Sandbox Page

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.

2,837 thoughts on “Sandbox Page”

    1. Bur, recent developments appear to be early next year…As for SJIJ its fate was sealed at announcement of merger. Its all but certain to be going to experts market….
      Our common stock is currently registered under the Exchange Act and trades on the NYSE under the symbol ‘‘SJI.’’ Additionally, our subordinated notes are currently registered under the Exchange Act and trade on the NYSE under the symbol ‘‘SJIJ’’ and our corporate units are also currently registered under the Exchange Act and trade on the NYSE under the symbol ‘‘SJIV.’’ Following the consummation of the Merger, shares of common stock, subordinated notes and corporate units will no longer be traded on the NYSE or any other public market. In addition, the registration of the common stock, subordinated notes and corporate units under the Exchange Act will be terminated, and the Company will no longer be required to file periodic and other reports with the SEC with respect to the common stock or otherwise.

      1. Grid—is it possible that sjij’s quarterly payments could be suspended indefinitely and just left that way? Or, if one is willing to just hold forever, it becomes an attractive investment at some lower price? My understanding is that some funds cannot hold deregistered securities and will need to sell. Your thoughts…..

        1. Randy, The likely outcome is continued interest payments provided the health of company remains intact. SJI is actually a holding company for a couple entities with the biggest being the actual regulated gas utility. This will continue to be a “walled off” subsidiary from other entities. This is a good thing as stated goal of SJI subsidiaries after merger is continued investment grade quality. This should keep the holding company proper as maintaining a decent credit quality.
          However the price of this issue could drop considerably more, as it certainly appears to be heading to experts market or possibly even untradeable like WTREP was until it got redeemed a year later. My understanding mirrors yours, but my desire now to hold a potentially expert market or untradeable issue here is non existent now. However, I am a bit intrigued by their 2031 BBB- subordinated debt bond. It does not have a deferral clause in it. And it has around a 8.5% YTM. I may be willing to hold a small amount of untradeable or distress priced decent quality debt of 8 year duration here, but not a potentially long dated stranded issue like SJIJ. That is just something I am not entertaining.

          1. Good morning, Grid – and Happy Thanksgiving to you and III’ers. As my TG gift to you, I’m going to offer you an option similar to what you offered me… You can either read this little bit of near useless minutiae or rewatch the Mizzou/Kentucky game…. lol

            You know how you like to point out that “liquidation preference” and “par” are not the same thing and shouldn’t be used interchangeably? Well the same thing goes with “maturity” and “duration.” Duration is a tough enough concept for most to grasp as it is in the first place. To say South Jersey 5.02% due 4/15/33 with its maturity being 8.33 years away is “decent quality debt of 8 year duration” is mixing up the meaning of duration vs maturity. I’ve never really tried to figure out how to calculate “duration,” so thanks for inspiring my willingness to look into it and discovering that there are calculators such as As an example, the only 8.33 to maturity bond trading at an 8.50% YTM that would have an 8.33 “Macauley duration” would be a zero coupon bond. Only an 8.33 years to maturity bond with a coupon under .66% would have an 8 year duration or more. This SJU bond due 4/15/33 at a yield of 8.50% has a Macauley duration of 6.61 years. And yes, I have no clue what the difference is between “Macauley duration” and “Modified Duration.”

            The point is that “duration” and “maturity” are not interchangeable terms. It’s hard enough for most (including me) to understand the importance of the difference between the two and using one as a substitute for the other only makes it more challenging… Hey, who needs turkey induced amounts of tryptophan to induce sleep when you’ve got gems like this to put you right into pre-game nap mode? You’re welcome.. ha

            1. 2WR, stated differently, the higher the coupon the lower the duration. Like you mentioned the only case duration equals maturity is for zero coupon bonds. The reason higher coupon issues have lower duration is that you are getting more of your return sooner via coupon payments. And the longest duration assets are generally considered to be “high growth” common stocks with low/zero dividend yields. You hear analysts say something like “add duration” when they are talking about increasing their allocation to commons. A while back I wrote up post on when to add more long duration assets but trashed it before posting.

              Happy Thanksgiving to all III’ers and hope you do not have Buffalo like snow today. (Unless you are at some of the ski resorts that are already open.)

            2. 2WR, Thats way over my brains capability. I can understand the difference between liquidation and par as those numbers can visibly be different. All this simpleton can comprehend is duration is a length of time. And the maturity date is the duration of time needed until maturity. FINRA and Fidelity price yield calculator have it as ~8.50% for the 2031 maturity (you accidentally put 2033 in there) so I am running with it….whatever that means, ha.
              Happy Thanksgiving, as I am on the road today for the gathering. Like the family, hate the drive, ha.

              1. Grid – You’re right – I inadvertently wrote 2033 when I meant 2031 but I think my calculations of Macauley duration were done based on 4/15/31 maturity… Sorry ’bout that..

                Re “duration,” I’m not entirely certain what the official definition of “duration” is but as a practical matter in my mind, it is the calculated amount of time, given standardized assumptions of reinvestment rates, that it takes for an investor to get his entire investment back when investing in a fixed income vehicle… Tex mentions that it can also be used for stocks too, vehicles without maturities, but I don’t know what the assumptions might be to calculate that except possibly on a dividend paying stock only. So that’s why the higher the coupon, the shorter the duration for two bonds from the same company with equivalent maturities. The interest you earn prior to maturity is part of the total amount you get before you get your full invested amount back, along with the assumed reinvestment amounts that the earned interest received earns until maturity.. Naturally, the higher the coupon the more you get back earlier.. So yes, you can think of duration as a length of time, but it is not “the duration of time needed until maturity.” And that 8.50% yield is 8.50% yield once calculated but I think (not 100% sure) that duration changes dependent upon the yield assumed…. Yield does not change dependent upon duration calculated however, one might wish to alter their assumption of what yield should be appropriate dependent upon how long duration is for vehicles of equivalent maturities…. I’d say yield “yield to maturity” but heaven knows NOBODY wants Alpha and me to get back into the weeds trying to properly define that, right, A? ha. How’s that sound, Tex?

          2. Grid—thanks. appreciate your opinion. I guess, at the right price, I would be a buyer of SJIJ. At 10 bucks, it yields 14.1%. Since it’s currently trading around $18, I don’t quite understand what’s going on. Maybe the large fund owners know where they can lay it off at a decent price. Something’s not right.

      2. Thanks Grid, I had missed that unequivocal statement about ceasing trading on the NYSE

  1. Trade of the day is NOT PSB-*! I expected the three PSB preferreds that we talked about to be the big trades of the day, but they are small potatoes compared to the strangely trading AGM-C. It is a $25 face, 6.0% fixed to float that does not float until 7/24. Today it closed @ 34.62 up 6.63 (23.7%) on 303 shares. There were about 1,000 shares that traded above 30.00. This gives a current yield= 4.33%. We can stipulate that Federal Agricultural Mortgage has an implied IG rating, although this issue is unrated.

    I have no earthly idea WHY it traded like this. It trades a lot higher than my logic can understand.

    We do NOT own it in any account and thank god we did NOT short it in any account.

    1. Tex,

      I see those big jumps and figure a fund or etf (PFF) added shares at any cost. No reasonable individual investor would do something stupid like that.

  2. Amen to that. Wish we could all be together and have a holiday toast, weather, it be an adult beverage or a beverage of your choice. Happy investing to all!

    1. Have you noticed how frequently “Warren Buffett” is mentioned in article after article implying, of course, that Buffett would be buying this stuff… Of course, ask, and he’ll deny he’s said anything of the kind……. oooops, sorry, Tim…….

  3. Happy Holidays to everyone! I am back to the tax free investment income window today filling in another year on my income ladder:
    North Las Vegas, Nevada CUSIP 660393U56 3% due 6/1/35 A1/AA underlying A1/A+ BAM Insured @$85.15 YTM/YTW 4.557% YTC 5.743%. These bonds traded at $104.947 2/25/22 😱
    Wishing everyone all the very best, Azure

    1. I’ve been avoiding buying low coupon muni’s at a big discount like this, because only the 3% coupon is tax free, you have to pay tax on the accretion from 85 to 100 one way or another (either as capital gains or ordinary gains). So the taxable equivalent yield is also lower than the stated YTM.

    2. Amen to that. Wish we could all be together and have a holiday toast, weather, it be an adult beverage or a beverage of your choice. Happy investing to all!

    3. azure
      can you suggest anything to read on ny munies.? Would like to follow them but find getting data is not so easy. If you can suggest anything to read on the subject would value it. I may have asked before but could not find any reply. Apologias if you already replied. If so please point me in the direction of the reply. tia and have a great holiday. SC

  4. Happy Thanksgiving everybody! And thank you, Tim, for growing the site so beautifully these past few years. All the best!

  5. I have noticed that some occasionally post that there is a pending dividend in the near future and they are buying the preferred. For anyone who does this, are you doing so because you anticipate (hope?) that the preferred will run up going into ex-div?

    1. th, The best answer to your question will be related to the overall context of the post. You might want to address questions directly to the writer of the post.

      Suspect the answer you seek is related to impact of short hold on effective yield. Shorten the hold time for same divvy and effective yield goes up – sometimes sharply.

    1. Here’s a simple challenge for you, H. See if you can find any articles on this right on this site that might give you some news……

      1. Thanks. I am fairly new to this forum. All PSBpX holders got royally screwed by Blackrock, me included.

        1. ** Blackstone is the one giving the bone to PSB share holders

          Blackrock bleeds investers in other ways

  6. Long ago we talked about social security “claiming strategies.” Boston University econ professor Laurence Kotlikoff has been leading the research on this for over a decade. He and others just published a new paper. Main take away from the summary:

    We find that virtually all American workers age 45 to 62 should wait beyond age 65 to collect. More than 90 percent should wait till age 70. Only 10.2 percent appear to do so. The median loss for this age group in the present value of household lifetime discretionary spending is $182,370.

    Link to full paper:

    1. A study like this lacks one important piece of information to determine what is the best age to take your social security, the age that you will die. So I am sure they use “average” life span. The problem with average is if I have one foot in a bucket of hot coals and the other foot in a bucket of ice, on average I should be quite comfortable.

