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.
What is the China “done” deal? I get the feeling it’s nothing at all except high tariffs which will be a (regressive?) tax on American individuals and businesses.
Is there factual information available about the deal?
“The [Wall Street] Journal noted that the much-touted agreement brings trade relations back to the baseline before Trump started his tariff war. ”
https://www.yahoo.com/finance/news/murdoch-paper-rips-taco-trump-145618212.html
Different day, same story, same result.
Oil is now above the price when Trump took office
Yes, crude oil up 14% in the last 5 days. Hasn’t helped my oil stocks much. Probably temporary. It was below $60 just 1 month ago. Now over $70.
danzeb, my FRHLF and GBNXF are up and the exchange rate is up.
RE: GJH – It looks as though we as holders of GJH will not be receiving any official notice of the T-Mobile tender AND we know that the provisions of the GJH structure pretty much guarantee that our underlying USM bonds will NOT be voted FOR conversion to T-Mobile debt…. The deadline is tomorrow, so that leads us to decide whether or not to continue to hold GJH knowing our underlying 6.70% bond will remain as it is, non converted….
It looks to me that the only guidelines we have to go by on what will happen to non voted bonds comes from https://www.sec.gov/Archives/edgar/data/1283699/000119312525125463/d909830d424b3.htm#tx909830_7 P. 68. There will be amendments made to the indenture, but on a quick look, they are adding an ability to defease which might mean they get them off the books even if they are not voted by making them an even stronger underlying…. Anyone have a strong opinion? I’m leaning toward just holding…
But the Conditions for Defeasance modification is not for the 2033 bonds. It is only for the others. The big modification is the “Action to Redeem Securities” for the 2033.
But I do not read that action to redeem as some clue to pay them off early…
Good catch, fc. I read it too quickly and missed that….. I wonder why that is??? Any clue? No a defeasance would not have it being paid off early but that would be a good thing….. Despite the only call being a make whole call, GJH holders would never get anything more than par. But if they’re defeased, then they’ll be backed with probably Treas or Agency dept in sufficient size to pay everything up until maturity…. In looking at the original prospectus P 9 – https://www.sec.gov/Archives/edgar/data/821130/000104746903039546/a2123863z424b5.htm, I guess this provision would therefore remain in place, so I suppose there’s no reason to consider defeasance to be off the table, yes?
Defeasance
Debt securities of any series may be defeased in accordance with their terms and, unless the supplemental indenture or company order establishing the terms of such series otherwise provides, as set forth below.
We at any time may terminate as to a series our obligations with respect to the debt securities of that series under any restrictive covenant which may be applicable to that particular series, commonly known as “covenant defeasance.” All of our other obligations would continue to be applicable to such series.
We at any time may also terminate as to a series substantially all of our obligations with respect to the debt securities of such series and the Indenture, commonly known as “legal defeasance.” However, in legal defeasance, certain of our obligations would not be terminated, including our obligations with respect to the defeasance trust and obligations to register the transfer or exchange of a security, to replace destroyed, lost or stolen debt securities and to maintain agencies in respect of the debt securities.
We may exercise our legal defeasance option notwithstanding our prior exercise of any covenant defeasance option.
If we exercise a defeasance option, the particular series will not be accelerated because of an event that, prior to such defeasance, would have constituted an Event of Default.
To exercise either of our defeasance options as to a series, we must irrevocably deposit in trust with the Trustee or any paying agent money, certain eligible obligations as specified in the Indenture, or a combination thereof, in an amount sufficient to pay when due the principal of and premium, if any, and interest, if any, due and to become due on the debt securities of such series that are outstanding.
Such defeasance or discharge may occur only if, among other things, we have delivered to the Trustee an opinion of counsel stating that:
•
the holders of such debt securities will not recognize gain, loss or income for federal income tax purposes as a result of the satisfaction and discharge of the Indenture with respect to such series, and
•
that such holders will realize gain, loss or income on such debt securities, including payments of interest thereon, in the same amounts and in the same manner and at the same time as would have been the case if such satisfaction and discharge had not occurred.
The amount of money and eligible obligations on deposit with the Trustee may not be sufficient to pay amounts due on the debt securities of that series at the time of the acceleration resulting from such Event of Default if:
•
we exercise our option to effect a covenant defeasance with respect to the debt securities of any series, and
10
•
the debt securities of that series are thereafter declared due and payable because of the occurrence of any Event of Default.
In such event, we would remain liable for such payments.
Any thoughts on BUSEP?
It’s a recent issue, 8 1/4% fixed, perpetual preferred, trading ever-so-slightly above par. Capital ratios look pretty solid. Anybody seeing any problems I’m missing? I picked up some shares and may add more.
It is not a well known bank. The crowd is not aware of it and no one on SA is pumping it. So low volume and struggling to move higher. I don’t know about the financials.
In a broad based sell off in the market or another bank crisis you could be looking at losses or be prepared to buy another tranche to lower your average cost if you have confidence in the financials.
Not the most profitable bank, and common is selling for less than book, which does not support the preferred.
From June 2nd.
https://seekingalpha.com/news/4454581-first-busey-expands-share-repurchase-program-by-2m-shares
They also did a merger last year. So mgmt is making some moves.
I think I have about 400ish shares between two accounts. I am comfortable going up to 500 maybe. Not something I want a 1000+ shares but a nice bite of it.
@JFOlson – I don’t understand the math/logic of what common trades at vs preferred. Common can be any value the company wants, to increase the price just do a reverse stock split, A 5:1 RSS would pop this to nearly $100/share, doesn’t change the fundamentals. Or they can do a stock buy, which by the way Busey has authorized an increase by 2 million shares, to 2.98 million.
I mean simply that a bank whose common stock is selling at less than tangible book is less likely to approve issuance of more common shares to shore up capital, and perhaps more likely to issue preferred if capital is needed.
Use of funds:
“We estimate that the net proceeds for this offering will be approximately $192,950,000 after deducting estimated expenses and underwriting discounts and commissions (assuming the underwriters do not exercise their option to purchase additional depositary shares). We intend to use the net proceeds of this offering of depositary shares for the redemption of the 2030 Notes and for general corporate purposes including to support balance sheet growth of Busey Bank. The net proceeds may be invested temporarily in cash or short-term marketable securities until they are applied.”
BUSEP is expensive money, but then again, new issue WTFCN from conservative Wintrust came out at 7.875% and is trading at 25.50. You might ask which you’d rather own: BUSEP at CY 8.125% or WTFCN at CY 7.72%?
Tim had a post about BUSEP about a month ago. I find the financials to be solid and integration with recent acquisition seems to be positive move.
https://innovativeincomeinvestor.com/first-busey-prices-new-preferred-shares/
I got my prif-f redemption at multiple brokerages but no accrued dividend payment-anyone else?
Same for myself. I am at Fidelity
Wonder where that is. Did some brokerages also not post the principle until overnight/this morning?
Same here at Merrill Edge. I will give it a few days before I get concerned.
Anybody yet get paid the F dividend? I’m getting the standard runaround from E-Trade that “we have to look into it – we have not been paid it yet, gotta make sure it is owed blah blah blah wait 2 business days” line….. Didn’t this same thing happen in April with PRIF-H?
I don’t remember a problem with prif-h, but fidelity is telling me that there’s nothing in dtc scheduled from them so as far as they know there won’t be a dividend payment. Which is nonsense, and the original press release says they will pay accrued from March 31-June 11.
I just looked back – I sold PRIF-H @ $25 immediately after the 3/31 dividend so I didn’t wait around for the dividend that went along with the call..
