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.
4,713 thoughts on “Sandbox Page”
Posted on Sandbox 2/12/23
Buy UTE preferreds or commons? Alpha and Grid are kicking around which UTE preferreds are attractive right now. We can stipulate that the risk of halted dividend payments is very low for traditional UTE preferred’s, PCG being the exception to that. Certainly in the same league as PSA for example. But that prompts a question: Are you better off buying a UTE preferred or the underlying common? “Good” commons have the advantage over preferreds because they can grow the dividend over time, versus a preferred fixed payment.
My database show 65 preferreds with 17 different underlying commons. If you are in “income” investor, do commons or preferreds give you higher income? I went back to 1/3/2017 a few years before Covid started. Assuming you bought the common then, what would today’s dividend yield be based on those shares? I used the full year 2017 dividends and used the last reported 2022/2023 one to assume what the full year 2023 dividend will be. The results:
Ticker, annualized dividend growth rate, yield on 1/13/2017 cost, comment
ETR, 3.41%, 5.87%
WEC, 6.99%, 5.33%
DUK, 2.38%, 5.17%
NGG, -15.1%, 4.96% British based, ADR
VIA, 0%, 4.92% Non-traditional, renewables
ES, 6.03%, 4.9%
AEE, 5.97%, 4.81%
CMS, 6.59%, 4.7%
AGR, 0.29%, 4.62%
SRE, 5.67%, 4.53%
NI, 6.12%, 4.51%
SR, 5.07%, 4.48%
HE, 2.52%, 4.38%
PNM, 7.17%, 4.32%
EIX, 4.77%, 4.11%
UGI, 6.44%, 3.14%
PCG, -90.7%, 0% Bankrupt due to fires
Alpha and Grid have specifically been discussing CNTHO and CNTHP, whose parent is Eversource Energy (ES). EV has grown its common dividend at 6.03% compounded annually, which means that a share bought on 1/3/2017 would be yielding 4.9% today. Compare that to CNTHO/CNTHP which have current yields = 5.44%/6.17%. So you would still be ahead yield wise on the preferreds, but if ES can continue to grow its common dividend, in time it will yield more and eventually grow well beyond the preferreds dividend yield.
Since we are talking about “income”, total returns are secondary. But in this case, it is no competition. Total return from 1/3/17 through 2/10/23
This argument for commons is particularly important for younger investors, say under 40 years old. I would argue those investors should strongly favor commons over preferreds. The question is what age if any should investors favor preferreds over commons? And this is a question that go beyond UTES..
Tex….An interesting comparison and some good, seldom discussed points have been raised. A few things I might add: When the current yield on the common at your original basis catches up to the yield of the preferred, your total income received has yet to catch up because of all the catch up years where your income was lower. In addition, if the extra initial income is free cash flow that is reinvested, the compounding effect for the larger preferred dividend further delays the catch up date. All that being said, with a fiat currency, over time, as more money is printed, asset prices, and dividends as a percentage of asset prices, corp. cash flows, etc. being a second derivative, tend to rise along with the money printing.
Just my opinion only, but I dont think anyone has stated preferreds outperform common stocks. In fact that is why I trade a lot to get more equity like returns. I totally agree with Tex why a young person would really need preferreds when investing for retirement. Index, contribute ongoing and forget. Studies consistently show that.
Personally I love utility preferreds (relative entry price point always matters though)but not a fan of utility commons. Actually I am a bigger fan of the subsidiary preferreds. Many get confused on this but the operating company and the hold co that one buys the common stock from are not the same.
Many operating sub utes are mandated by regulators to have IG credit. The holding companies are not and regulators dont regulate hold co credit. They just worry about the financial health of the subsidiary that the preferreds come from. They generally only worry about their health when a hold co wants to acquire a ute. As they dont want a weakling endangering their local ute.