      1. Robinhood said: “A study like this lacks one important piece of information to determine what is the best age to take your social security, the age that you will die.”

        RH, this is 100% correct for an unmarried individual, but is NOT correct for a married couple. In that case you have to know the death date for BOTH. The most common case I see where this is a factor is the following:

        Married couple roughly the same age
        Man had higher lifetime income, hence higher SS benefit
        Woman had lower income, hence her SS benefit is lower
        Man’s life expectancy say is 77 years
        Woman’s life expectancy is say 90 years (One of my accounts is 97 BTW)
        When the man deceases, the woman’s benefit steps up to the man’s, so if the man claimed early, say 62.5, the wife will get a lower benefit for 13 additional years.

        This is why I strongly recommend use one of the SS claiming strategy calculators. Kotlikoff’s firm is the gold standard but will cost you a little. Here is a free one that is credible.

        You must click the “Certain situations require additional input” which allows you to put in any life expectancy you want.

        I have no affiliation with this website or the individual that runs it.

        1. I have some annuities that are paying me now and until I croak so I don’t need SS to live on so I took it at age 62. If I had died before 62, the gubbermint would have kept up to 4 years of it.

          And then there’s the aforementioned political risk (current rumblings in DC are building to cut the social safety net). My breakeven is age 78. If I make it past 78, it was the wrong choice and that’s not a problem.

          1. If you don’t need it to live on then you can invest it all and if invested well enough, will your breakeven date even matter?

            1. I won’t be taking SS for many years to come as I’m in my 50’s, but I was always under the impression to take the monthly payout as soon as possible (62 1/2 now) as just who knows what tomorrow brings. If you die before you can take the cash (you will get nothing and like it), I’d rather have someone I trust mange the cash (me over the SS Administration) and the real break even age if you don’t take (and earn 7% on the cash flow) is around 78 (could be a different number now). Thoughts?

              1. Recall that your SS payout increases 9% per year for every year you do not claim it up to the max age. If mortality did not figure into the calculation, that would be the hurdle rate. Is anybody sure they can get 9%/year returns for say 10 consecutive years, regardless of what bonds/stocks do? For most people, I would recommend taking the 9% and be happy. . .

                1. Tex2, Now that the I-Bond rate is under 9%, the SSA accrual re-takes the crown as the highest risk-adjusted “yield” on the planet (albeit without a balance sheet entry).

                  1. Not for everyone, A…. Last year, I made a mistake and inadvertently remote deposited a low 6 digit figure amount into my IRA which was intended to go in my JTWROS…. I immediately caught the error and had the deposit moved to my JTWROS the same day… TDA charged me $475 because they claimed that’s the amount my deposit earned in the IRA the single day it was in the account, despite the fact that I had zero transactions that day and the market was stable… Given it was my mistake I didn’t argue too hard when they said they were going by IRA regulations…. The effect of this error also meant a staggeringly high bogus quarterly 1040 ES payment amount this year which was OK because I’d get that back eventually and might even be able to buy a physical IBond with it.

                    NOW, The IRS is dinging me for my high adjusted gross income last year that was caused by this error and that 8.7% increase is going to go down to 5.90% because they’re going to tax me for my high adjusted gross last year…. Adjusted gross probably doubled my usually stable range for adjusted gross, because of this immediately caught mistake…. Man, I’m not looking forward to attempting to get them to see the light I”m seeing hours of fruitless effort in my future…. Then to add insult to injury, what with the market the way it’s been this year, I suspect I’ll be reporting adjusted gross BELOW my average this year…. Grrrrrrrrrrrrrr..

                    1. 2WR,
                      A well written letter showing the high AGI was due to a mistake, or it’s a one of event, will get you a waiver.
                      My kid the CPA is 2 for2 batting 100%, getting the waiver.
                      You will have to back that letter with proof.
                      Happy Thanksgiving to you and all the good people on this board.

                    2. Thanks, Newman – I’ll give it a try… Do you happen to know if this can be handled at the local level? Meaning if I document this all to my local IRS Office and do it in person, can that work???? It would sure beat having to attempt going thru any other redtape, impersonal channels….

                    3. I agree with Newman on writing a letter to the IRS. Many years ago a large brokerage we talk about around here bounced a six figure check to the IRS on one of our accounts. Their was plenty of cash in the account to cover the check, but it was in the “wrong” money market fund. The IRS assessed a large late payment penalty. We made the payment including the penalty. Later on we wrote an explanation letter to the IRS and they refunded the penalty. I do not recall how long it took, but with today’s backlog it might take up to a year. Worth the shot.

                    4. Thanks, Newman and Tex – At least there seems to be hope that I can fight this…… Monday I’m going to attempt to deal with the local SS Office located one town over as a starting place…. Maybe I get lucky and end up finding someone who knows something and actually cares too… nothing ventured nothing gained… Also, the notification I got does provide an avenue of recourse to protest, however I’d hate to whip off a letter to a phantom person somewhere in Nowheresville thoroughly documenting in my mind what happened only to discover 6 months later that I needed to provide this or that piece of documentation I failed to provide… Most importantly though, thanks for the encouragement to start the process……

                    5. 2WR, I STRONGLY suggest you do not meet in person with anybody, even if they would allow it. I also STRONGLY suggest you do not try to cover this in a phone call with them. I would write a letter to the “Ombudsman” at whatever IRS site sent you the hate letter. And spend a few extra dollars and send it certified, which reduces the odds it gets lost in their system. Site back and wait a while and you will hear back. . . .

                    6. Thanks, Tex – Although you don’t go into detail as to why I should not attempt to meet in person or speak to anyone directly on the phone regarding this IRA problem, there’s a certain part of me that most certainly was hesitant with my idea of person to person direct contact with them…. That same hesitancy in fact had me considering not doing anything at all about this unfortunate circumstance…. I mean who wants to voluntarily talk with or identify yourself directly to the IRS? So I’ll await further info from Newman and also spend more time understanding what avenues of recourse are outlined in the letter received and then decide what to do…. I suppose no matter how I continue, resolution will take a long time, so in any case there will be a period of time when I’m dinged and will be hoping resolution will include reimbursement for amounts already taxed away from me.

                2. Where is the quality of life in these discussions of the best age to take social security? Should we all spend the premium early years of our retirements living so frugally because we want more money when we are too old to do much with it besides spend it on health care? There is more to consider than which strategy results in the highest lifetime payout. My offspring are likely to inherit most of the extra benefit paid for waiting and they should be working towards building their own retirement nest egg.

                  Granted I plan to delay my SS but take my wife’s early given her leukemia diagnosis likely pulls forward her expiration date. But there’s little chance I will wait for age 70, maybe Full Retirement Age if I can maintain discipline.
                  Until I quit working (next birthday being the likely target), there’s no point taking SS early and having the government tax it right back.

                  1. Tombstone said: “Where is the quality of life in these discussions of the best age to take social security?”

                    TS, let me give you a real world example of how this can go badly.

                    Equal aged married couple
                    Man made >max SS income for ~ entire career
                    Wife was stay at home and had no SS benefit on her own
                    Man took his SS payment @ earliest 62.5
                    Man died shortly after taking it
                    Wife’s benefit steps us to his benefit and LOSES her ~ 50% benefit
                    Wife lives to 90+ on his reduced benefit
                    Has a hard time paying her bills

                    Bottom line is that for married couples, sometimes the quality of life decision is complex. And yes, longevity is a big part of all of this.

                    1. My own mother is now 88 and having her share of trouble paying her bills.
                      I and my two siblings have begun paying her electric, water and car insurance just this year.
                      My Dad took SS as soon as possible and died within a year. My Mom who is 4 years younger, also took the widow’s pension at age 60. I think this meant she only receives 80% of what my Dad was getting which amounts to not much more than $1000/month. So I am aware of how this decision can end badly.
                      I have a small retirement from a German company I worked for that I’ll collect at 65 and more in savings than my parents. But I inherited my mother’s frugal nature and know I will have trouble spending much when my income stops and I wait to claim SS. Just like I have learned that I can’t spend real money on vacations for hotels and airfare now, even though I can afford it. So I play the multiple credit card games and accumulate free nights and points which I can spend much easier than cash. There is an element of psychology involved that is hard to put a dollar figure on and is different for each person making the decision. I’ve discussed this with my former coworkers that have retired and they appreciate the time value of money aspect. By that I mean having it when you can enjoy it rather than waiting to increase the monthly payout. Of course I and they likely have enough saved to not worry excessively about outliving our resources.

                    2. Tex – not knowing the answer myself, what would the woman in your example have been able to collect if her husband died BEFORE having taken any SS… Granted, in the particular case, that couldn’t happen because he started taking SS ASAP, but what would a widow be able to claim if a husband intended to start collecting at 70 but died at 69 never having collected a penny?

                  2. It is not just quality of life. There are a whole host of factors these “studies” ignore. Some have already been mentioned. Here is another

                    For people like myself who retired early, and am managing my income for ACA subsidy purposes, that also impacts things. I am only 61, my wife 64. Thanks to good planning, we can qualify for big ACA subsidies (this year we pay $2.45 a month for health insurance premiums) because we live off our savings. Once my wife turns 65 next July and gets on Medicare, we are going to make a decision on what to do with her SS (we both worked and her benefit, while not as high as mine will be is still pretty high).

                    From an ACA standpoint, it would be best for her to hold off until I turn 65 so as not to impact my ACA subsidy. However, she like many have the thought that “I would rather take it now because who knows how long I may live and why forfeit it all to the government”. So it’s a question of trying to balance both. At a minimum, I told her she needs to delay taking SS for 6 months til January 2024. That gives me at least another year to manage my ACA premiums when I sign up for 2024.

                    While from a pure ACA standpoint, it probably makes more sense for her to wait until 66 1/2 taking me to 2025 with ACA management – given her desire to start it sooner rather than later, we may start it for her at 65 1/2.