I just tracked down the right person to talk to, naturally at PROSPECT. His number is 212-448-0702. they’ll give you the link havint ot do with Priority…. Guys name is STEVEN STONE
I just spoke to prif investor relations at 212-448-0702 and they said they’d look into it.
Ha! You must have been the first to get to him….lol
Steven was very apologetic and said I was the second one to call him… Said that the problem must not be wide spread otherwise his phone would be ringing off the hook… He was surprised when I told him I knew of shareholders at Fido and Schwab but maybe that was too specific as well is ETrade having the same problem. Sorry I didn’t mention Merrill Edge
Every day I update 3-month term SOFR on my spreadsheet. The number feeds into every floating rate asset I own. The spreadsheet calculates an annual income from all dividend and interest paying assets.
Wondering what would happen if SOFR dropped by 1% (four rate cuts), I changed the number and found that annual income dropped by a tiny 1%.
I look at it differently. While a drop in the distribution yield from ~4% to 3% on a say $100,000 portfolio can be called a tiny 1%, a drop in gross income received from the same portfolio, from $4000 to $3000 looks like a much bigger drop in spending money to me. JMO. DYODD.
Bear, To use your example, I read Rocks post as that $4000 would now be $3960. $40 being 1% of the $4000 income.
Rocks, Dollar weakness has increased my income derived from Canadian holdings by over 7% during this stretch. I’ve found that more than makes up for any drop encountered from floaters. If you want to look at it that way. I guess depends on one’s amounts of Canadian securities that pay in Canadian dollars. I have a sizable amount.
Pig, same here. Not sizable but a decent amount.
pig-
That’s right, $40. If the Fed has made four cuts, I figure there’s a lot more going on with my portfolio than the yield from floaters. Smart, the Canadian hedge.
How to prepare for rate cuts is a big concern of mine. My only thought is to hold non-floating uncallables at yields that I can live with if rates rise instead.
WTI Spikes Nearly 5% as U.S. Embassy Prepares Iraq Evacuation
https://oilprice.com/Latest-Energy-News/World-News/WTI-Spikes-Nearly-5-as-US-Embassy-Prepares-Iraq-Evacuation.html
Daily chart of SPX emphasizing the period from Nov-present. The rectangle on the chart captures all of the price movement except for the big drop to the April low. Even though the setup looks bullish, I’d like to see price break out of the range, one way or the other, before drawing a conclusion. NDX is similar.
https://www.tradingview.com/x/y5I9Dyrl/
Not sure about everyone else but I have cash to invest but I am just sitting here undecided what to do. It was just 5 years ago I would have been thrilled to purchase so many things with the yields we are offered today. Yet now they no longer thrill me. While I do buy a sampling of new issues I do not go very heavy into them. I would like to buy more muni but I want > 5%. Not 4.65-4.8% for my state when discussing longer duration.
I want a deal. I almost look forward to market disruptions. Now don’t get me wrong. Every week I invest in retirement accounts like clock work but that is basically set it and forget it type situations. This is additional money outside of retirement accounts. Real estate in my area is just bonkers here in New England. The math does not math very well. Common stock is quite pricey right now for most good companies. Cigar butt investing comes with risk.
I am almost to the point I should just toss it all into SGOV and just forget about things for the summer. Come back in late Aug and worry about it then. Or at the very least wait for some deeper red days to cough up some good deals.
Fc, that is all I have been doing is re-balancing where I think I have some risk and just putting it in the short term treasuries funds at Fidelity and Schwab.
Yes I have bought a few things that come with risk like the JBSAY but not more than I want to risk.
I wait for those red days like that first week in April and when others are panicking I take a deep breath and buy a few things.
— IMHO, in a volatile market like this it depends on whether you are of retirement age (or retired) and what your crystal ball says. My crystal ball – I think long rates are going up (too much debt) and short rates are going down (political pressure for EZ money) so I have been staying on the short side with cash, laddering Treasuries and CDs (SOP for me). I will eventually throw in the towel and go to SGOV.
— If you are young and working, its not a bad time to think about taking some risks. I would stick with quality now and not yield hog. Over the years I have found quality stocks held for the long run far outperformed my yield hogging picks. Also, believe it or not, when you’re young you don’t need the income and its taxed anyway.
— Real estate. Unlike stocks I see no “wealth effect” in my home’s ever-increasing value. Just higher insurance rates (+50-70%/ year) , electric rates (+20%), and a coming tax appraisal, up, say, 50% (office buildings seeking 50% cuts on tax appeals and new buildings cutting 20-year tax freeze deals.)
– Disclosure crystal ball accuracy: crude oil prices up 10% since I predicted a drop on increasing Saudi pumping. JMO. DYODD.
Your crystal ball was on the fritz on the oil call.
Sounds like you need to move somewhere less expensive.
Insurance rates (+50-70%/ year) , electric rates (+20%), and a coming tax appraisal, up, say, 50%.
My homeowners insurance is up about 20% but that’s over the last 5 years. My electric cost increase isn’t noticeable. My property tax appraisal is up 80% in the last 10 years but I live in a popular resort tourist town on prime lakefront (expensive) so that’s my fault.
Electric around $65/mo
Homeowners Insurance $100/mo
Property Tax $480/mo
Sales tax 6%
Income tax- negligible as the state doesn’t tax SSI or my Federal Pension
Welcome to Idaho!
Hey Richard, I read a lot of Californians are moving up there and driving up the real estate prices.
I have been shipping a few jobs up there as the medical centers have been expanding.
Beautiful country up there.
Idaho is a very diverse so it depends where in the state you are. Yes, real estate prices are up. In the Boise area $500-$600k will still get you a very nice new home in a great location. I’m up north. Prices are a little cheaper here in town but of course lakefront will be very expensive. We have a different appeal than say the Boise area which is a 7 hour drive south. Both areas are beautiful in different ways. Up north we are all about mountains, lakes and recreation. Southern Idaho is agricultural (famous potato) and the economic hub.
The Treasure Valley (Boise) has grown tremendously thanks in part to Californians. The northern part (Coeur d’Alene and Sandpoint) has its share of Californians but a lot of our growth is also coming from OR, WA, CO and Texas.
Here’s an odd point and I don’t mean to be political, just an interesting observation. As you may know, Idaho is a conservative state and I hear all the time people saying that all the Californian’s are going to change that. The state tracks political party registrations for newcomers. 2/3 of all newcomers are registering as Republicans. In the south, it’s conservative Californians. In the North we supplement that with a lot of conservative Washington and Oregon people apparently tired of the liberal policies in those states. Idaho is more conservative than it was 10, 20 or 30 years ago. Again, not trying to be political. Just an interesting point. Anyway, you are right…it’s a beautiful place to live.
It’s also not too expensive to exist here. The state government has been returning excess revenue to residents for years rather than looking for new ways to spend it. What a novel idea! We got direct payments, reduction credits to our property taxes (which are all local) and a reduction in the state sales tax and income tax rates. Our state income tax is now almost a flat tax. When I moved across the border from Washington 21 years ago, I wasn’t sure what to expect. What a surprise. It’s a lot cheaper to live here. I could never afford the house I have on this lake if it was 30 miles west in Washington. Property taxes in Washington fund state government. Washington penalizes you for having nice things. Not here.
Can you tell I love living in this state?
I had a outside salesman for one of my plumbing and heating customers. His company was bought out by Genseco out of Seattle. He retired way up North on the pan handle. He said they are so close to the Border they go shopping in Canada.
Probably lives in Bonners Ferry ID. A small town on the Kootenay River. Beautiful place and just half an hour from the border. Probably shops in Cranbrook or Nelson BC.