As far as dividends go many utes (the hold cos) have had to cut their dividends. There are all sorts of non utes with safer common stock dividends. Take a look at ute hold co Ameren. They just raised their common stock div over 6.5% three days ago. Exciting huh? Yes, the dividend is finally now all the way up to where it was in 2009 before it got whacked. Hold Co divis arent nearly as safe as the legacy subsidary ute preferreds. But they certainly cant grow though unlike common as Tex already mentioned.
Each individual should pick their own personal poison as it is all about what one is wanting to accomplish goal wise.
What, if anything, is preventing the remaining ute sub preferreds from going to expert market like SLMNP?
Because the holding companies segregate out the financials of their subsidiaries. Example…Ameren…It’s basically 2 entities, Ameren Mo and Ameren Ill. Their financials are reported so the subsidiary preferreds are OTC pink eligible under the “piggy back” guidelines.
730, Im home to give you a further example with a link…Ameren MO is a subsidary of Ameren and Ameren owns all the common stock. However, its original name is Union Electric was the original company and unknown to most, they still SEC file under the Union Electric name. Notice the ticker names of all the OTC Union Electric preferreds under the filing.
Got it, thanks.
I can see Ameren provides separate financial statements for Union Electric and Ameren Illinois
And Eversource provides separate financial statements for CL&P and NSTAR
So all of those should be safe from Expert Market. Not sure if there are any other Ute Sub preferreds still out there
Actually there are still several but some trade on the big board like PCG and SCE preferreds. Those are subsidiary preferreds. CMS-B (not CMS-C which is a hold co preferred) is also on big board. Subsidiary Public Service New Mexico has an OTC and Southern Gas is a subsidiary that has a couple OTC issues. This is just from memory and there a few more, but there arent a lot and most are not real attractive yield wise now. Oh also all the CLP issues are subsidiary too.
Grid, you make good points. There are other perspectives though. A pre-2009 AEE holder experienced a significant drop in both common share price and dividend but now has a gain of at least 45% (from best I can tell). On the other hand, some post-2009 AEE buyers could now have as much as a 400% gain and benefitted from dividend grow as well. So you are right: entry point matters, and it is equally applicable to common.
One last point is that Tex’ data did not include some utes that are solid (IMO) as they do not have preferreds.
Tex, as always, thank you!
Best regards, (no number)
Market Index funds clearly provide superior returns over time, though valuation/entry as is important.
Holding an index and adding systematically when it is trading at or below it’s mean multiple or periodic trading range will provide above average returns with very little effort.
alpha: ran across this, this afternoon give me a couple example tickers to backtest , thanks in advance mike
VTSAX is one of the biggest and best.
Sailor & Alpha, back tested that vanquard against a couple of etf index fund of mine, back to 2011 FDL & SCHD very similar annualized returns but I’m going for highest qualified dividends as appose to growth thanks both of you.
Mike, Like retired Sailor indicated VTSAX is a good one, though just head over to Vanguard and you’ll get the whole list.
For back testing though. Can be done simply.. pick up a chart of any, longer the time frame the better. Pick your favorite entry spots on the chart. Maybe like ten of them. What do they all have in common? Trading below the recent average. That’s all you need. “Recent average” I would specify over months and years.
Los of other bennies using an index but GF (wife) staring at me on my phone in Lahaina.
Alpha, you probably have already been there this trip, but if not, it is about the best investment you can make. You might have to drop Grid’s name to get a reservation though. . .
Mama’s Fish House
Tex, Thank you Tex! Tried last week…they’re booked literally for months!
Tex, 3 to 6 months reservation in advance? Wow… I have no pull anywhere and certainly not in Hawaii. I doubt I ever go to Hawaii as I couldn’t sit in a plane that long. St. John is about all I can tolerate.
Grid, make it a golf junket and add a trip to Mama’s! Maui has a gazillion courses to play. You can take a G5(Gulfstream) non-stop there, so you don’t have to change planes in California.
Mama’s claim to fame is that the local fishermen catch them in the morning and you are eating them that night. Hard to find that many varieties of freshly caught ocean fish this side of the Tokyo fish market.