                    It would not be purely a financial decision but both a lifestyle and peace of mind one for her where in her mind, she reduces the risk of not collecting all that is due her and handing it over to the government (note – she is very aware of the age her parents lived to)

                3. Tex;
                  The benefit increases 8% to a max of 32% for 4 years after FRA.
                  For example, if one’s benefit at FRA is $2300 a month it would increase to $3036 a month at age 70 a difference of $736 a month. Given that, the amount that person would have drawn for those 4 years between 66 and 70 is $110,400.
                  Divide that by $736 a month and it would be 12.5 years to the break-even point at age 82 1/2 and that is assuming the person who collected 110K put it in a shoebox and didn’t earn a dime on it. The words of Dirty Harry come to mind “do you feel lucky punk”. If the guy who waits until 70 dies, his spouse (if married and if the spouse has a smaller benefit of their own) will get his benefit which is $736 a month more, nice. But some people would rather their spouse have a somewhat smaller benefit and $110,000 in a shoebox, all depends. For me, still working at 74, retiring next April, I took the money at 66/FRA paid off the small balance of my mortgage and have about 80K left earning a bit over 6% in a joint brokerage account.

                  1. Bill, you are correct it is 8% per year, not 9.0%. My apologies. (One margarita too much. . . ) But I don’t think you considered the case of claiming at first date versus waiting until the last date. You do not receive the FRA if you claim early, it is reduced by 30%. So you receive 70% more if you wait until the max date versus taking it at the first date.

                    The case I see often is this one where the person starting taking it at the earliest possible date. And yes, in some of those cases, they need it then to meet basic living expenses. So the whole discussion about postponing it is pertinent for people that can afford to do without for a few additional years.

                    1. Tex,
                      Margaritas for Thanksgiving ? Sounds pretty good to me : )
                      I agree, taking it at 62 if you don’t absolutely have to does not work
                      out well for most people unless they absolutely need it and have no other choice. Not a lot of longevity in my family, my dad passed at 78 and my mother who was 8 years younger than he passed at 78 herself, guess I got 4 years left. Seriously though, I believe FRA (66-661/2) is the sweet spot for most folks.

                4. Yeah, but. Betting against mortality is a zero sum game. You die, you lose it all. And your breakeven point assumes you spend your SS check when you get it, doesn’t it?

                  Instead, suppose you don’t need to spend any of your SS. So let’s say you take it as early as possible and invest it faithfully in something fairly safe like, I don’t know, how about EPD, which has raised its tax-deferred distribution for 24 years without a cut. So I get my first check this month and I put it in EPD paying 7.5+%. And do that faithfully every month. And hit the longevity jackpot, too. How would your growing EPD distribution compound to compare with the SS forbearance proceeds? That’s essentially what I did. Some of my early units have a tax-deferred yield on cost that’s astronomical, and my overall tax-deferred yield is more than the current lofty SS forbearance rate. Of course, I’ve had to pay taxes on some of the SS I’ve gotten over the years, too, so it’s never without some mitigating circumstance or another. And and and.

                  Still, taking SS as early as possible has worked spectacularly well for me and the missus. But of course everyone’s life circumstances are unique and my final word of advice on the matter would be to measure twice before you cut.


            2. Other than a statistical reference point, the breakeven date has no relevance to me. However, when I break is relevant to my heirs :->)

    2. Disagree. Dos not take into account earnings on investment. If you average 5% gain per year you accumulate less than 3% net by waiting. Live to be 100 and you might break even by waiting. If you’re retired and in a lower income bracket with no other factors taking it early is a no-brainer Especially if you have a good IRA let it grow tax free while spending SS and savings.

      1. Martin, looking at what you posted. “Gain 5% per year on investment” but then “spending SS” . I don’t see how one can gain 5% (or anything) on an income which is being spent.
        Dave Ramsey always recommended taking SS early IF one was going to invest (not spend) that amount. Of course, he thinks one can make 12% a year on investments.

        1. If you’re spending SS you’re not spending as much other money you would be spending if you delayed SS. Earning a profit investing the money you didn’t spend. That’s what’s not included in many of the flawed calculations recommend waiting.

          1. Martin:

            I’m still a long way from 62+, but I will likely claim far earlier than age 70 so I don’t have to spend as much time, stress, etc. as I do investing and monitoring an income portfolio. I depend on the income from my portfolio to pay the majority of my bills and have been doing so for nearly 15 years now.

            So it will be a lifestyle choice for me (and perhaps other Innovative Income devotees) to collect early and have another guaranteed income source. Also have an annuity that kicks in at 65 and pays me $40K/year until death.

            Although the challenges and rewards of investing keep me ultra-busy in my current “retirement” (I have learned that you don’t retire from something – you retire to something), I’m certainly looking forward to the days of more travel, leisure, and golf and less income investing and trading!

            1. You introduced some new factors other than maximizing total return for life. A personal decision nobody can argue with.
              I quit the work force in my early 50’s. Boosted my income by trading, which was necessary because the dividends and gains alone weren’t enough. Enjoyed it more than a real job so I never looked back, even tho I could’ve made more money working. This is my job now and I have the world’s best boss.

        2. In my case I;m soednign easrly SS so I don’t have to withdraw from Roth IRA sooner. Tax advantaged as well as profitable. Unless I live to be 120 and nothing changes.

      2. Martin, I think your opinion of disagreeing would change to “it doesnt matter” concerning my situation. At 62 I think I am eligible for about $125 a month. That wont even pay for the supplemental, lol.

        1. Grid:

          But don’t you have a nice pension payment? My Dad is in the same boat. He worked for the Post Office for 30+ years and now gets a $35K annual pension from them.

          He worked 10 additional years (40 quarters) after he left the Post Office (at that time of his tenure post office employees did not pay social security taxes) at various jobs to pay into the SS system and quality for a SS payment. But the Medicare Part B payment and his supplemental insurance now eats up almost the entire SS payment amount!

          Thankfully he lives in an over 55 condo community in a low cost of living city and the $35K pension income covers all his needs.

        2. Grid-
          You must not have been contributing much to SS ! Maybe a different system.
          With the new raise for ’23, I be getting 20x that.

          I was happy to take my full benefit at 66 and continued working for 3.25 yr- basically investing all of my SS and some extra. Don’t think I’d wait for age 70 if I was doing it over either.

          1. If you’d be enrolling in a Medicare supplemental plan to cover the 20%, consider the high deductible plan.

            In my county, a standard plan costs about $325 a month or $3,900 a year with no copay or deductible.

            My high deductible F plan (no longer available to new enrollees so you’d go with G) provides exactly the same coverage but only costs me $64 a month ($768 a year) and has a $2,700 deductible. That means that full coverage starts at $3,468 out of pocket (annual premium plus deductible).

            Why should I pay $3,900 a year to have no out of pocket when the worst case scenario with the high deductible Plan F is $3,468 out of pocket? That’s a savings of $432 if I were to max out with claims. Last year my out of pocket was about $400 so my total cost for the year was $1,168 which is a lot cheaper than paying $3,900

            If you want to avoid the supplements (B and D), consider a Medicare Advantage plan (C).

          2. Yes, I am not too worried, as I am fortunate to have a pension that is Cola’d and covers way more than I spend. I only contributed to various Mickey Mouse PT jobs over the years. I actually have enough to get about $400 SS, but the GPO law (General Pension Offset) reduces it down to around $125.

      3. You can work out take now / take later scenarios by setting up an Excel spread sheet. It’s actually pretty easy. If you want a deeper dive, you can plug in tax / reinvestment scenarios.

        I found a decent research paper on this topic a few years ago. Luckily, the researcher used my birth year and birth month. The study ran through a number of alternative scenarios. My payback periods generally clustered around 14 years. Which was beyond my expected lifespan.

        I had deferred for a year. I pulled the trigger. I have never regretted the decision.

        FWIW, my cousin died at 61. He never collected. His wife, also 61, a retired teacher, then with Alzheimer’s, died 8 years later, at 69. So waiting till 70 is not necessarily a good choice for all. There are lifestyle issues. And, you know neither the day nor the hour.

        OT – One risk ( which I rarely see discussed in deferral discussions – and I have no current knowledge of) is untethered medical costs if you take Medicare without Social Security. SS has an implicit cap on Medicare if you do both. There is no cap if you don’t. There were complaints about this a few years back.

        Just my opinion.

    3. I did a quick read of the article so I may have missed some points. But I find it interesting the paper does not mention political risk. As for political risk – I am very concerned that Congress will push Social Security to a means test as the year 2035 approaches – the year the trust will not have sufficient funds to pay out 100% of its promise.

      The paper does mention longevity but does not delve into the actuary science used by SSA. For instance the SSA annuity breakeven age is approx 82 years old when comparing the ages 62, 65, FRA and 70. I would like to have seen a probability factor added to their lost of funds for taking SSA payments early.

      1. Political and economic risk are added factors for me too. Though I rarely mention it because it opens side discussions. And I don’t need it to make my case.

      2. Talkdollars

        I think SS has means testing thru the back door today via rates set for Medicare premiums.

        1. IRMAA (medicare) and taxation of SS in accordance with level of income sounds like means testing to me.

          1. That’s true though it’s not a major factor in deciding when to take SS. Just another benefit for low income people. If you hold off you don’t pay the partial tax on SS but when you do take it you pay tax on a larger amount. Depending on investment income.

          2. Lonetree and Greg, You are correct there are some income means testing prior to FRA. But once you hit FRA then there is no penalty for taking SS payments even if you have a full time, good paying job. Of course taxes still apply against all income. The IRMAA is a means test for Medicare premiums independent of SS.

            By means testing – I fear that Congress will legislate that SSA may consider asset tests for retirement assets like 401K, IRA, pensions or even one’s net worth.

      3. The year the trust will not have sufficient funds to pay out 100% of its promise seems to always be a moving target just like the year climate change will flood the entire state of Florida does as well……It’s always some date in the not too near, not too far future. That being said, I remember coming up with a breakeven number of about 81 when I made the decision to take SS ASAP. That was probably 20 years ago and SS was slated to go under well before 2035 back then…

    4. Taking Soc Sec early for us has been created an opportunity for us to:
      – allow more TIME to allow our assets to compound and turn toward fixed income securities.,” time to turn the ship around.” ie: 5.5 % of a $million = $55,000 of annual compounding especially if it is a tax sheltered environment (hint for all kids: ROTH!!!) All of the compounding interest happens in the last few years as principal get large, so migrate into fixed income as your time shortens. $55,000 x five more years of hands off = $275,000 at 5.5% = $1,260.00 per month tax free from a Roth. Raw Math and Numbers cure many investing decisions.
      – Also if one spouse dies the other still retains ALL of the private assets, but after the death of one, the other is typically reduced in SS pmt. Systemic bias.
      – SS is really NOT a method of savings or spending. WOW! Really?? If one becomes organically situated within their budget, just look at the debit side of the equation: What are SS pmts. going toward? SS pmts. are the source to SUBTRACT the Medicare co-insurance, used to subsidize a private insurance Medigap policy, other deductibles Part A and B, as well as larger co pays unless you only buy a Plan G Cadillac plan, Part D copays, your residential and personal property tax (which is included in rent escalations!), utility bills AND if there is any left, maybe a small stipend for basic grocery. These elements sustain Overall Social Stability as people buy these things from your dividend paying private corporations.