There’s a nice write up on EIC by ADS Analytics on the SA web site.
https://seekingalpha.com/article/4793938-eic-adding-clo-fund-on-drop
This excerpt dissuaded me from being a buyer:
As a ballpark, for a 1% drop in short-term rates, a typical leveraged credit CEF’s portfolio yield will fall around 0.65%. Because EIC has fixed-rate liabilities, they do not even partly offset the drop in income on the asset side of the fund when short-term rates fall. This means that any change in short-term rates (whether up or down) is magnified for EIC. If the Fed continues to cut short-term rates, the fund’s income and, likely, dividend will continue to fall.
I find the shares riskier than I’d like and am long the term preferreds.
I see interesting trades on many days and usually go on with life. On rare occasions I see a REALLY, REALLY interesting trade. Today was that day. Take at look at:
SLQD-ISHARES 0-5 year corporate bond ETF
Closed during regular hours @50.16
3 minutes into after hours trading, a 418K block traded @ 53.10 which was the inside ask at that time. That is a $22 MILLION trade. Then it gets busted 15 seconds later. So the original trade was $1.2 Million above the market.
The trade eventually gets replaced ~ 2 minutes later @ 50.16, which was the right price.
Interesting to have an error on that size of a trade. Very interesting how they were able to bust it in 15 seconds. Normally busts take a lot longer to get agreed to IMO, typically maybe ~ 15 to 30 minutes.
We were not involved in any of these trades. Our average trade size is a bit shy of $22 million.
Tex, perhaps it was just reported incorrectly to the tape?
Did your time and sales feed indicate “ bust?”
Although not mentioned in the podcast summary, there is an interesting (to me, anyway) short discussion of Egan Jones ratings included in this Bloomberg podcast. ~9.30 min. If the podcast doesn’t open on the Bloomberg site, it is on several other podcast sites. Also a discussion of Wells Fargo JMO. DYODD.
“Money Stuff Podcast: Learn to Perch: WFC, BBB, TOPS”
https://www.bloomberg.com/news/audio/2025-06-06/money-stuff-podcast-learn-to-perch-wfc-bbb-tops
“Katie and Matt discuss Wells Fargo’s asset cap, credit ratings conflicts of interest, private credit controversies in the insurance business, why BBB- is the best rating, Main Line real estate prices, Marshall Wace, hiring cheaters at hedge funds and signals from the sell side.”
RLJ-A A few days ago, I scanned a back and forth discussion regarding RLJ-A. My intention was to go back and read it more closely but alas I can’t find the convo now. I seem to have trouble backtracking to a previously read comment on this site. This could very well be a user issue, lol.
My history with RLJ-A was taking a full position under par, sold over par and now have taken a much smaller position once it has dipped under par again. The aforementioned conversation was about whether if RLJ went private, would the preferred be made whole (at par) in such a transaction. I believe the likelihood of RLJ going private was discussed as well. This was all speculation, nothing official, but lots of knowledgeable folks on this site, so always interested in their comments.
If anyone has any thoughts about RLJ-A, I would appreciate if you would share them. Thanks
Using this link around page 175…
https://www.sec.gov/Archives/edgar/data/1511337/000104746917004630/a2232694z424b3.htm#di49201_description_of_rlj_capital_shares
I do not see a mandatory redemption or anything useful if RLJ was purchased by another public company or purchased and went private. I only spent a few minutes reading it though but normally that is enough for a clue on the topic. I do not think the ability to convert shares is useful in this case due to the terms of the conversion being lopsided.
RLJ-A is my largest preferred stock holding. Got lucky and bought some during the COVID crisis around $15 but bought closer to $25 as well. Very pleased with it. Not too worried about the “going private” risk. Good luck!
Do high interest rates cause lower stock prices? (Op-Ed pertinent to investors under 80 years old.) Answer is yes if they get high enough. A few points:
1) Just this week we had a post on III: “CD Rates Now as High as 4.45%” which considered whether to invest in CD’s or preferreds/babys. The direct point was that at some rate, CD’s become more attractive. Recall how many III’ers were happy to see CD rates hit 5.0% in 2024, after a many years’ hiatus where CD rates fell due to ZIRP (Zero Interest Rate Policy).
III type investors represent maybe .001% of US investable assets, so even if they went all in for >=5.0% CD’s rates, it would not move the needle. But what happens if CD rates went to 6%,7%,8%,9%,10% or higher? A much higher percent of US investable assets would look at that in comparison to long term US stock returns of ~ 9% nominal and decide to allocate away from stocks into CDs. On 12/31/1981, 1 Year US Treasuries yielded 11.97%- and 10-year US Treasuries yielded 13.98%. I suggest that many US investors would make the choice to buy a 10-year UST with ~ zero principal risk compared to any common stocks if they had the 13.98% offer.
2) Many “fundamental” investors use some form of DCF “Discounted Cash Flow” models to determine “fair value” for a given stock. One of the inputs in the DCF model is the “discount rate” which is an interest rate you plug in for future years. All else being equal, the higher the interest rate, the lower the DCF value goes. Consider the extreme cases for $1 of earnings, one year from now. With ZIRP interest rates of 0%, $1 of earnings is worth about $1 today. With 10% interest rates, it is worth $0.91, close enough to 10% less. Carry that forward and future earnings become worth less and less and less. Bottom line is the DCF derived value is STONGLY influenced by the assumed discount interest rate.
3) History! The reason this is most pertinent to US investors under 80 years old is that they have NOT experienced first hand what high inflation and interest rates do to common stock values. If you were NOT investing in 1966, you have NOT lived through this. And maybe 99% of the commentators you hear are under 80. I have seen many studies along the lines of “how stocks react to inflation” where the data starts in ~2000. Clueless, totally clueless IMO. And if you were NOT an investor back then, you CANNOT appreciate the pain it brought to ALL investors, not to mention average citizens.
Facts:
12/31/1965 UST 1 year=4.72%, UST 10 year= 4.65%, CPI value= 31.85
12/31/1981 UST 1 year=11.97%, UST 10 year= 13.98%, CPI value= 94.1
In round numbers, the Dow Jones Industrials first hit 1,000 in 1966
In round numbers, the Dow Jones Industrials climbed above 1,000 and stayed there for good in 1982
That is 16 years with ZERO nominal growth
Only problem is that 1,000 in 1965 was worth 338 in 1981 in REAL, after inflation dollars, and yes this does not include dividends which would have helped. So you lost 2/3rds of your principal.
4) Why it is different this time, compared to 1966? 401K investors have substantially changed the investing landscape since then. 401k’s came into being ~ 1980, so they did not exist in 1966. 401K investor place a “perpetual bid” under stock prices. They cause ETFs/Funds to automatically buy common stocks, regardless of price and/or value. At some point if/when common stock prices fall, they will follow human instinct and say “get me ought” by lowering their allocation to commons. We have seen this in spades the last few years. IMO, it will take longer for stock prices to fall, but with higher enough interest rates, the stock versus UST/CD scale will take over.
5) NONE of these factors talk about the timing of when/if this would occur. Each investor gets to make their own judgement about if and/or when it would occur. My base projection is that this is the endgame for US stocks between now and 100 years.
6) Odds of Washington making material changes to cumulative debt/SS/Medicare is about the same as me hitting more home runs this year than Aaron Judge. Odds of something bad like worldwide epidemic, nuclear war, are higher than Washington dealing with it. IMO this is what makes the high inflation/interest rates the most probable long-term outcome.