Gotta add it to the bucket list. . .
ENBA and EBBGF – What to expect???? Any opinions on whether or not the following comments from the CFO in ENB’s Quarterly CC might be signaling their thinking on the upcoming call or don;t call decisions to be made on ENBA and EBBGF in particular? Decision on ENBA would have to be made by approx 3/15 in order to call before it begins to float BUT it then becomes continuously callable I believe. Decision on EBBGF is a once every 5 years shot and that will have to be made on approx May 1. Could this comment be implying they’re weighing issuing 5-10 year paper to take out the perpetual note ENBA and/or perpetual preferred EBBGF when they can?
From ENBRIDGE Quarterly Conference Call – response to analyst, Jeremy Tonet from JP Morgan:
“But Vern, do you want to speak to the floating rate debt issue?”
“Okay. Thanks, Greg. Jeremy, as you know, we run our debt book with percentage of floating rate debt in each and every year. And over the long run, we create shareholder value by having some floating rate debt out there. Our target is to run between 10% to 20% of the book and floating rates. And as you’ve seen, obviously, interest rates go up, we’ve gone to the shorter or the smaller end of the target range. We’re highly hedged on new issuances as well. So there is obviously some interest rate exposure, but we will carefully manage that. And I think you’re right, there is some value in the shape of the curve right now, and that will be part of how we manage our debt portfolio as we go forward because, obviously, in today’s market, a 5 or 10-year bond is actually cheaper than floating rate debt. So you raised a good point.”
I’m also watching ET prefs. They issued 5.5-5.75% bonds in Dec, and now have nice, growing DCF running through the pipes. Mgt has stated they want to reduce debt ratios, and why not get rid of these 2023 prefs that are going to reset near 8%? I’m tempted to accumulate more prefs and might even take some common as a bet.
Has EBBGF fallen (or due to fall) into the illiquid category. I thought I read that someone had difficulty selling these issues (IRC, it was through Vanguard)? I have been trying to research this concern further. Thanks all!
Hi, I added to my tax free municipal bond deep stack portfolio:
Bucks County, Pennsylvania Water & Sewer Revenue 3.5% coupon due 12/1/41 @ $89.83 YTW/YTM 4.285%, YTSink 4.39%, YT Par Call 5.942% Rated S&P AA AGMC Insured. PLEASE do your own deep due diligence as this tax free municipal bond is one of over 100+ individual municipal bonds I own and may or may not be right for your risk tolerance, time frame, risk/reward, volatility etc etc etc Have a great and memorable weekend, Azure
I’ve been investing and trading for 30+ years but I’ve never purchased treasuries so a noob question:
2.766 (Current Yield)
11-30-18 (First Coupon)
4.614 (Yield to Maturity)
How does this minor discount plus a coupon of 2.75 result in a YTM of 4.614?
Would also appreciate a web site recommendation that would get me up to speed on this.
It adds capital gain that you get at the maturity since you are purchasing below par(100). It will apportion that capital gain according to the time left to maturity. I use yield to maturity calculator https://www.financeformulas.net/Yield_to_Maturity.html It also has explanation
I assume you have very short time to maturity
What’s the maturity on your Treas example? tough to figure YTM with knowing the M.
It’s a pretty broad question regarding what you might be looking for in the way of a website that could help you get up to speed, but depending on your starting point, you might try https://www.fidelity.com/learning-center/investment-products/fixed-income-bonds/bond-prices-rates-yields.