      THAT is the REAL use of SS, Overall Social Stability!
      It is easy to see that SS is basically a very large social program that uses PRIVATE for profit brokers to provide a very broad based balance in our American Culture. It is actually a biased, HALF-TRUTH that does NOT really allow for the actuarial (science!) of The Law of All Inclusion or The Laws of Very Large Numbers. Most of the numbers we use are massaged to weed out risk, to excluding many of the real risks associated to statistics and permutations. Bad math = Bad long term results.

      Once again, SS is a method of buying TIME, especially if one will end up subject to the American Ideal of Self- Dependance and reliance upon one’s own asset base. I did not include the COLA adjustments which were initiated to keep up with Medicare premium and Gap insurance payments.
      – Lastly, owning your own assets CAN allow for savings in other areas FYI: insurance deductibles, quality of food, etc. It becomes like a heartbeat and breathing that you don’t think about, but it just keeps working!
      Everyone’s situation is different, and yes, it gets hard to contrive at times, but you either live WITH the FACTS of die by the MYTHS.
      NO POLITICAL COMMENTARY is intended here, just an honest assessment or the here and now.

    5. I took SS earlier this year at full retirement age. I am extremely happy that I did. I had always intended to delay until 70 and spend down my capital for 3-1/2 yrs. Now, having my SS (and Spousal SS) hit my bank account guaranteed is a great thing. I barely need to draw on my other accounts. That extra wealth growing in the Roth, IRAs, etc. will look after wife and heirs if /when required. I just need rates to calm down so the accounts will actually grow! For me SS is SWAN! I love it!

  7. You want to trust rating agencies? An interesting case study. The City of Chicago posted a 14 year history of their general obligation ratings from Kroll, Moody’s, S&P and Fitch. Frankly I would be embarrassed to publicize the ratings. Kind of like taking your shoe off and saying “Hey, look at the hole in my sock!” But that is not the point. The point is that for a recent 3 year period, here were the ratings:

    Kroll- A2/A
    S+P- Baa1/BBB+
    Fitch- Baa3/BBB-
    Moody’s- Ba1/BB+

    How on god’s green earth can all four of the agencies be looking at exactly the same data? Seems like somebody is on speed and somebody else is a Debbie Downer. Certainly makes you question the overall validity of the rating agencies, if you still had any faith in them.

    Link to the chart, WORTH a few seconds of your time IMO:

    1. Tex, Stable really ?
      Chicago is the only City I have ever visited that looks like a war zone in some areas of the city. I think people there have gotten used to it and don’t realize it. Traveling the inter- city train and looking out at neighborhoods where whole blocks have the houses leveled and only one or two on a block are still standing. I wondered, was it because the neighborhood had deteriorated so much it was best to tear down abandoned buildings? or was it to keep from giving the lawless a place to hide?
      Don’t get me wrong, I loved visiting the museums, Wrigley, the ethnic neighborhoods, The Pier etc.

      1. Hi Charles, for the record, here is my order of upcoming defaults:
        Chicago schools
        Chicago city
        Illinois state

        All three are destined for default IMO. It is just a matter of time. Current law does not allow any of the three to declare Chapter 9 bankruptcy, which is the form that municipalities use. Covid bailouts by the federal government delayed the day of reckoning, but did not eliminate it. Illinois state law does not currently allow municipalities to declare BK, but they could change the law. Current federal law does not allow states to go BK, but they could change that also. It did not allow Puerto Rico to declare BK, but congress passed one law which allowed it. And the PR bankruptcy has been an epic failure. The oversight board has blatantly ignored the written law and shafted bondholders.

        The law school professor, David Skeel, that is head of the Puerto Rico oversight board has lobbied that municipalities SHOULD be allowed to declare BK. If that view prevails and spreads, it will become a long term problem for muni bond holders.

        Bottom line: I would not be a long term holder of any of them, past a few years out.

        1. Tex, If that view prevails and spreads, one can envision it will be a long-term problem for the municipalities themselves.

          Rating agencies would then uniformly apply the potential for default to each municipality. Credit spreads would widen considerably. Many formerly viable projects would be deemed too expensive.

          The potential for the outcome you describe does throw a bit of a shadow over munis.

          1. Might bring back a little fiscal sanity to funding projects. On the other hand, we might see more public works projects financed and owned for profit by private equity.

          2. Alpha, the most challenging situation is when they change the rules mid-game like they did in Puerto Rico. PR GO’s used to be rated AA when the law would not allow them to default. They got congress to pass “PROMESA” which essentially allowed all PR entities to go BK. They don’t call it BK, but it is the same as BK and a BK judge from New York is overseeing the litigation. Some number of states already allow municipalities to go BK, but Illinois is not one of them. US law does not allow states to go BK. PR taught us how easy it is to change the law. And the BK judges in Stockton, Detroit, San Bernardino and PR taught us how easy it is to shaft bondholders.

            The per capita debt in Chicago is $136k and this must be serviced on a $34k income. Not exactly sustainable, so the debt keeps rising. Unknowable when the music stops, but we all know that it WILL stop. Not exactly rocket science involved here.

            Link to per capita debt burden:

            1. Tex, $136K/$34K. This is truly staggering and the attached article sobering, if not maddening.

              Being completely transparent; our continuing divestment from CA real estate includes multiple rounds of Q1 2023 proceeds earmarked for munis. Your post today re David Skeel et al is borne-out in numerous other publications and forcing a reevaluation.

              Grateful, thank you.

      2. The only defense (and a damning one at that) is that the rot in Chicago is not a new trend. My family owned the land under an Amoco gas station on the South side of Chicago 50 years ago. Amoco shut down the location, razed the building and let the lease lapse. 45 years ago the empty corner lot that was surrounded by occupied apartment buildings was unmarketable and we had to let it go back to the city for unpaid taxes. How can a city long survive land valued at zero? The other counterpoint is how much many current residents of the Chicago area profess their undying love for the city.

        1. Potter, I was there for my’s wife’s family reunion. Everyone who hosted the event lived outside the city and we had daily rides on the train into the city for day trips. We were back in our hotel by the airport by the afternoon.
          One relative owned a cabinet shop and was interested that I was a hardwood salesman, told me the taxes were making it so he couldn’t expand the business and hire help besides his son as taxes didn’t make it feasible

          1. When will McD move headquarters to Dallas? Before the Bears go to the Super Bowl? Before Dallas goes to the Super Bowl?

    2. Tex, do any of the rating agencies look at the term structure of the obligations? It seems <5 year paper will probably pay. But with all the union and pension protections now in the Illinois constitution, I wouldn't pay $.05 on the dollar for 20 year Illinois paper.

      1. Steve, the rating agencies do not change ratings versus term. A one year GO is rated the same as a 30 year GO. Like you highlighted this makes it difficult to impossible to consider long term issues. For the record, we DO own some short term Chicago and Illinois paper. We might be wrong, but we are betting they do not go bankrupt before January 1, 2023.

  8. Question—how do I go about getting on Schwab’s notice of upcoming new government agency issues? I’ve gone through their website but can’t figure it out. thanks.

        1. Eladio, I see the link is active, but all the bonds listed are financial. Also up to the user to assess credit risk.
          Adds to your risk if your concentrate your holding too much to one sector

          1. yep, they are the notes from just the financials. I agree, and would not overweight any one sector.

      1. Eladio,
        That Bong king guy also said to buy GLD and make some money on the upswing he sees happening through mid December.
        My Preferred’s should all gain value if we go up anyway.
        But, I am trading 125-200 shares of GLD and so far made a chicken dinner with the profits.
        Just having a bit of fun.
        I’m testing his opinions in order to dismiss him or continue to check him out some more.

  9. I don’t know nothin about nothin, but the venerable (?) WSJ reported this morning that the Saudis were going to increase quotas by 500K barrels per day. Oil & associated stocks cratered and I bought a lot of my favorites, especially EPD. It was a gift. SA refuted the WSJ report in the afternoon and things began to rise. These are crazy times. Be careful out there in bond land. The world runs on O-I-L and will for a long time.

  10. RE: LANDM – Is the language in the prospectus open to interpretation where it says, “if we fail to redeem or call for redemption the Series D Preferred Stock pursuant to the mandatory redemption required on January 31, 2026, the dividend rate on the Series D Preferred Stock will increase by 3.0% per share per annum to 8.0%, until such shares are redeemed or called for redemption?”

    In other words, does this mean that it’s subject to a single increase to 8% if it’s not called on or before 1/31/26 OR, does it mean that every year (per annum) that it remains outstanding after 1/31/26 it will increase 3.0%? So by 1/31/27 it’s an 8% coupon, then 12% the next year??? If it’s a one time adjustment, then LAND might be willing to consider this to be an 8% perpetual bond and if today was 2026, have no interest in retiring these ever because they couldn’t refinance at a yield good enough to economically call an 8% perpetual…. I just bot a marker amount today at 23.23, so now I have reason to do more than just wonder what the right answer is…..

    1. 2wr, I read that to mean that if they miss the mandatory redemption date then the rate would increase once, to 8% (from 5%), and stay there until the issue is redeemed.

      I agree that this would have been clearer if it were written “will increase by 3.0% per share per annum to 8.0%, AND WILL STAY AT 8.0% until such shares are redeemed or called for redemption.”

      (Not sure what the distinction is between ‘redeemed’ and ‘called for redemption’ in this context: dividends paid at redemption are presumably paid at the same rate between the point of call and the point of redemption as they were before the point of call.)