7) Obviously, all of this might be 100% wrong and even in our grandkids lifetime, we do not see materially higher, sustained inflation/interest rates.
8) If you have not figured it out by now, the 1966-1982 scenario is STONGLY etched into my beliefs.
9) I could have written a lost more about this, so as hard as it is to believe, this is the executive summary. Entire books have been written about it.
— There will be winners and losers. IMHO, The older you are, and the farther along you are in retirement, the more likely you are to be a loser.
— In my current Vintage Wine in Fine Oak Kegs mode, I find the prospect of stagflation horrifying. Fixed income and a fixed portfolio vs. uncontrolled expenses. Electric +20% Y2Y. (Thank you data centers!) Latest insurance increase a mind boggling 147%. (70% wasn’t enough.)
— I was young during the stagflation / Volcker era, Life was good. First year, first job, I got 3 pay increases. My MMF, a new fangled invention was paying ~14%. My uninsured bank-by-mail account was paying 7%. Bonds were paying 10-12-16%, some double tax exempt. The ute I bought in high school likely dipped greatly but I never looked and the reinvested quarterly divvies compounded rapidly. “It was a very good year.” – Sinatra. JMO. DYODD.
Bear said: “There will be winners and losers. IMHO, The older you are, and the farther along you are in retirement, the more likely you are to be a loser.”
Bear, one of the most important questions is “Who are you investing for?” The two extreme cases are: seniors that rely on their investments to live on today and in the near future. At the other extreme are seniors where a large part of their investments are going to end up for their kids or grandkids. We deal with both extreme cases on a daily basis, so it is not just hypothetical.
Depending on the investors age and personal best guess of when/if the high inflation/interest rate regime takes effect, can have a dramatic effect on portfolio allocation approach.
Definitely not a one size fits all type situation.
Tex, I go to a community pool for a senior swim. It just occurred to me how much this pool time is similar to standing around at a cocktail party.
Some people are still working because they need to, others do it for social interaction and others are not to the age they can start collecting retirement.
One couple I was talking to are in a situation I think several here can relate to. They both retired from working for a utility company. I mentioned I hold investments in the same utility. They said isn’t it a shame that at one time the utility stock price was in the 70.00’s and now it’s in the teens and is paying less then 1/2% dividend. Think about the capital loss they have taken and the dividend that hasn’t kept up with inflation.
They said the market goes down then it goes back up.
Obviously with their union pension and SS they are not concerned about their market portfolio.
I don’t think this couple even knows their former employer issued preferred stock that is paying almost 7%
Another question might be does the perception of higher interest rates among investors create opportunities to beat the 4-5% CDs and short term Treasuries, to which I’d answer yes. Not sure where all the angst is coming from considering money market rates have dropped since the beginning of the year, but if the market wants to misprice the risk of hold short duration (2026 maturity) baby bonds I’m willing to oblige….YMMV, DYODD.
Tex:
RE: your #4– Concerning 401k holders ‘getting out’, I doubt that there many, if any firms like Vanguard that offer CDs and Treasuries that their customers could jump to. So, I don’t see the 401k, 403b, etc having an effect– although, they can certainly go to cash and if they get paid a few percent, that money might be used by Vanguard, etc, to purchase treasuries- I’m not certain about that.
I smiled at your ‘ now to 100 years’ window.
Gary, a few points regarding investors “getting out” (GO):
1) Yes, many 401K plans do not offer CD or UST’s, but they all offer money market funds. Some offer shorter term bond funds. Both of those would be choices for “GO” investors.
2) For investors that use robo advisors, investors can dial back their risk level, which forces a reduction in common stocks.
3) If you are a fiduciary advisor on an account and UST 10’s get to 14.0%, what is your responsibility to the investor? Lower stock allocation, up UST/CD allocation?
4) This is what happened bigly in the 1966-1982 bear. Investors got worn down over the 16 years. I am attaching a link to the Business Week “Death of Equities” cover story.
5) This March 2025, some percentage of investors lowered their allocation to stocks by various means. Any advisor you talk to will tell you about the phone calls they received during that period.
6) BOTTOM LINE: is that I think the move away from equities would be slower next time around, but I think the gravity of say 14% UST 10’s would win out.
Link to “Death of Equities” cover story
https://www.scottoeth.com/intrinsic-value-blog/2019/8/5/the-death-of-equities-40-years-on
Tex-
Thanks – I do agree change is coming, and at my age I’d gladly opt into something like 10-14% for years.
Tex, aren’t TIPS a solution?
sorry if this has been asked and answered but I’ve been traveling
Much appreciated, Tex.
I started researching 2026 maturity baby bonds earlier this year with the objective of beating the short term Treasury/CD yield by buying the BBs below par and holding to maturity. My sole criteria is whether the company can pay off the existing note, not whether they are going to thrive in the future. So far I’ve added ATLCL OXSQZ and SWKHL to the portfolio and have been satisfied with the results. Steady income without much volatility.
This week I started a position in SuRo Capital Corp. 6% Notes (SSSSL) maturing 12/30.2026. SuRo is a San Francisco based BDC that invests in venture capital backed private companies. Their record is mixed but have been investors in startups that have become very successful. Current investments include Open AI, Plaid, Locus Robotics, and Liquid Death among others. It also has a position in the publicly traded Core Weave which has not been doing well as of late.
Because the duration on SSSSL exceeds one year I will add to this position slowly, but expect to be fully invested by year end barring a spike in short term rates. I may also consider investing in the common shares if they lower their exposure to Core Weave and/or the Core Weave situation improves.
SSSSL currently trades around $24.70 and there are seven coupon payments to maturity. My estimate of YTM is 6.85% and it goes ex-dividend again on 6/15. As always, YMMV and DYODD
OXSQZ has a partial call on 6/9
Yes…I didn’t see the notice but they segregated some shares in my account. I consider it to be a good sign they’re going to call the rest. OXSQZ still trades below par so I’ll replace the shares they take before the next ex-dividend date.
I always find it interesting to see III posters start looking at the same issue independently. I’ve been reading up on SSSSL over the weekend.
Ultimately I decided to stay off of it because I think there are some better yields out there with QDI instead of interest income.
> I may also consider investing in the common shares if they lower their exposure to Core Weave and/or the Core Weave situation improves.
But I also considered their common too. Do note that CRWV has roughly tripled since its IPO, and SSSS’s Q1 books have it at the old price.
Heard at senior swim today. Nice lady mentioned she had spoken to a person she knows who is a union supervisor at the Oakland docks.
He told her there were no ships being unloaded and none scheduled to dock either. Said there are probably 300 trucks parked on the streets around the docks.
If true, I don’t have a clue what will happen next.
> If true, I don’t have a clue what will happen next.
I don’t think it’s true.
https://www.vesselfinder.com/ports/USOAK001
Thanks O. Chongusu
Shows what gossip gets passed around. I had my doubts but didn’t know how to disprove what she was saying.
Global Times (China) on LA port:
…an average of 733 job orders was posted per shift over the past 25 shifts (about two weeks). Ordinarily, between 1,700 and 2,000 job orders are posted during a typical day shift, and between 1,100 and 1,400 are posted during a standard night shift…
https://www.globaltimes.cn/page/202506/1335661.shtml
Pool buddy said dock workers remain on call and have to show up if called. The ships still coming in could be from other destinations. I forgot I deal with freight being shipped out on Matson to Hawaii, Alaska, Guam and they would be bringing freight back in.
Looking at the list of ships due in the Janet Marie is American Flagged Ohana class owned by the Pasha group run under the Jones Act
https://en.wikipedia.org/wiki/Pasha_Hawaii#:~:text=Pasha%20Hawaii%20is%20an%20American,Pasha%2C%20IV.
