
KTH and EP-C are both trading with YTM’s around 6.5%.
GL-D is down significantly along with the GL common.
“April 11 (Reuters) – Shares of Globe Life (GL.N), opens new tab fell 14% in morning trading on Thursday after Fuzzy Panda Research disclosed a short position in the company, alleging multiple instances of insurance fraud.
The short seller in a report said it had uncovered “extensive allegations of insurance fraud ignored by management despite being obvious and reported hundreds of times,” including policies written for dead and fictitious people.”
https://www.reuters.com/markets/us/globe-life-shares-plummet-after-fuzzy-panda-discloses-short-position-2024-04-11/
Sounds like the ABR short attack last year.
Fuzzy Panda Research ; sounds like a bunch of children playing with Teddy Bears ; too funny
I took a shot at this one ; 200 sh at 14.95. ;
my guess ; just like every short seller formula ; sell and allege all kind of mis deeds; this is the only outstanding preferred of GL and had a BBB+ rating
Ted –
Having worked in the Financial Services Industry 25 years, both is sales and in compliance, I was only aware of two instances of sales reps writing life policies on fictitious persons during that entire 25 year period. Both were dismissed immediately on discovery. Both had only written a handful of policies, definitely less than 10 each, for fictitious persons. Both were quickly discovered, and fired. This was in the 80’s and 90’s and even back then, the underwriter could not only determine the person does not exist, but also had available the applicant’s detailed health history via a health underwriting exchange report of sorts. So on that note, Ted I put in an order for 10 shares of GL Preferred D at $14.90, because the claims made by the short sellers are extremely dubious to me. It’s quite possible some sales reps were selling fraudulent policies, but I’ve little doubt that this was not condoned or tolerated, if so,
I don’t know. GL dropped 50% in a single day. I know ABR was volatile but it took several days to do what GL did in 8 hours. On top of that ABR had interest rates weighing it down as a natural sinker attached to it.
With that said I have not even read the news yet on the topic.
I haven’t read through the entire short report yet but thought I’d share the link for anyone interested: https://fuzzypandaresearch.com/globe-life-american-income-life-david-zophin-steve-greer/
I don’t own GL-D currently. I used to own it but sold in November 2023 for $19.15 (5.5% current yield). I bought the shares in October 2023 for $16.65 (6.4% current yield). It was a 15% gain in less than a month.
GL’s common was down almost 51% today. I don’t think I’d be interested in getting involved in something like this unless the price of GL-D went much lower.
We are disappointed today to see self-motivated short sellers push inflammatory allegations in order to drive down Globe Life’s stock price. We reviewed the report and found it to be wildly misleading, mixing anonymous allegations with recycled points pushed by plaintiff law firms to coerce Globe Life into settlements. The motivations behind this short seller’s report are driven solely by short-term profit earned on the backs of the thousands of shareholders, hardworking employees, independent contractor sales agents and customers who know and trust our brand and strong track record. We have successfully defended ourselves against these types of claims. The short seller analysis by Fuzzy Panda Research mischaracterizes facts and uses unsubstantiated claims and conjecture to present an overall picture of Globe Life that is deliberately false, misleading and defamatory. Globe Life intends to explore all means of legal recourse against the parties responsible.
Globe Life strives to act in accordance with the highest level of ethics and integrity at all levels of the organization and to comply with all government regulations. American Income Life (AIL) has processes in place to review, investigate and address all allegations brought to the Company’s attention concerning unethical business practices, sexual harassment and inappropriate conduct and we do not tolerate such behavior.
We intend to more fully rebut these allegations in the near future. Rest assured we are steadfast in our commitment to delivering sustainable earnings growth that provides substantial value for our shareholders. Our dedication to providing the highest quality to our customers remains unwavering
LOL I loaded up on the news going into the close. VERY uncustomary for me. Even if I make a boat load its too distracting for me. I try to remind myself “Losers buy Losers”…..and probably be better off adding to apple, than playing trading game.
Still very unusual action. News out at 907AM opened down like 5. Proceeded to move from 95 to 39! Many earnings estimates on GL. Very tightly grouped. What I see are comments that they have low capitalization so co susceptible to more dramatic moves on bad news. I’lll say!!
I read the whole Fuzzy report. Parts of it read like a Hollywood tabloid and parts seem to be keen on the financial aspects. They throw around the word “fraud” about 1000 times but never really go into much detail. This is what I took away from the whole thing:
1. Yes, there could be shenanigans going on
2. Most of it is directed at related agencies who sell GL policies
3. Lots of vague accusations which in sum give you the impression that everyone in the entire organization is a low-life, drug-crazed alpha-male who sexually harrasses all the women. I’m sure there are bad actors, there are in every company, but I doubt it’s everyone.
4. They cite numerous past judgements by state insurance regulators, but not sure how relevant those are. If you’ve ever followed life companies, they all have state regulators and attorneys chasing them for settlements.
5. Like we didn’t already know that life insurance salesmen/women don’t always tell the truth?
6. All the above was supposedly condoned by management.
7. Insurance sales recruits were directed to a testing facility which was owned by executives of the company, who then received kickbacks. Later the testing company was sold. While this doesn’t seem ethical, I’m not sure it’s illegal or against regulations.
8. The DOJ is doing an investigation of the company. No details but one could assume for certain business practices by the agents selling their products.
All-in-all, maybe this will help the company clean up the bad actors, who knows. I’m sure the stock will remain volatile, as well as the preferred. I bought some of the preferred on Friday at $14.25.
I’ve watched KIM-N ( no call or maturity) decline a few bucks, but can’t recall the discussion here in the recent past. I know it was an RPT issue that got re-named, but is it in danger of something drastic that is causing this?
Thanks-
It’s just trading down with rates increasing.