    2. 2WR, Two issues here. The first I take it mean its 8% per year if outstanding… Second issue, Im about 96% sure this isnt a “chance to screw the shareholder” loophole.
      Look at 4th paragraph of prospectus…
      The shares of Series D Preferred Stock have a maturity and mandatory redemption date of January 31, 2026.
      Now I havent dug deep on this one, but I have others of same ilk. And the purpose of that clause is to be invoked if they cant financially redeem the issue. Meaning they cant get access to the capital, or it triggers a debt covenent violation if they did. Otherwise they pay. And if they cant scrape up the money to redeem some way without compromising the company, I wouldnt want to be holding the issue at that point anyways.

      1. Grid – To the degree of trust involved, I’ve been involved in various Gladstone issues for a long time, not just LAND, so I certainly don’t disagree that the original intent is not there to have this be a “screw the shareholder.” However, circumstances change every now and then that need considering from the issuer’s point of view, so I was more wondering if anyone feels confident about the legal interpretation of the language. Sure it was not intended to screw, it was intended as added reasons why they will be redeemed as intended… However, that was 400 basis points or so interest rate environment…… How COULD this language be interpreted?

        In my muni days, I once sued a water district in Washington about the language in their official statement and how the District was not abiding by it…. I lost with the court saying something to the effect that although the intent of the language was clear, it’s not what was written….. I think that’s in the back of my head when wanting definition here….

        1. You will have to read the fine print to flesh out the details. And that is assuming if its even there or understandable for us to interpret. But, “maturity and mandatory redemption date” certainly have some meaning. But, I suspect if you dig deep enough you will find this issue in other term preferreds.
          For example term dated RMPL-. Most probably arent aware this is buried in their prospectus.
          Adjustment to Fixed Dividend Rate—Default Period. Subject to the cure provisions below, a “Default Period” with respect to Series A Term Preferred Stock will commence on a date the Fund fails to deposit the Deposit Securities as required in connection with a Dividend Payment Date or a Redemption Date (as defined below). A Default Period will end on the business day on which, by 12:00 p.m., New York City time, an amount equal to all unpaid dividends and any unpaid redemption price shall have been deposited irrevocably in trust in same-day funds with the Redemption and Paying Agent. The applicable dividend rate for each day during the Default Period will be equal to the Fixed Dividend Rate in effect on such day plus two percent (2%) per annum (the “Default Rate”).
          So this doesnt cause undo concern for me. Either the company has legally funds available to pay or they dont. If it is that nip and tuck, I personally dont want to own the security.
          If that is a concern, do what I did and buy PLDGP. Its about 6.2% YTC, and assuming a descent to par, from then on if it isnt redeemed you get 8.54% going forward from a company a lot better off financially than LAND will ever be! 🙂

          1. But the point, Grid, is that they may very well have the funds on hand to call in ’26, but if there only downside to not calling them other than it becomes an 8% issue and no longer a maturity date without penalty if not called on that date, then what you/we have thought was a 4 year piece of paper will take on the traits of a perpetual instead of a short term piece of paper…And if rates at the time would say LAND could not issue an 8% perpetual, then what would be the incentive to lay out the bucks to redeem? Similar situation would be some of the Gabelli preferreds that were issued with a couple of resets within a coupon range along with shareholder put provisions at each reset whereby if you didn’t put your preferreds back on the last option date to do so, they then became perpetuals…

            Man I’m feeling awfully cynical about practically everything right now, don’t you think? Conspiracies exist under every rock all out to get me…….. ha

            1. You worry too much and for the wrong reason…This is what it is…
              Mandatory Redemption
              We are required to redeem the Series D Preferred Stock on January 31, 2026 at a redemption price of $25.00 per share plus an amount equal to accumulated but unpaid dividends thereon up to but excluding January 31, 2026.
              ……Your worries fall under the “What if a bank with a non cumulative preferred decides to not pay a dividend” or “What if a company decided to suspend dividend for 3 years and then offer a tender at $15 to save a bunch of money and screw the shareholder”.
              Your concern isnt a legal one, its an ethical one or an ongoing concern viability issue. If you think either are in question, one should avoid.

              1. Yeah, I get that way sometimes, where I don’t trust anything I read or the person reading it… It’ll pass…….

                1. If it doesnt pass….I will make you re-watch that Tennessee-South Carolina game! That will get you on board quick, ha.

                  1. UT got rattlered instead of hookering another team…. how come he decided to come to life vs UT after 2 years of potential only? I feel so bad for Hooker after such a magnificent season..

  11. I see some people have thrown out some interesting online viewing recently and thought I would throw something else out there for viewing pleasure.
    Here is one of the more memorable interviews I have watched with Tony Deden of Edelweiss Holdings. The interview is packed with plenty of interesting points. I think most readers on here will enjoy.

  12. Wondering about how the market values the Entergy bonds and their 1 preferred issue.
    I feel ENO at a coupon of 5.5% should be valued higher than the true preferred issue at 5 3/8%.
    Is it because the preferred has almost 2 years till 1st call while the bonds are all callable now? Or is it that the preferred is cumulative. The bonds all have higher credit ratings than the preferred. I hope my table is readable

    Symbol Description Yield Price S&P Rating Moody’s Rating
    EAI ENTERGY ARK INC 1M BD 4.875%66 5.80% $21.02 A A2
    EMP ENTERGY MISSISSIPPI LLC 4.90 1ST BD 66 5.63% $21.75 A A2
    ENJ ENTERGY NEW ORLEANS LLC 1ST MTG 5% 52 5.41% $23.12 BBB Baa2
    ETI/PR ENTERGY TEXAS INC 5.375% PFD A 5.69% $23.63 BBB- Ba1

    1. Tombstone, just to clarify a bit, these are not “Entergys” responsibility to pay, but the actual individual subsidiary company that issued it. So these are all “unrelated sisters”. The cumulative part would be irrelevant because bonds already have even stronger protections. I would suspect the two major reasons the ETI preferred doesnt yield more is possibly because its largely illiquid with a tiny float, and also this could be “band aide” capital that may be redeemed after company meets its regulated debt/equity percentage.
      Even though Entergys owns Entergy Texas, ET is supposed to maintain a certain amount of capital. Maybe Entergys didnt want to plunk the money down and was needed for some capital project. Just guessing, but yes it pretty much always trades this way, for whatever reason. But yes it is lower rung capital than those bonds are from other subsidiaries.

      1. Thanks Grid,
        At Least I learned the structure of Entergy and the operating company breakdown.

        Operating Companies
        EAL Entergy Arkansas, LLC
        ELL Entergy Louisiana, LLC
        EML Entergy Mississippi, LLC
        ENOI Entergy New Orleans, Inc.
        ETI Entergy Texas, Inc.

    2. Yeah, Capital stack.

      I agree with Grid.

      never mind my previous post – I thought you were asking about something else

  13. I know some people here know UHAL business . is UHAL common stock a buy here long term ? Thanks

  14. Do you think libor (or the equivalent rate) will be above 1.43 on October 1, 2024?

    Do you own MBINN?

    If yes to both, I suggest you sell. About the only relevant difference between MBINN and MBINO is that MBINN is fixed at 6% while MBINO has the same 6% coupon but floats at Libor plus a spread of 4.569% on October 1, 2024. I would think that Libor would be above 1.43 in October 2024, which would make MBINO more attractive than MBINN at the same price. Yet MBINO trades at 20.85 (current yield 7.2) while MBINN trades at 22.12 (current yield 6.8)…..

    Also I think MBINP should be sold in favor of MBINO. MBINP current yield at 24.42 is 7.16 and floats at Libor plus 4.605% on April 1, 2024. If both issues are still outstanding in October 2024, MBINO will look much better over the net two years due to its significantly lower current price.

    Of course, no taxes were considered in this analysis.

  15. A pretty good article on SA about the “much hated” Prospect Corp (PSEC). Recent results analyzed, key statement: “Prospect Capital’s problem as a passive income investment is that the business development company has not been able to grow its net asset value per share for a very long time… The drop in net asset value has left a blood trail in investors’ portfolios, and I believe many investors are still regretting their decision to invest in the BDC years ago.”
    For those of you stuck with PSEC-A (guilty!) this won’t cheer u up:

  16. Any one watch “The Bond King” on you tube?
    I’ve only seen 2 of his uploads.
    He does not give opinions, he shows us what the Fed and major banks say and write and, explains it in terms most of us can understand.
    I won’t tell you what his last one was about. It was not what I wanted to hear, but in retrospect, I should’ve known.
    Oh, I am no longer going to be overweight in financials going forward.

    1. Newman, Too many vid’s on you tube. I spent 15 minutes watching a interview with Mary Childs on her book.
      I would need a link to the correct clip

        1. Eladio,
          Thank You for posting that link.
          I’m curious, what did you takeaway from that?

          1. I think there is a risk of default for sure. Many people are overextended, in my opinion.

            Exercise risk management. Don’t overweight financials in your portfolio.

            In other words, “don’t put all your eggs in one basket”.

            1. Two points on banks holding of MBS:

              1) Most banks securitize the mortgages they underwrite and offload them, so they are not on their books.

              2) For banks that DO have either of them on their books, there is a much larger risk BEFORE they ever get close to defaulting. I posted about this a while back. With rates rising, the value of any MBS they hold is falling. As a reference point, 10 year US Treasuries are down roughly 20% year to date. If a bank’s MBS portfolio was worth 20% less, it would show up on their balance sheet. Some banks will be insolvent with that mark to market. The Federal Home Loan Bank has said they will close their lending window in that situation. If the Federal Reserve closes their discount window also, the bank will be out of luck. Bank analysts expect some smaller banks to fail in this case, but the Too Big To Fail banks are likely safe. You think the Fed would let Citi or BofA for example go under? I would assign that as less than 1% probability, not zero, but not something I would lose sleep over.