Quite a drop in shipping coming into West coast ports. Thanks Fabrib
Thanks for sharing. 6 container ships for next week. Based on what I was able to find, it looks like this port gets 20-40 container ships for June, 34 for last year. So looks reasonable for previous shipments.
Just thoughts for the weekend.
I am always looking for hidden currents to see if there is a riptide that can carry a person far out to sea where you are lost. There is going to be another crash in the market someday. Sometimes something similar to before like banks but not always the same or it can be something completely different.
I read this article,
https://finance.yahoo.com/news/wall-street-hot-way-sell-121100467.html
I remember just a few years ago when we had the commercial real estate collapse and investors were looking for an exit.
https://www.reuters.com/business/finance/blackstone-limits-redemptions-69-billion-reit-2022-12-01/
Recently talk has been about Private Equity buying insurance companies to gain access to money for funding buyouts and takeovers and to place the assets purchased with the insurance companies.
Now I wonder if these P.E. managers are trying to exit their holdings to raise cash. See the recent IPO of AHL by Apollo
Note in above article it says there has been only 2 days of positive inflows of money since its inception, yet there has been 25 interval funds launched this year alone?
CRE collapse is only in the middle innings.
https://wolfstreet.com/2025/06/05/banks-getting-rid-of-bad-cre-loans-dutch-megabank-ing-dumps-one-of-the-largest-office-properties-in-san-francisco/
Nathan –
“CRE collapse is only in the middle innings.”
If you are referring to office properties and not blanketing the entire CRE sector with your arbitrary “collapse” comment, then the recovering stock prices of office REITs like BXP, SLG, VNO, KRC, etc. seem to indicate that perma-bear Wolf is (as usual) wrong again.
Wolf a perma-bear? Huh.
I don’t trust all the extend and pretend that has gone on in the CRE sector and office REITS are due for a correction. I won’t touch them. You really want to judge the stability of the commercial real estate market by the prices of the equities? Ok, good luck.
Here’s the Boston Fed study from March analyzing the effects of changes to the supplementary leverage ratio (SLR). The focus is on liquidity in the treasury market.
https://www.bostonfed.org/publications/current-policy-perspectives/2025/relaxing-dealers-risk-constraints-can-make-treasury-market-liquid.aspx
I was going to hold tight but found something not on my watchlist that seemed like a buy. The Issues from AGM.
Placed orders for a couple of the AGM preferred issues. It took some effort because of the Fido mommy syndrome. Had to break up orders into small tranches to get them placed. The G issue finally filled so I canceled the order for the F issue which never got a bite.
Re; Fidelty not executing full share trades.
I incurred a situation a few weeks ago where Fidelity would not let me SELL
all my shares in a holding at one time. I thought that was REALLY odd and just wonder if anyone here has had the same thing happen. I had to break the sell orders into much smaller lots and wait 1/2 between each sale. ( they were protecting me from getting all the $$$ I wanted at one time ? )
2nd comment. I tried to edit my comment to read 1/2 HOUR between trades.
Fidelity is very quirky if you’re trying to buy or sell illiquid issues. A pop up screen will appear and indicate you’re placing an order that exceeds the share limit. If however, you break it up into several orders and you space some time between orders, you can usually get them placed. Doesn’t mean they’ll fill.
I recently bought RJF-B. Had to break it up. Now here’s the kicker. Three of my tranches I placed after hours for next day execution. The next morning I got 2 shares of the 250 amongst those orders. The orders were above the bid and a few cents below the ask. No further bites so I tried to change my order to match the ask. No luck. Didn’t fill. Not happy with the lack of action I changed one of my orders to “market”. Usually, FIDO won’t let you do that either for illiquid issues. The dreaded pop up screen usually appears telling you market orders on illiquid securities are not allowed and to change to a limit order. In this case, unbelievably, the order took and my order filled one cent above the bid and 5 cents below the ask I just tried to execute. I quickly changed my outstanding orders to market and they all filled within a penny of each other.
Go figure!
Richard, I am a little rusty on my knowledge.. but my recollection is that Fidelity receives rebates on market orders, and these rebates are fully passed back to the customer, unlike many other brokers.
Rebates are payments made by market venues to brokers to use their venue. So, your execution at that lower price likely included a rebate as part of your “price improvement.”
Whatever it is.. Fidelity tends to have the best market order execution, especially for smaller lot trades.
This Topic Post = 3mo Term SOFR rates March 31 2025 vs June 4 wkly Avg …..
I do a daily note on the above per my hldgs of Fltrs. These ##’s are Plus the ,26bp
Week ending Mar 31 I have a wkly avg of 4.5598% ( Mar 31 10yrTsy= 4.19% )
As of June 4 I have a avg of 4.580% ( Jun 4 10yr Tsy = 4.46% )
Issues have different float tackon’s.
Any issue w/ the above ##’s , let me know.
Just a thought why the Active Fltrs continue to interest me.
Off Topic, without a doubt ……..
I’m not sure what you’re saying but I hope it’s not that the 3 mo term SOFR average price has been around 4.58%. 3 mo Term SOFR has not been as high as 4.58% since October 31, 2024 no less average around that number. Today 3 mo Term SOFR = 4.316 as per https://www.barchart.com/stocks/quotes/SOFERMM3.RT/interactive-chart Have I misunderstood what you’re saying?
My posted 3Mo Term SOFR ##’s were with the .26bp addon….. not just the SOFR #.
ie …. my 3mo Term SOFR for March 31 ( 5 day avg ) shows me a 4.2982%
the .26bp tack on ups the # .
Thanks for reply, I may well have an error re the 3Mo SOFR usage for some Preferred Floaters.
Gotcha….. Thanks for clarifying……
ATLCL
ATLANTICUS 6.125% Baby Bond DUE 11/30/26
Selling for around $23.90. Looks like a 9.8% annualized profit at redemption.
About $1.10 of the profit is capital gain. Good parking spot for 18 months.
I bought a bit more of that recently. ATLCZ is also quite interesting. More yield and a bit more duration but nothing obnoxious way out there. One can buy at par, 9.25%, and matures in 2029. I only add to either on really red days now days.
Jack-
You’ve made the assumption that ATLCL will be paid off on the due date. Seems reasonable but not 100% guaranteed. If the market thought it was w/o risk, the price would be closer to par, although traders might be more concerned about price risk. The path to par could include a price drop.
The CY at 23.90 is 6.41%, which is what you get paid while waiting for the cap gain in 17 months. There are better yield plays to consider that don’t have the benefit of the ATLCL due date.
This is not a perpetual. This Baby Bond matures in Novermber next year. The market has priced in the risk with a 9.8% YTM. Nothing is certain except death and taxes.
Re interest rates, up or down? I am reading about proposed changes to bank “supplementary leverage ratios” which may happen sooner rather than later. SLR changes would allow big banks to buy many more Treasuries by changing an arcane accounting rule. Bankers, (both TBTFs and Centrals) and politicians all think this change is a very good thing. The Treasury gets more buyers for its debt. (“… the safest asset in the country, U.S. Treasuries.” – Bessent, March 6 ) The Treasury Secretary, thinks rates could drop 0.30 to 0.70% (The Banker, April 2.) That would be quite a nice boost to rate-sensitive securities.
Above my pay grade, but from a street level civilian viewpoint, this looks like a “magic pen” fix to a small part of the expanding US deficit / debt. Nonetheless, I will be happy to take a quick bump up in prices of preferreds and utes. JMO. DYODD.