Yep, I left the maturity out. It’s 05-31-2023
OK, knowing all the details including the maturity, the results you have can be confirmed DEPENDING upon the date you’re using for settlement… And BTW, this is not a Treasury specific question you’re asking, it’s a bond calculation one…
In this case, because the maturity is so short, just the slightest discount to par will impact your calculated YTM most dramatically. When you think about it, that’s pretty logical. That’s why you can have such a large difference between current yield and YTM in your example… Make sense? Don’t forget, YTM in the case of a bond shorter than a year in maturity will be presented on an annualized basis…
As you probably know this is frequently discussed here. I would disagree with vah regarding the best calculator to use because in his type calculator you estimate dates in number of days/months/time to maturity etc. IMHO the two most accurate calculators are Fidelity’s at https://digital.fidelity.com/prgw/digital/priceyieldcalc/ or one recommended by Alpha, at https://quantwolf.com/calculators/bondyieldcalc.html In these you put in the exact info for your bond, including the exact maturity date. In most cases you’ll come up with the same answer, but it’s up to you to be sure you put in the exact details… Also in the case of Fidelity’s calculator at least, it gives you the ability to also calculate yield to call provided you enter that info…. There are different nuances to learn on both for absolute accuracy, but that’s the skinny… Also if you’re using Fidelity’s if you see at the top where it says, “Learn More about this calculator,” that will lead you to more potential info to “help you get up to speed on this…” hope this helps. Try putting your give info into one of these two calculators and see if you can verify what you have… Make sure you have the settlement date match what you originally had.. you should be able to duplicate the YTM you’ve shown and that should give you some greater confidence going forward..
2whiteroses – thanks for the detailed information about this calculation. I couldn’t get to this until today and because it’s Saturday, Ameritrade isn’t providing Treasury quotes so I don’t have the exact settlement date or the mark-up inputs required by the Fidelity calculator. Despite that, its output was within 2 basis point of AMTD’s quote data and that’s close enough for me. As for calculator nuances, they’re above my pay grade. I just want to be in the ballpark, not pitching the game :->)
Also, my thanks to vah for providing the other calculator link.
I had the official offer to tender KTBA for $19 show up in my inbox at Fidelity today.
The odd thing is that they are valued at $18.20 on the “expert” market so even a tender offer doesn’t really affect the price any there. In fact, the price has gone down since the offer.
Either way, I don’t think people will be lining up at the door to tender their shares at that price.
I bought a new 3-year CD in November at 4.95%. It is being called next week. That sucks! I hope that is not a sign of things to come. All these great rates on CDs and new bonds may be short lived.
My fear also is that the good times of higher interest rates for reasonably safe investments may be short lived. That’s why I bought GDVprK. 4.25% coupon but at current $20 price point, that’s actually closer to 5.3% . Not callable before 10/2026. And with that unremarkable coupon, maybe they won’t bother. Investment grade and not sure offhand but I think it’s cumulative and qualified.
My thoughts exactly.
EAI / ELC
I caught the lows last year when they were loser to 6%- ish.
Better lucky than good. I missed the dip in the CTA issues, still a sock drawer issue to me but Merrill Edge is funky with the bid ask prices one these.
Even now at 5 1/2% ish IG to me is still an ok deal if these are never called.
CD gets called there is no capital gain, so this is a fun game we play.
I could lock up a 5 year non-call for 3.8% and be happy because after next year, who knows. Maybe 1 year at 2.5% ??
When rates retreat, my evil twin starts chasing yield, I need to lock that guy away somehow.
Nick, you’re right, I forgot to mention that point about GDVprK. If they do decide to call it, one gets a 25% capital gain as a consolation prize. And there’s no penalty if one decides to sell.
Every time a Fed big mouth speaks the market goes nuts.
Why? What did we think they were going to say?
It’s the same “ We have more work to dooda dooda”
My MM yields 4.17% so keep yakking you cutthroats.
Right or wrong, I dont like to buy callable CDs or those agency notes, because of the asymmetric risk. I get that already with perpetual preferreds. There are a lot of noncallable or make whole bonds out there for me. The CDs one generally has to take a few bps lower to get the call protection. Oops, I forgot I did buy one callable CD a few months ago. Its like a 12 year one at 5.25% that can be redeemed after first year.
Grrrrrrrrrrrr – Here’s another one – This one was offered on 11/10/22.