      1. Didnt Gross get his crown ripped off his head by the current bond king Jeffrey Gundlach? I think he is wearing it now. He is a much better predictor. Here is an example…
        ….Now that the New York businessman has shocked much of the world by vanquishing rival Hillary Clinton, Gundlach sees something else unstoppable: a rise in bond yields that could lift the yield on the 10-year Treasury note to 6% in the next four or five years.
        Since this was written in October 2016, I guess the 4-5 year time limit has elapsed.
        And one wonders why many investors tend to dollar cost ave into things, lol…

          1. I have won several games by saying, “welp that’s another 3 pts for me… it’s close enough!” 🙂

  17. I know readers have discussed this before, I am considering buying a 1yr subscription to SA that they are offering as a Black Friday sale.
    I’ve had no problem reading just about any article I want with my laptop (not so on my phone). The only thing I could see of use is does the premium service offer access to the different authors forums and early alerts before public posting? They list 189 “experts ” for analysts which 2/3rd of I have no interest in.

    1. Charles—I subscribe to SA to be able to look at all previous articles on any stock and to follow a few authors. For instance, I like The Preferred Stock Trader. Overall, it’s really not much help to me for preferred stocks and baby bonds, but it can be slightly valuable for common stocks.

      Early alerts are really for people who subscribe to an author’s service. Once it gets posted on SA, if I think it’s interesting, I’ll just wait until it comes back down if it’s a thinly traded stock.

      1. So Randy the premium service doesn’t give you access to the authors services? On top of this you have to pay $500.00 to $600.00 to join BT ‘s group or CWM reit forum ?

        1. That’s right. Payment for author service is in addition to SA service fee. OTOH, you don’t need SA subscription to sign up for SA author service

    1. azure
      Can you suggest anything to read on ny munies? Not sure if there are any publications that follow munies by state. TIA SC

  18. Interesting story on the 30 year old CEO of FTX sister trading company Alameda Research, Caroline Ellison today on Forbes.

    One quote caught my attention:
    With him tending to his new exchange — and rapidly becoming known as a crypto czar — Ellison rose at the trading firm, becoming co-CEO of Alameda alongside Trabucco in the summer of 2021. Trading around $5 billion a day, the role pushed Ellison to the forefront of the industry.

    Soon after, Ellison and Trabucco were featured on the Forbes 30 Under 30 list. “It’s pretty nice,” she said in an interview at the time, “for us to have two people who can take ultimate responsibility for things.”
    Don’t know about you, but I trading a little less than $5 BILLION a day when I was 29 years old. . .

    1. This is not jealousy. I was around during the early days of bitcoin. I was a miner making pretty good money since I worked for an ISP and had access to a data center. So I installed a wire shelf and away I went with cheap cpus and video cards mining away on bitcoin/litecoin before asics were a thing. Since the money was easy I also ran a litecoin pool that became popular. So making money just came naturally if you were a tech/IT person.

      But the real players.. were the ones with no morals or ethics. They were the ones spinning up gambling websites, drug websites, exchanges that offered interest, and every slimy thing under the sun. Everyone with a brain and a conscious knew what they were doing. In due time they all flopped/disappeared and the money was gone. This is how you gathered your seed money back then for “greater and bigger” projects.

      So that left exchanges doing it “correctly”. Very few and far between. Coinbase is an example of doing it right and it cost a lot of money to do it right. Once these things caught on you could gather a team and start looking for investors. Doing it right though would not lead to big money. You would actually probably lose money for a couple of years.

      Unless… you had no ethics, no conscious, no morals. FTX is a great example of the same scams that have been going on since 18 months after bitcoin was created. So trading 5 billion of other people’s money illegally? No problem in that crypto world. Just do not give a flying crap about anything and lie. Then lie more.

      1. FC, thanks for the excellent background. It is ironic that Elizabeth Holmes got sentenced to prison today. Very similar to FTX/SBF in some regards. Both had a LOT of highly intelligent, sophisticated backers including silicon valley venture capital funds. And both required “true believers” that had absolute faith in the mission. I think Elizabeth really believed in the mission, just like SBF and Caroline. I don’t think any of them woke up one day and said: “I am going to go out raise a lot of money, commit fraud and bilk a lot of investors.”

        Elizabeth and SBF were deified and put on the front covers of many magazines. Wall Street Journal writer John Carreyrou started the dominoes falling for Theranos, but it was with great personal risk. Lawyer David Boies, of Bush vs Gore fame threatened both Carreyrou and the WSJ.

        I am a little surprised that SBF’s parents, both of whom are Stanford Law School professors did not have a more active role in preventing the outright fraud. I don’t know if they were out of the loop or maybe they were “true believers” like everyone else.

        The US lost three of it’s “Thirty under thirty” leaders of the future with the downfall of Elizabeth, SBF and Caroline. Not clear if there will be any legal ramifications for SBF and/or Caroline. I guess we will have to rely on the TikTok influencers to lead the country in the future. .

        1. I just reread my reply and realized I misspelled conscience twice.

          I think you are giving them to much credit. The mission was to makes gobs of money and they did not care one bit about the possible damage their actions would cause at a certain stage. They are too highly educated not to have had an inkling this could happen once they stepped over a certain line each and every person you mentioned knew they were crossing.

          Sure. Maybe some were innocent for a while. They had good intentions from the beginning but I can assure you in the crypto world.. and this is the reason I left it so disgusted… it was full of sharks, rubes, and true believers. True believers, as I define them, would never trust an exchange. It goes against the whole crypto ethos. You meant rubes. Once people got a taste of easy money, the attention of a successful crypto business, and the endless legal and illegal possibilities when people trust you with their “money” it is like having the devil at your back.

          Obviously an honest crypto business is quite rare. FTX is the norm. Most are having trouble right now and many have gone bust which basically proves what I am saying. Customer money all over the place intertwined in who knows what. Scoundrels everywhere in the industry. It takes a smart person to create a crypto business but what is more rare is the wisdom to hold yourself to a very high standard when being given the chance to be the custodian of other’s money. Reputation is everything in business.

          1. fc, thanks for sharing your background in early crypto.

            And lol I have to say, copping to misspelling ‘conscience’ is in some sense the essence of conscience ;-).

        2. SBF’s mom could not keep him out of trouble because she was busy writing essays about how we must move away from the “philosophy of personal responsibility” and arguing against free will.

          Read it and you will have no trouble at all understanding why her son turned out as he did. She is very much against the concept of “blame.”

          Apparently Stanford will give anyone a law degree — even someone whose personal philosophy is wholly at odds with any notion of justice recognizable to the public at large. Maybe we should take her at her word and hold her son blameless and put her in jail instead for filling his head with that nonsense.

        3. FTX was full of scam artists, plain and simple. The only reason their people were deified and put on magazine covers is FTX gave out grants to many media companies,, in essence buying favorable coverage.

          Then they got in deep with politicians and regulators by giving huge campaign contributions. In fact, it is public record that SBF was the second biggest donor to Democrats this election cycle giving multiple millions. I could go on but I want to keep this financially focused. These scam artists knew what they were doing by buying influence in a variety of ways to help perpetrate their fraud.

          The trustee overseeing the bankruptcy has called this fraud the worst he has ever seen – far greater than Enron. It will be interesting to see if they get locked in a cell (as they should) and for how long

        4. I don’t know what Holmes intended at Theranos but her decision to bring two children into her prison future speaks volumes. At her sentencing hearing on Friday, she appeared visibly pregnant,perhaps to reinforce her sentencing plea for home incarceration. I can imagine her lawyer pleading that the Court must not punish the innocent babies? As a result I am not willing to give her the benefit of the doubt on Theranos.

      2. Interesting insight, thanks for sharing, and for having a conscience . . . too rare in the public sphere lo these past few decades.

  19. In my high-risk category, bought FBRT-E at $18.99. Fins for them look solid IMHO. Looking at BXMT – they looked really positive for floating rates.

    I might be wrong, but it seems like we are in a sweet perferreds-spot with solid companies, and small to mid-caps that seem solid have not moved off lows very much. I think I’ll be really happy with most of these 1-2 years out.

  20. In other happy news (FTX aside): Twitter is likely to go dark with so many employees resisting signing a loyalty other to work like rented mules. Offices are closed.
    And, if we need more crazy – Mark Cuban is right-on when it comes to his comment on Zuckerberg and his virtual real estate sales on Meta. Me thinks virtual RE = crypto to the nth degree.

    Me: kissing the ground in front of the NYSE, et al.

  21. New Crypto Token Available – introducing the all new stable token “GRjoel” guaranteeing 15% APR. If interested, see a mental health professional immediately. Seriously folks, after watching Cold Fusion’s (on YouTube) excellent piece on FTX and Terra, I just can’t comprehend why people, let alone sophisticated investors, would invest one penny in crypto. Sequoia Capital just lost its entire $221 million investment in FTX and countless others have lost millions. I just don’t get it. Is it just drinking too much from the punchbowl of greed?

    1. The only sense I have been able to make out of crypto is buy it today and hope in the future someone dumber then me will pay me more than I payed for it (Hopefully a lot more).

    2. GRjoel.. everyday I marvel at how much smarter we are in investing than the so called experts! Even Ontario Teachers Pension fund–a pension fund!!– was stupid enough to put 95mil into FTX. That is really going to help fund the pensions in the future of these hard working folks I am sure (sarc.) Bea

      1. The Bozo at the Ontario Teachers Pension Fund who decided to put $95 million of teachers money into crypto should have to repay the fund and wear an “I am stupid” tattoo on his forehead.” There is another idiotic investment called nft’s. Justin Bieber just lost over $500,000 on an ape nft. All this kinda reminds me of the Beannie Baby craze. They had value until they didn’t.

  22. The untold story of the FTX bankruptcy. Unless you have been living under a rock the last few weeks, you have heard about the bankruptcy of wonderkid (Sam Bankman-Fried) led FTX. Hard to get accurate numbers but the claim is that roughly 1 million customers might have lost $10 to $15 BILLION. Impossible to know what recovery if any they will receive. The court appointed receiver, John Ray, released the “First Day Pleadings” today in the BK case. Suffice to say it is a mess royale.

    I am thinking US stock/bond/preferred investors like III’ers should kiss the ground in front of the Securities and Exchange Building in DC. We might complain about them forcing issues onto the “expert” markets or other obscure rules. But we DO not wake up every day wondering if one of the major brokerages is going to go belly up having comingled user assets/funds with the firm’s assets. This is precisely what occurred with FTX according to what the founder, SBF, has said. Even when Lehman went bankrupt, customer accounts were kept segregated and you eventually got access back to them. The SEC was formed as a result of the 1929 stock market crash in an attempt to restore faith in the US stock market.