Why Scott Bessent wants to make it easier for banks to own Treasurys
https://finance.yahoo.com/news/why-scott-bessent-wants-to-make-it-easier-for-banks-to-own-treasurys-140035986.html
https://www.marketwatch.com/story/treasury-secretary-bessent-has-a-plan-to-bring-down-long-term-yields-but-will-it-work-bbe73dfe
Very interesting. Thanks for posting. I am not qualified to weigh in on what the Treasury should do. I am happy to see that Besent is looking for options to get long-term rates down.
Around election day, a talking head (generally useless) had some other useful information on US Treasuries. They claimed that only U.S. citizens pay income taxes on interest from U.S. Treasury bills. So foreigners do not only get the “safety” of the US T-bill, they get it tax free – at least as far as the US Govt is concerned. If this is true, wow are they getting a good deal. Of course, the country they live in may collect interest on foreign interest earned. But for all the huge interest payments being made the US Govt is not recapturing income taxes like they do for US Citizens. If we could recapture some of that, it would help reduce the deficit and would fit in with Trump’s America First policies. Clearly when I pay Canadian companies, the collect government does withholding and is part of their tax system.
Could it backfire? Sure, that would tend to reduce the foreign demand for US Tbills. That would mean higher interest rates. But would 5% be tolerable? An alternative, is to make US T-bills tax free for US Citizens. That would spike US demand and tend to lower interest rates. Those lower interest rates may wind up with lowering the annual interest payments and actually be good for deficit reduction. But then, do you kill the local govt tax free muni market?
Steve, Interesting. I plugged the question into Chat GPT and this is what it spit out:
No $30–60 B$/yr
(state) $4–10 B$/yr
Defer Future impact
Investor Type Holdings Interest (at 4%) Taxable? Est. Tax Rev Avoided
Foreign 7.6 T$ 304 B$
U.S. Domestic 2–3 T$ 80–120 B$
IRA & Pensions 3+ T$ 120 B$
So, “cost” to US Gov’t between $4 – $10 billion per yr to make US treasuries federally tax free (as well as state tax free as they currently are). Not sure what that would equate to in terms of lowering yields as you state. Another “cost” to be considered though is if new American citizen trillions go toward purchases of Treasuries, that would affect Equity markets also.
Good info. It seems like something like this could be viable. A spike in demand will lower rates. How much? I would think the government economists should be able to do a forecasting model. If not, I am positive the private sector could. This seems like a potentially viable way for the government to reduce spending that both parties could agree to.
Yes, it could hurt the stock market. Also, the Muni market at the state and local government level. It is an idea a talking head proposed.
Steve,
Keep in mind that most foreign owners of US treasuries would likely get a credit/deduction in their home countries for taxes paid to the US treasury on US debt – just like US taxpayers can deduct foreign taxes withheld on foreign investments. So, in those cases, the impact on foreign owners should be minimal. It would be essentially shifting tax revenue from “home” countries to the US.
Of course, foreign gov. purchasers would be paying tax to the US instead of paying themselves…
Does anyone have the symbol for the new UMB preferred?
Umbxv on FiDo OTC
Until they are listed on Nasdaq then supposedly umbfo
I’m still buying duration..
Not because I have this grand macro view.
It’s simply to lock in these great yields.
Am I completely ignorant regarding the excessive debt and political weakness?
Nope..I do think it’s possible we have spiraling interest rates. But then again, I think anything is possible.
I do know that investment professionals and the general public are horrible at predicting interest rates.. like a 55% success rate for the likes of Dalio (maybe 60% for Druck) and much worse for others.
So I happily take my super safe 5-7% yields..and higher yields but that’s more of a credit duration story..
And it doesn’t hurt that I have a 25 year 3% mortgage.
And ofc, I have other stuff too.. but 5+ yr duration makes up about 55% of my portfolio.
Maine, Duration is where the “value” seems to be so that is where I have been fishing as well. Not a lot mind you but seems like some solid income available. I’m aware of Gundlach and others predictions of shunning long term; in any environment there will be respected people making predictions, some right, most wrong. I find there is usually a market segment out of favor at any given time and that is where I plop my behind down and throw out a line. Some perhaps look past it, but bonds can also be dollar cost averaged. So in the event interest rates don’t go our way, just make sure the initial purchase and subsequent purchases were low enough to not have a problem buying that 7% AA bond that you thought was a steal at 5.5%. Sometimes it does feel like the 101st walking into Bastogne while the rest are walking away but I find these strategies to have worked well for me.
Please excuse my little contribution of nothingness to the Sandbox, but you talking about throwing out a line just reminded me of a great song called, “Paint the Town Beige” – it just feels right, sometimes doesn’t it?
I gave up the fast lane for a blacktop county road.
Just burned out on all that talk about the mother lode
I traded for a songbird and a bigger piece of sky.
When I miss the good old days I can’t imagine why.
Still I get restless and drive into town
I cruise once down Main street and turn back around.
It’s crazy but God knows I don’t act my age
Like an old desperado who paints the town beige.
Down along the river and past the swimming hole
You can find your piece of mind with just a fishin’ pole.
Robert Earl Keen
2wr, thx for this, never too old to discover music that’s just been sitting there waiting (in this case since 1993 go figure)
Could you explain duration in a bit more detail? There seems to be a lot of focus around here (III) on short maturity – myself included. I’m kind of in a “I don’t trust anything right now” mindset, so I like the idea of getting my capital back after a short time earning more than MM.
But you talk about duration at 5+ years. Are you mostly leaning into $1000 corporates, or are you also looking at BB’s and term preferreds? I probably need to change my mindset on the $1000 issues, but without liquidating a bunch of stuff, I just don’t have the purchasing power, or the timing, to get decent pricing. And without commissions, I’ve gotten so used to nibbling that I have a hard time dropping a grand (or several) at time. Mind you, I’m buying like 10, 15, 25 shares at a time because that’s my comfort level and also my cash available level.
I have a number of positions in banks that are being redeemed, and I am going to be looking for some new parking spots. I just can’t get very excited about any of it, so I just keep legging into the illiquid utilities, but I’m going to be overweight there, and frankly, I’d like more than 6 1/4.
Back to the duration question, the thinking is that locking in some funds now at a decent yield helps to protect capital, and if interest rates drop, you’ll be sitting pretty until maturity? I’m just wondering where you’re finding 7% “super safe”.
Duration reply ….. tack on from Investopedia site…..
Definition
Duration reflects how much a bond’s value is expected to move when interest rates rise or fall.
What Is Duration?
Definition
Duration reflects how much a bond’s value is expected to move when interest rates rise or fall.
What Is Duration?
Duration measures how long it takes, in years, for an investor to be repaid a bond’s price through its total cash flows. It is also used as a tool to determine the change in a bond’s value in relation to interest rate movements.
A bond’s duration is easily confused with its term or time to maturity because some duration measurements are also calculated in years. duration measures how long it takes, in years, for an investor to be repaid a bond’s price through its total cash flows. It is also used as a tool to determine the change in a bond’s value in relation to interest rate movements.
A bond’s duration is easily confused with its term or time to maturity because some duration measurements are also calculated in years.
Just to add into Jim’s reply.
Yes, one can learn what “duration” means via Google, YouTube etc. it is not a perfect measurement. But it’s the starting point for measuring investment grade fixed income risk.
Put simply, it’s the measurement of how a fixed income instrument moves in relation to interest rates. Assuming a duration of 10, it means the price will be up/down 10% for every 1% change down/up in interest rates. It is NOT maturity, but is often related to
Maturity.
Adding duration is a way to lock in these current coupons, and I am willing to accept unrealized losses over the long term.