Good point
Gary KIM
BofA Securities analyst downgraded KIM from Buy to Neutral ’cause accretion fm RPT buyout proving less than expected
I’m holding
Irish –
I guess you believe rilyo won’t recover after the nice ex-date payment you could collect tomorrow? But will take a current 1.5% or so profit in hand ?
Just curious.
I don’t mean I’m selling, I’m buying a little at 25.2 to round out my position.
50 days to rilyo maturity, goes ex tomorrow for a full quarter divi of .42-selling today at 25.21. IRR ~11%annualized.
Just bought a full position of AEL-B at $24.51 that many of you are familiar with. Coupon of 6.625% that resets at 5YRT +6.297% on 9/1/2025.
tks for show..I just paid 24.35 for AEL-B..given the 5yr reset on 9/1 I expect this to be called..ytc to 8.6..fyi AEL was bought by Brookfield Reinsurance
American Equity Investment Life Holding Company is being acquired by Brookfield Reinsurance, and current shareholders will receive a cash payment and shares of Brookfield Asset Management.
I bought 1000 AGM-C today at $25.05. 6% coupon until 7/18/24 and then 3 month libor plus 3.26% if it’s not called. My YTW is 5.3%, I previously bought 1,000 at $24.90 on 1/19/24. The dividend is qualified. Maybe I’ll get lucky and it’s not called. If not, I see it as a good short term investment.
Whidbey; I just looked up the 3 month libor & it said currently “5.56%”. If that is correct and then add in the 3.26% you end up with a rate of 8.82%. My point is there is no way in heck that they would not call it when they can. Nobody is going to pay you 8.82% with their strong credit rating.
Chuck – Don’t tell this to PPL. I own a floating rate subordinated debt issue from them that is currently floating off the 3 month (CUSIP: 69352PAC7). The current coupon is 8.23% and it’s rated BBB/Baa2. It’s even been trading slightly below par.
I tried to buy the PPL issue on Fidelity platform and it was not quoted
I purchased through the bond desk at Schwab. I had to call it in.
I think most floaters that do not trade by symbol (cusip only) are not officially on the “Fidelity platform” because of them being floaters…. Call the bond desk and they’ll track it down for you and give you a quote that you can act on.
Infinitely off topic, but more important than any of the income stuff we talk about around here: you gotta live long enough to enjoy it! Bloomberg has an excellent story out today about Ed Thorpe. One of the best investors that the masses have never heard of. Guy is 91, but could pass for 61 or 71.
Related to this, we had an epic fail recently. Our of our account owners passed away. They could have spent 10X annually and still left a lot to their heirs, but chose to live well below their means, despite my urgings to spend more while they were alive.
Excerpt:
How a Pioneering Blackjack Master Beats the Odds of Aging
Bloomberg
The mathematics professor and hedge fund manager Edward Thorp rocketed to fame in the early 1960s by showing readers how to best casinos in blackjack. His book Beat the Dealer laid out a groundbreaking system of card counting, followed by guides to roulette and other gambling games. Thorp also invented or perfected a number of the quantitative hedge fund strategies being used today, and he delivered 30 years of 20% annual returns for the hedge funds he operated, with only a handful of down months, none large.
Less well known is that Thorp has devoted his talents as much to health and longevity as to beating casinos and markets. At 91 he’s remarkably healthy and vigorous. Although he’s no longer running marathons or doing serious weight training, Thorp jogs and works out at the gym regularly. He weighs 155—2 pounds above his weight at age 17—and can do two chin-ups and 15 pushups. He analyzes scientific literature and manages his regimen carefully.
We sat down with Thorp to distill his wisdom on the subject. Questions and answers have been edited for clarity and length.
Bloomberg Businessweek: We’ve heard you quoted as saying you “beat the dealer, beat the market and are going to beat the man upstairs.” Is that right?
I think I said something like that. Well, maybe I’d modify it to “push the man upstairs back as far as I can.”
What’s your approach to longevity?
The goal is to have a long life that’s also a healthy, productive one. As opposed to being in assisted living somewhere.
I think of it as having two parts. One I’ll call defense, in which you minimize the chance of really bad outcomes of one sort or another. And you try to eliminate weak links. It just takes one weak link to finish you off. Like alcoholism or a terrible skiing accident.
So one can look at the whole array of risks, the things that kill people, and figure out how to try to minimize a lot of them. With cardiovascular disease, for example, you can minimize that risk by what you eat and the kind of exercise you do and by regular checkups, so that if something is going wrong, you can address it before it gets worse.
You can go through the list of main killers, and you can see which things require the most attention. I do that. This leads to proactive defenses like regular checkups or vaccinations and managing overall risks.
On offense, exercise is one of the magic bullets. The evidence is that if you exercise a moderate amount, you can probably add half a dozen years to your expected life span. And you can add more than that to your health span, because you won’t be as weak as early in your remaining life.
And then there’s flexibility, which is something that a lot of people don’t think about enough, including me. But that’s something that starts getting to you. As you get older, you lose flexibility. And when you do that, you lose a lot of other things. You lose mobility, you lose balance, everything becomes riskier, and old people die from falls at a very high rate.
I bot SPNT.PRB at 25.25 (stripped price near 25.03) as the spnt.prb/pgx pair seems to have bottomed ..it went from 2 sigma rich in november to near 1 sigma cheap now.. current yield near 7.9 ..likely to be called 2/26/2026 as reset is 5yr + 7.29
mjtroll-
What is the pgx part of the ‘pair’ ?
thanks
Thank you! Fills at 25.22 to 25.25 today.
I bot ESGRO at 24.49 (24.29 stripped) for a 7.18 yield ..the esgro/pgx pair is trading near 2 sigma cheap (3yr horizon)..it has outperformed since inception 12/2018