    Add in the SIPC insurance for brokerage accounts and the FDIC for bank accounts, and we should be a thankful bunch. They do allow us to buy assets that perform poorly, even going bankrupt, but it is our decision. (Fidelity excluded) BTW, does anyone else see the irony that the week FTX went BK was the same week Fidelity started their “Countdown to Crypto” campaign? Great timing. We have it great compared to many crypto investors, beyond just FTX, that have suffered ~ 100% losses.

    Link to FTX First Day Bankruptcy filing if you want to read a Shakespearean tragedy:

    1. Didn’t Jon Corzine comingle assets several years ago and they went poof? Nothing ever happened to him.

      1. Corzine was subpoenaed to appear before a House committee on December 8, 2011, to answer questions regarding $1.2 billion dollars of missing money from MF Global client accounts. He testified before the committee, “I simply do not know where the money is, or why the accounts have not been reconciled to date,” Just a complete MORON 🤬 that should have served a long time in a prison, but if you look at his political background you will see why he was spared…

  23. I need to call Ally about this Lincoln Financial Group preferred. I need to feed them the right info to get it into their system and it is also on the pink today so I can buy if I would like to.

    LNCDV right now. Will it change to LNCDL soon?

    Eventually becomes LNC-D. I know V is “when issued” but unclear when it changes to L or I am just plain wrong. I have the cusip/ISIN.

    The reason I am asking is because I can call into my account but I need to get their ducks in a row so I can buy in my wife’s account without calling in which requires her to be right next to me on the phone.

    1. Any thoughts on why this investment grade preferred stock was issued at 25 this week with a high 9% coupon?

      1. See Reader alerts 11/15 9:02 by Early bird. And also today on Reader alert.
        Maybe a pause & rethink? And it’s > $26

      2. LNC took a nasty hit to its insurance operations in 22 to wipe out annual earnings. They are selling 1 B of preferred to improve capital ratios: not a pretty use of proceeds for IG. There are two issues: $500 M of straight 9% and $500 M 0f 9.25 % reset at 5 year Treasury plus about 5.3% in spread (ouch).

        Two recent down grades to neutral and two upgrades to buy common at 6 times estimated ‘23 eps.

    2. replying to myself in case it helps anyone.

      Ally systems still show it on the grey. Even though the OTC website shows pink with info. I will just call them tomorrow. Not much they can do for anyone until their system switches to pink.

    3. fc,

      I recall the last letter of temp tickers typically changed from “V” to “P”.
      Did you see anything saying it’ll go to LNCDL (instead of LNCDP)?

      1. mbg,

        It starts as V. When issued. I is now ending in L. I was able to place an order with Ally today. The situation might have been starting on the grey the first day, certain brokers/syndicate had earlier access, and only when it switched to L variation of the ticket symbol was training wheels Ally able to assist me.

        With that said.. i placed my small order at 26.30 for today in an attempt to track it more closely. At this stage I do not want to chase it. 26, 26.50, 27… if held until called won’t change overall profitability much over those years. I can wait for a down day. This is 1 Billion worth of issuance after all for both combined I think it was.

  24. OPINL –

    New York, November 16, 2022 — Moody’s Investors Service (“Moody’s”) has downgraded the senior unsecured rating of Office Properties Income Trust (OPI) to Ba1 from Baa3. Moody’s has also withdrawn OPI’s issuer rating and assigned it a CFR of Ba1, placed on review for downgrade and SGL-3 rating. Moody’s also downgraded the senior unsecured rating of Select Income REIT to Ba1 from Baa3. The ratings of Office Properties Income Trust and Select Income REIT were placed under review for further downgrade. The ratings downgrades reflect OPI’s elevated leverage and challenges it faces as it seeks to execute asset sales and reduce debt levels amidst a challenging transaction environment for commercial office real estate. The downgrade also considers risks to operating cash flows as OPI faces a large amount of lease expirations in 2023 and 2024. Moody’s review will focus on the REIT’s prospects for selling assets and raising capital needed to address 2024 refinancing needs, including the maturity of its unsecured revolver and $350 million bonds that come due.

    1. 2WR, this is another REIT controlled by the Portnoy family (RMR). They are all run with an incredible amount of debt, the Portnoy’s pull as much assets/money out of the company is possible and eventually they restructure their debt in a modified bankruptcy. I highly recommend staying away for ANYTHING the Portnoy family has an interest in as they eventually all find the same fate.
      If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards, I am Azure

      1. Thanks, Ab – I only posted this because of the relative importance of it losing its IG status and as perhaps general commentary on the state of the office property space… Given I’m not a member of the Portnoy family, I have learned to steer clear of anything Portnoy…

      2. Azure: Travel Centers of America (TA) is also managed by RMR. That was a big factor in my decision to sell TANNI and TANNZ when I had a pretty good capital gain on both. I hated to part with the 8% dividend, but I didn’t want to get left holding the bag in case there were any shenanigans going down as their maturity dates got closer.

        1. Bill, thank you for your post. About 7/8 years ago one of my old employees that was on my team managing institutional money (he had just left graduate school and was one of my hires) and I had a very interesting dinner. He told me a very long story about how great Travel Centers of America was (and their management teams vision) and that they were getting a ton of institutional money coming in to let them borrow at a very low rate for their current poor credit. I bought the debt the next week as I really trusted this guy and he was actually managing part of my family’s trust on a discretionary basis at one point. I sold everything TA related late last year and am embarrassed to say that I didn’t know that Adam Portnoy had anything to do with the company just before I sold the debt and instructed those managing this family trust to dump the TA debt as well. The Portnoy’s are just so untrustworthy. These financial crime family morons were recently involved in Five Star Senior Living that followed the same pattern of many of their holding (run the debt up, take take take and then file for a modified bankruptcy) and now rebranded the senior living company as AlerisLife Inc. STAY AWAY FROM THE PORTNOY’S, they will always cause investors pain in the end 🫤

          1. Should I dump my TA, what would you suggest that I replace it with that offers a similar yield? Thanks.

            1. David, I truly appreciate your post but I would be doing you a great disservice giving you and portfolio advice (none of us here but you) know your current portfolio, your risk level, income needs, volatility issues, time frame, age, income level, etc etc etc Please do your own deep due diligence and I am wishing you the very best for profitable investing, A

              1. AB, I was finally able to open an Fidelity account a couple days ago. I found out why I was having problems doing so, but that is another story.
                I spent 50 minutes today on the site with a nice person showing me around the site. Asked me what I was interested in and I told her the bond site was recommended so I wanted to learn more. She took me to the site and showed how they had 15 different advisory services and different areas of investment. One was high yield investment grade. first AA that popped up on the list was Credit Swisse, good thing I wasn’t taking a drink of coffee or I might of choked laughing

                1. Charles, I’m happy to hear that you opened a Fidelity account. I believe that Vanguard and Fidelity have the best bond desk(s), but in no way should they ever recommend an individual bond to you. Today, I posted that I just bought 10 bonds of the new 9.25% fixed to float Lincoln National Corporation @$105 that executed at 3:29 PM. I got my normal text from Vanguard and figured the trade was done. Unfortunately, I got another text from Vanguard at 5:41 PM showing I bought another 10 bonds @ $105. I called Vanguard, but their bond desk was closed. I did speak to a representative and they are going to put in a work ticket to make sure the trade is corrected. The story is you have to always be on the lookout for your own accounts and there is no one that is going to take care of your money like you will. In my 24+ years on Wall Street there were only a handful of CFO’s that really understood financial risk management and wanted to make sure that every dollar running through their accounts was working to the master plan. A blatant scam like FTX taking in Blackrock/Ontario Teachers Union/Mr Wonderful (all play the greed game), as some of the “brilliant” minds on Wall Street certainly doesn’t surprise me anymore. Wishing you all the very best, I am Azure

                  1. Azureblue, could you kindly list the cusip you used to purchase the bonds at Vanguard? I attempted to search the bond list using Lincoln National Corporation but nothing was found.
                    Thank you.

                    1. Challenging, none if my brokerages appear to have this available:
                      Schwab:This CUSIP is currently not available. Please call a Fixed Income Specialist at 800-626-4600 if you need further assistance. Vanguard shows it but cannot place bid. Might be account settings will need to check.

                    2. Same with TDA: No results
                      There were no results returned by your query. Please click the back button on your browser and try again.

  25. General discussion question about yield spreads:

    I know it’s a hypothetical and an educated guess, but with all the experience and insight here on III, figured I’d ask the group.

    I’m considering the treasury as “risk free” rate and everything else is subject to default risk. I also realize there are variables including credit rating of individual securities, duration, etc.

    If 10 year treasury makes 5% sometime next year, then what yield spread would be expected for the following:

    IG Corporate Bonds (my guess 1.5 to 2%)

    IG Preferred Stocks (my guess 2 to 3%)

    Common stocks (SP500) (my guess: earnings yield of at least 5% over treasury yields) Which means common stocks are way overvalued currently.