Names with high duration: the discounted illiquid utes, TLT, 10+ year treasuries..
Names with low duration: SGOV, floaters, 5 year resets, corporate bonds that are
Likely to be called in the near term, agency mortgage backed securities with higher coupons than prevailing market rates
There is also a concept of spread duration, or DxS. If you pick individual names, and have a meaningful amount in fixed income, I urge you to learn these concepts. Basic level math is required.. Fabozzi is an author with many books on the subject , but it will one TMI except for math geeks.
Maine has the best reply for my usage of Duration in his 2nd paragraph …..
” Put simply …….. ”
Thanks
As another Add-on to Jim’s reply, here’s something to think, Mark, to get a better feel for the difference between maturity and duration. XYZ 0% note due 6/10/30 priced at 5% will have a much longer duration than XYZ 5% note due 6/10/30 priced at 5%. The duration of the 0% note also will have a duration of exactly 5 years because you get nothing back until it matures…
Yeah, I was definitely confusing “duration” with “term”.
Thanks for all the replies. Now I have even more questions. I’ll do some reading……
What is actionable regarding the US budget, annual debt, cumulative debt, “Big Beautiful Bill” etc.? There have been numerous III posts making different points regarding the above, but what seems to be missing is what actions can III’ers take? (Executive summary only.)
A few brief stipulations:
1) The debt problem is far worse than what is being discussed. Yes, the official debt is ~ $35 trillion. What is missing is the ~$ 75 trillion hole in Social Security and ~$100 trillion hole in Medicare. Both of those have been explicitly promised to Americans. So, in round numbers, we need to come up with ~$200 TRILLION TODAY to be debt free as a country.
2) 99.9% chance the country is going to “default” on one or more of the above debts. Default in this sense might men you get less SS and Medicare coverage than you were promised. And/or it might mean high inflation erodes the value of a US Dollar.
3) Unknowable exactly when or how the default occurs. Might be this year, might be in 100 years. Obviously, the default probability goes up over time.
4) ZERO precedent that any country can keep borrowing to infinity for infinite time. Odds are high that the US will not be the first.
5) Washington is NOT going to pro-actively deal with the problem. Zero chance. ALL parties.
6) III’ers and other wealthy American’s have the Willie Sutton issue: that is where the money is at. One way or the other, wealthy folks WILL be tapped to pay more. Higher taxes, wealth taxes, asset confiscation, etc. There is NO other way to generate more funds when the ability to borrow dries up. “Poor people” do NOT have the money or assets to help out.
7) “Bond vigilantes” are extinct. You can see their display at the Smithsonian next to the dinosaurs. Eventually they will make a Phoenix like rise from the ashes and FORCE the US to deal with the problem.
Actions for III’ers: (opinion section)
1) Don’t waste your time posting or talking about this with anyone. You are not going to change their mind. And guess what: Nobody in Washington cares what you think. Even if they tell you they are listening, their ability to make a significant difference is ZERO. Ask Elon how that worked out.
2) You and only you have to decide when you think the “default” will start to occur. One extreme is in 2025 long term interest rates start growing to the sky. Other extreme is we are all 6 feet under before any meaningful default starts.
3) Once you decide on what you think is the most probable outcome, you can decide what investment plan to have.
4) Investments for near term high inflation which would crush common stocks, preferreds, baby’s and nearly all bonds. TIPS, physical assets like real estate, possibly gold/silver. (You decide on digital assets/bitcoin.)
5) Investments for “we’ve got another decade or two before it hits:” continue as is, bonds, stocks, party on!
6) Investments for ultimate end game: physical assets including in other countries, gold/silver. A few common stocks. ZERO fixed income. Big supply of lead. Since the odds of this scenario increase over time, it would be more pertinent for our grandchildren’s generation.
Boston College Economics Professor Laurence Kotlikoff has written extensively for decades on this topic, including many papers and books. He has a new blog post that summarizes the situation. A long read, but worthwhile if you want to deepen your understanding.
https://larrykotlikoff.substack.com/p/fiscal-child-abuse
Well thought out and written Tex.
Ironic, I was working last year with a customer who was buying Lead to build safe rooms , “bunkers” in the Southern Calif and Las Vegas areas. If these have to be used as fallout shelters I’m not sure assets are going to matter much.
Being serious Tex you paint a pretty bleak picture.
Charles, there is another, even simpler way to characterize the situation. Today the “rating” of the US is Aa1/AA+ (Moodys/SP). The point is that the rating agencies use a single rate for all of time. Nobody thinks the US will default on treasuries in say one year. But you can find a lot of people that would not make that bet over 50 to 100 years. The rating should be lower. IMO, the 50 year rating would NOT be investment grade. I would rate it somewhere in the CCC-C range.
Same rating versus time is an issue for corporates, munis and everything else. In muni land, Chicago Schools, City of Chicago and State of Illinois should have 10 year ratings in the CCC-C range, unless a miracle occurs. The miracle would be being bailed out by the US Treasury. The schools are already junk rated @ Moody Ba1. The city is low investment rated at Baa3, so it is not a far stretch to forecast them headed to deep junk or conditional default in a decade.
MSFT bonds are AAA. I buy them a lot.
JNJ are also AAA. Why I don’t know, Apple bonds
Are AA+. These all yield over 5% when I bought them.
Tex, as Charles mentioned…. great piece for the BIG Picture… ie Govt Debt and then the tack on of the Soc Sec & Medicare.
I don’t think the chaos will begin in the near term, but it sure seems to be on the horizon. I would forward on to the four adult ( 40’s ~ 50’s ) kids …. but I fear bringing on the….” so what do I do NOW Dad ? ” question.
All the III posters keep this dinosaur being alert due to the Big Picture posts, and the investable items for now. Thanks
Good point about Chicago and Illinois issues. But the US government has many more tools at its disposal than the city of Chicago or state of Illinois does. Chicago/Illinois are constitutionally barred from imposing taxes on goods imported from Wisconsin or Indiana, for example, but Congress could decide to tax all goods crossing state lines.
Tex—-the question is always one of timing. The politicians will never suggest we bite the bullet and rein in spending. All they want is to be elected over and over again.
I can foresee the US falling into a severe recession/depression that lasts for 3,4 or 5 years All social benefits will be frozen at first and maybe reduced somewhat. Military spending will be reduced as we become an isolated country with no involvement with foreign countries. We will service the debt with a devalued dollar. The marginal tax rate will be 70-80-90%. If the extremely wealthy attempt to evade taxes, their assets will be confiscated. Basically, our standard of living will be dramatically reduced. This could easily happen. The question is when. JM2C
Please explain Japan?
Postal savings bank
Thanks for the thoughtful and more importantly actionable post, Tex.
I am late to this discussion but although I am violently in agreement with most of the points you made, I am curious why you write that “near term high inflation … would crush common stocks, preferreds, baby’s and nearly all bonds.”
If the dollar loses purchasing power quickly, certainly it would crush bonds and preferreds which are just financial instruments.
But to the extent a common stock represents an ownership claim on part of the real productive capacity of the economy, I would think that common stock would go up. Consider a miner or oil driller. The resources they extract don’t lose their inherent value in the case of high inflation, instead that real value stays more or less constant. Denominating that value in a depreciating currency should mean that shares go up with inflation. There’s a similar case to be made for manufacturers, who add real value to raw materials.
Do you see things differently?
Mike D – Great points.
Next Divi re CpN …. CititGroupCaplTrust Floater …..
Has any poster / holder seen a new declared Divi ??