    Zombie stocks, SPACS, crypto crap: (my guess: avoid)

    1. I’m just an amateur, but I’ll give it a try. Today the 10-year treasury is at 3.78%, so it would gain 1.22% to hit 5%. Therefore:
      I would expect most corporate bonds to drop by 1.2% for each year of duration to maturity, although IG bonds will hold up better.
      Roughly, I would also expect preferred term stocks to drop by 1.2% for each year of duration to maturity, although I use the appropriate spreads (1-year, 2-year, etc. based in each duration) and the spreads/prices as of Jan. 1, 2022 for my calcs. This works reasonably well for most terms from OXLC, PRIF, RC, and ATLCL. The calcs have been too low for ECC and TANN, and they have been too high for most RILY and Sachem terms.
      For perpetual preferreds, I start with the price and 10-year treasury yield on Jan. 1, 2022 as base values. Using the values from Jan. 1, 2022, helps to factor out some of the “noise” due to IG versus non-IG because Wall Street has already factored credit quality into the equation, although preferreds also tend to be anchored to par. The 10-year treasury was at 1.5% at the first of the year, so the spread to 5% is 3.5%. I then multiply the price on Jan. 1, 2022 by the equation (i/(i+spread)), where i is the original coupon yield. So a non-IG 6% coupon at $25 on Jan.1, 2022, would be $25(6/(6+3.5)) = $15.78. Using the current 10-year treasury of 3.78% (spread = 3.78 – 1.5 = 2.28%), the current price of a non-IG 7% coupon would be at $25((7/(7+2.28)) = $18.85. As a quality control check, there are many 7% coupon non-IG perpetuals that started 2022 near $25 and with 52-week lows near $19. IG perpetuals tend to run about $1 to $4 higher than the non-IGs. Overall, the REITs dropped more than the calculated values, the industrials were very close, and the banks/insurers were better.
      I haven’t found a consistent rule for preferreds that float or reset, although Wall Street doesn’t seem to like anything that float or resets more than 1 year from now. I keep hoping that this spells opportunity for floaters/resets from the same company that have similar base yields but wide price divergences due to a slightly longer duration (e.g., AGNCN/AGNCO, MBINP/MBINO, NLY-F/NLY-I, etc.).
      I agree with your thoughts on common stocks and crypto.
      I’ve been about 80% invested in preferreds most of the year, and I’m down about 0.5%, which is great compared to the overall market. However, I have increased the yield of my portfolio by about 2%, and I should be in a position to have some nice capital gains if preferreds recover. I would have done much better if I had developed the equations earlier and followed them. Math is my strong point; discipline is not.
      Hope this helps.

      1. goin2cali

        Thank you, great response. Great example of why this site is such a great resource.

        Additional thoughts I’ve had:

        REIT preferred are priced lower due to dividends being non-qualified and rising rates hurt their margins (debt, debt, debt).

        Banks and Insurance companies (lots of assets) make more interest income when interest rates are higher and are priced higher.

        Preferred and bonds in general can drop more as rates rise, but you have to balance the price drops with the interest / dividends earned during that time frame. May be a complete wash from where we are today. The real danger zone was when rates first started to climb earlier in the year.

        Now, if we go thru a period like the 1970’s and high inflation just won’t die, then preferred with low coupons and low coupon bonds will suffer heavy losses. I hope that’s not the case, but no one predicted the last several years either.

        I’m not sure the US can handle 10 year treasuries with 5 to 10% rates. Not with 31 trillion in debt and a government with a serious spending problem.

        1. I agree with your points. The nice thing about having a Fed that forecasts its moves (e.g., JP stating they are not ready to pause yet, Neel Kashkari stating months ago that he expected rates to hit 4.4%, Mary Daly stating that she expects rates to hit 4.75 to 5.25%, etc.) is that we can calculate the impact of these moves and decide if the dividend offsets the price drop, or if we want to bail on rallies and set a lower price point to buy back in. The last method has been the correct move for most preferreds all year long.

          Following my previous post, I looked at PSA-N (3.875% yield, BBB+ rated, 52-week high/low of $25.20 and $15.12) as an extreme example of an IG perpetual that will never be called. The 10-year treasury hit a high of 4.38% in October (started at 1.5% on Jan. 1, so spread = 4.38-1.5 = 2.88%), so the equation is $25.20(3.875/(3.875+2.88)) = $14.46, which is only $0.66 (4.4%) below the 52-week low. Including an assumed 10% bump for IG, the buy price would have been $15.90, which is $1.06 below today’s closing price for a capital gain of 6.6% and a current yield of 6.1%. Not bad for a perpetual that you could put in your sock drawer. However, if Mary Daly is right and the 10-year treasury goes to 5%, then the buy point (with a 10% IG bump) would drop to about $25.20(3.875/(3.875+3.5))x1.1 = $14.50 for a current yield of 6.6%. I sold and set a buy limit at $14.50 (not recommending this for anyone else).

          The Feds are setting the rules for the game. I’m just trying to play it as well as I can, and I’ll keep selling on the pundit-created rallies and buying after the interest rate induced drops. When the Feds indicate they might pause, then I’ll try to invest everything, but it might be with buy stops in indexes or preferred ETFs (e.g. PFFD) with more liquidity than individual preferreds because of their low liquidity and very wide bid/ask spreads.

          Sorry – probably TMI.

          1. goin2cali,

            more good stuff. Yeah, pinpointing the top for rates is the real holy grail.

            I’m thinking if we do see 5% treasuries, there is gonna be such a massive rotation into fixed income, the equities market is destined for a hard fall.

  26. AQN – AQNU – Anyone starting to look at these issues for a long entry? A dividend cut has to be coming, and am trying to decide if I should start a position prior to or wait for the annoucement. Probably, as always, patience is best to see how large a cut will be announced. But I think these are worth watching until that annoucement comes.

    1. sjc. They keep issuing equity as well as long term debt like it was free or something. I personally would not own anything related to AQN. I wonder when our slick oily friend at SA will post something on them with the buy opportunity of a lifetime. They usually recommend falling knives as investment opportunities for retirees… and making the assumption there is no underlying trouble there. Insert double laugh here.

      1. Mr. C speak of the devil….Oh pennYless most certainly did this week in TV’s negative article on it….As usual the same “spin” was in, as nobody loves a huge capital loss better than him….
        No, we didn’t get the entry wrong for AQNU. Yes, the price is better now, but that doesn’t make the price bad earlier. It was still a good value.

        Of course these 2 retorts to the cap loss king were priceless…
        “I’d be hiding under a blanket for the whole year if I made half as many mistakes as you.”
        If he hid under a blanket I would lose so many of my short opportunities. Let him spout off. He’s a money printer for me..

          1. Oh, I didnt, but they block 90% of my posts. I wouldnt say buying at 80 and then he quietly stated on a post he sold after it finally got above 80 several years later as any big victory though. At least not as good as the victories in PTY at $20, OXLC down 30%, WPG bonds, PEI preferreds near par, etc. etc. So yes, come to think of it, on a relative basis that was a big winner and I should congratulate him! 👍

    2. I’ve looked at them. If I understand it correctly, the shares are used as collateral. The preferred shares come with an obligation to purchase $50 worth of AQN sometime in 2024. Based on today’s price of $7.62- for $50 you get 3.33 shares- or shares worth about $25.37. You lose about $25. But the preferred shares are trading at about $27.50. So you are purchasing below the $50.00 liquidation value. However, even buying substantially below liquidation, you’re still down a couple of bucks right off the bat.

        1. No. I didn’t. I also don’t understand the interest in the note held as part of the collateral- as I can’t seem to find the prospective.

    3. Saw that report mentioned earlier, and sold my AQNAs yesterday. ATM, it’s too easy to find similar or higher rated stocks w/less debt issues. Nice quick 10% gain on it so that was nice.

  27. This is not good. Unless you trade US Treasuries for a living, you might not be aware the market is fragile. Nellie Liang, the Under Secretary for Domestic Finance delivered the keynote speech today at the Treasury Market Conference. Her entire speech addressed Treasury market liquidity. One chart really caught my attention: depth of book (DOB) for both the 2 year and the 10 year. This is Figure 2 on the chart deck.

    DOB is lower by 5X to 10X compared to 2019. And 2022 volatility is maybe 2X higher. Both of these are familiar to III’ers that trade preferreds where that is a good thing (channeling Martha Stewart). However, it is NOT a good thing for UST’s since they underlie a lot of worldwide finance. Also directly correlated to the volatility. Treasury is trying to put things in place to lessen the volatility, but a different interpretation is that bond dealers are more reluctant to take positions. Probably means more volatility ahead for us in preferred/baby bond land.

    Charts link:

    Verbiage link:

    1. Similar article in the FT’s “Big Read” a day or two back, Tex …
      The cracks in the US Treasury bond market
      The meltdown in UK gilts exposed the vulnerability of large bond markets. Could the biggest of them survive a wave of selling?

      Buying and selling in the world’s biggest bond market is supposed to be easy. However, for most of this year, says Gregory Whiteley, a bond portfolio manager at DoubleLine Capital, it has been anything but straightforward.

      Whiteley says a trader used to be able to get hold of $400mn of US Treasury bonds — not an outsize quantity in this $24tn market — as a routine matter. But now that typically involves breaking up the order into smaller chunks; perhaps doing $100mn of the trade electronically, he explains, and then picking up the phone to see if they can prise the rest of the debt from the hands of Wall Street’s trading desks over the course of a day.

      The US Treasury bond market suffered a huge scare at the start of the coronavirus pandemic when fears about a collapse in the global economy led to a sudden slump in prices and liquidity.

      Now as the Federal Reserve battles to rein in inflation, a recession looms and most asset prices have faced a dramatic sell-off, the world’s most important bond market is creaking once again.
      (Article continues …)
      (“This article is currently free for anyone to read.”)

    2. Tex, Troubling though refreshingly transparent front line info. Thank you for posting. Grid and I just yesterday were discussing Treasury volatility and “an event” as 2 of 5 reasons for going-slow on LT positioning, but we were shooting at the side of a barn. This report nails it.

      10-year weakness in this environment is a bit of a mystery. Seems it could touch 5% before the smoke clears.

      1. Alpha, the yield curve has become inverted even more lately. Is it signaling recession? If so that isnt backslapping fun for preferreds typically.

        1. Grid, No it would not be, which is central to my focus on boring high IG issues. We’ve been reading here with increasing frequency of cracks appearing in foundation of lower rated. Haven’t yet been able to correlate the increased risk of 100% loss or suspended dividend with a 1.25% yield premium.

          Yes saw 2/10 spread increase again today though not thinking fed is going to back down until labor supply/demand is more balanced. Then there’s the potential Treasury volatility. I recognize 5% sounds like somewhere outside Pluto. We’ll see!

          Interesting headlines ahead.

    3. Who is a buyer of all the paper that the Treasury has to sell? The Chinese have to shore up their real estate market, the Japanese are supporting their 25 bp rate and the Fed is tightening?

      1. I am lol.
        3 mo treasury paying ~4.3%. I have a nice little 3 and 6 mo ladder going.
        IMHO The US is still one of the safest markets in the world.

      2. If the increasing volatility induces a selloff in Treasuries, likely short-term buyers are the private-equity firms. See the link below about how Apollo bought about 1/3 of the discounted assets in the UK crash. Longer-term, more cash could flow from stocks into bonds. If stagflation is coming, the stock market could flatten out as in the ’70s.

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