Last was paid Apr 30 …. Next up should be July 30
Thanks
Has anyone seen the official notification that Wesco is calling their preferred WCCPRA? Or is there one? I haven’t seen anything other the statements that they plan to use proceeds from private issuance to pay off the preferred and the 30 day notice is past. I couldn’t find anything on their website. This has been a good one for me for 5 years.
announced over a month ago…
https://investors.wesco.com/news-releases/news-release-details/wesco-international-reports-first-quarter-2025-results
Does anyone know anyone who has or does own STT-G? I’m working with an attorney who is trying to find any holder of this preferred (past or present) to speak with them. I can’t say much about it but it involves possible significant monetary compensation for your time.
She’s a little frustrated that she hasn’t been able to find anyone. So, if you know someone, please let me know. I’ll provide you a way to contact me and then I’ll put you in touch with the law firm.
She’s a securities lawyer and this is her bio:
https://www.dilworthlaw.com/attorneys/catherine-pratsinakis/
Completely legit and as scrupulous of a securities lawyer as you’ll find. I work for her on an occasional basis as a consultant.
I am guessing for a cause of action similar to PMT-B?
I don’t think I ever owned STT-G but I found that LIBOR fallback curious too.
If you read the prospectus it is pretty clear cut to me that the previously fixed yield is what should be used going forward.
“If, following the procedure set forth in this definition of three-month LIBOR, the calculation agent is unable to determine three-month LIBOR for any Floating Rate Period, then the dividend for such Floating Rate Period shall be calculated at the dividend rate in effect for the immediately preceding dividend period.”
https://www.sec.gov/Archives/edgar/data/93751/000119312516532234/d172256d424b5.htm
Top of page S-24.
Since LIBOR is dead. You cannot call around to get it. SOFR (a replacement) is not mentioned. You follow the language of the prospectus. I am not sure how I would go about debating that but then I am not a lawyer.
This also might help STT a bit too… heh.
“The calculation agent is a wholly-owned subsidiary of State Street Corporation.”
> You follow the language of the prospectus.
Unless there’s a law that supersedes it. And there is: the LIBOR Act was explicitly passed in 2021 to deal with situations where contracts referred to the benchmark that was about to be deprecated.
There’s a lawsuit going through the courts right now about a very similar provision in PMT-B that turned a fixed-to-float preferred into a fixed forever one.
Yes exactly. She’s working on the PMT case and wants to start a new one with STT.
This should be an SEC job not a sleazy lawyer job. If they would enforce the rules to protect investors then we wouldn’t have to throw all this money to buy lawyers yachts.
Why do you think she’s sleazy? She’s literally out there trying to help us retail shareholders which apparently is a thankless job. Anyone working to protect the integrity of the preferred share market should be thanked. There aren’t many people doing that.
There are many reasons why the SEC isn’t getting involved here. Among other reasons, there”s no clear and obvious violation of law. The PMT case is currently in federal appeals court. While it may seem like an obvious violation to us, it’s not. It takes the hard work and dedication from lawyers like her to bring companies like that to justice and defend the rights of shareholders.
Good luck thinking the government is going to save you from every injustice. That’s not how it works. The only thing that’s going to save us is all of us working together. Instead of fighting the people trying to help us, let’s help them.
I own 700 plus shares in various accounts.
Suncity,
Thanks for replying. Could you email me at uv.redskinsfan@gmail.com
I will explain over email. She’s the attorney handling the PMT case and she’s interested in opening a case to help STT-G holders as well.
I work for her as a consultant because while she’s an expert in the law, I know a lot more about preferred stocks and how to reach people in the preferred stock community.
Think of this as something that’s not just about helping yourself. We need to keep these issuers held accountable to make sure there is a level playing field and they are not taking advantage of us retail shareholders. It will help the integrity of the entire preferred stock market to make sure that we are not cheated out of our rights.
I believe she win will. In 2016 when this prospectus was issued it was well understood that LIBOR would be replaced. It was with SOFR. Trying to play a game that says LIBOR was replaced, so we get to stay fixed rate is bait and switch. In my business law classes from 40 years ago, this would be called a bad faith agreement. I cannot help I did now own this issue.
If she wants to taken on MS-F, that did something similar, I can help
Thanks, Steve. I talked to her about the MS case and thought there was less of a case there because the preferred stock price didn’t go down when they announced the fixed rate. That makes it hard to prove harm. But if the precedent gets set with the PMT case (currently in federal appeals court), it will be easier to prove the other cases and we may circle back to MS. I’ll mention it to her again anyway.
Questions for the group for anyone that has switched from Schwab StreetSmart Edge to Think or Swim:
Do you find the Active Trader Desktop version of ToS better than the web version? Which one do you primarily use?
I am being forced to switch from SSE in the next few weeks. So far, by running the “Paper Money” version of ToS, I find SSE to be a far superior trading platform than ToS.
ToS can’t even get the dividend amounts, yields, etc. correct for preferred stocks when I try and setup watchlists. It looks like ToS is trying to mimic a Bloomberg Terminal, and that is never going to really work?
Thanks in advance for any feedback!
As of June 2, i started my transfer to TOS from SSE.
Very difficult set up for me. I recently found the Divi $ Amt / Divi Yld columns unfindable for my Watch List input column. If so, a problem for me, being focused on good divi commons and preferreds.
The TOS must be better, yet I would suspect that product came along with the purchase of the other broker firm. For me, I could care less about options and futures high powered trading, yet the printed promo seems to feature that. Been with Schwab for decades, so I will have to relearn.
I have heard the web version is more simplistic and easier to learn then the desktop version ….long time SSE user that is forced sometime this month to go over to ToS platform bc they bought someone and have to justify purchase imho…it’s like learning a new language…not happy about it and if in a few weeks it’s not intuitive or works for me then I will go search and learn a whole other platform somewhere else taking my $$$ with me!
Chappy and Jim –
Much appreciate the feedback. My understanding is that Schwab won’t let you “test run” the Web version of ToS without shutting down your StreetSmart Edge account. You can run the “Live Trading” and “Paper Money” desktop versions of ToS while you still run SSE.
I find the ToS desktop version very difficult on my eyesite. My eyes have been sore after the last few trading days while I run ToS. Schwab must think we are all Wall Street traders with 6 or 8 computer screens running multiple charts, gadgets, and trading every 5 minutes. That seems to be the best environment for ToS desktop.
But I can’t move more of my accounts to Fidelity given their nanny state status on income securities. Already have a traditional and Roth IRA there. But Fidelity’s Active Trader Desktop platform is MUCH easier to navigate than ToS.
So I’m stuck with this awful ToS for now. Will take a hard look at Interactive Brokers.
FWIW : SGOV was 6.865% higher on interest May to June 2
That is impressive. Will be shifting some (not all) from CLIP and USFR.
Gary,
June 2 div was vor 32 days vs 30 days for May 1 Div. 32/32=1.066
So same
TOM-
Thx- but, CLIP uses the same time frame 6/2 ex and kept the same div.
Moved a bunch of USFR that I had some profit in to SGOV. Not expecting to get rich
this is a heads up for anybody who has not looked at the prospectus for LANDM. it’s redemption is not guaranteed on January 1, 2026. I was looking at the prospectus for LANDM and noticed this clause in their section on dividends and redemption:
….”In addition, 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.”
Mentioned as well in the CC……… They are considering all options but apparently have the funding in place to redeem, but they do leave the window open. I’ve owned LANDM for a long time and remember thinking at the time the 8% was so punitive that I could consider these as 2026 maturity. How times change…. Still right now LANDM would be worth more if they didn’t redeem…