Description: FEDERAL FARM CR BKS BOND 6.30000% 11/15/2029
Maturity Date: 2029-11-15
Quantity: 10.00 (Quantity equals the number of bonds. 1 bond equals $1,000 in face value.)
Redemption Price: 100.00
That’ll probably mean 3133ENX21 FEDERAL FARM CR BKS BOND 6.44000% 11/01/2032 issued 10/25/22 can be considered a goner as well ASAP when it becomes callable on 5/1/23
Call Date: 2023-02-15
2RR these fall under SEC rule 144a How would you have bought these ?
Charles – Fidelity announced them as being available for purchase as new issues when they came out.
2WR, does this look familiar?
We could solve all of the YTM debates if we used one. . .
Ha! I do remember the Monroe computer and also the Wang computer as well…. https://history-computer.com/wang-2200-guide/ Oddly I don’t actually remember using either one… But everyone either had “a Monroe,” or “a Wang.” Heck I go so far back that I remember using an actual book of some sort and having to go that book as a starting point to then interpolate in between the printed numbers to get to a semi-accurate number for yield on what you were working on… Wish I could remember what they called that book.. That would have been late 60’s early 70’s or so. Also remember getting soooooooooo excited when hand held yield calculators first came into being… I still own a Texas Instruments Fixed Income Securities calculator sponsored by the Securities Industry Association. I had to lobby my company hard to get that, but now I haven’t a clue how to even use it… lol
2WR, we can get you a backup TI for $20. . .
And that one doesn’t even come with the 220 page Guidebook which I have… I bet I could get a fortune for that! Copyright 1989…. Hmmmm, I just checked to get a bead on just how old and out of date this may be – not a single mention of IRR in the Table of Contents or the Index….. lol Should a chapter titled “The Time Value Of Money Worksheet” count?
2WR, I am beyond impressed that you could not only find the calculator but also the manual! Are your sure you have not been using it when schooling us on the REAL YTM’s?
hahahaha 2wr. IRR pages came in the corporate finance addendum. It required a password and secret handshake to acquire and you had to look around to make sure you weren’t followed. you made me lol with this post.
not related, but related…ever read on Jim Simons and Renaissance Technology? IIRC only hired people with no finance background, 2/3 had math PHDs, 66%/yr, 30 yrs and doubt they had a Monroe or Wang. I’d have swept the floors to a job there less for the $ than for the fun of being part of that team.
ha, yes that would have been fun to have worked for Renaissance. They’re in East Setauket, LI, one town over from where I grew up and where I got married, so I’ve known about him for some time. Renaissance was so under the radar in the area for so long, I had to look up where it was actually physically located…not flashy in any way.. His association and background at U Stony Brook prior to forming Renaissance was more known than his location…. lol
A great book written about Jim Simons and RenTech. Jim and RenTech are very secretive and Greg Zuckerman did a great job pulling together their story.
An interesting character to say the least. . .
He does have a nice little house in East Setauket…. Zoom out a little bit to get a grasp on its great location https://virtualglobetrotting.com/map/james-simonss-house/view/google/. If you zoom out enough, you’ll see “Pirate’s Cove” in Port Jefferson to the east. We lived in a house in that area before leaving LI. It did not rival Simon’s…
2wh thanks for that link. Next time I’m fishing around Old Field Point I’ll see if I can see his house. I’ve been to his park, Avalon Park, many times and appreciate that contribution to the local community.
I believe James Simons made his billions doing something closer to day trading then income investing.
If anyone is interested in this sort of thing: NLYprG goes from fixed (6.5%) to float (3month LIBOR + 4.1%) on March 31st. That’s about 9%. Of course, they could call it but at ~$24 currently, that wouldn’t be a bad outcome either. I already have a full position so I’m just an interested observer with skin in the game. And it’s cumulative in case they decide to skip it completely.
NLY-I has a higher floating rate. 15 months later it’s better than NLY-G and I expect it will be priced better if not called. I have a small position, both pay a little less than other REIT preferreds that might be just as good.
Alpha it just popped up to 58.75 like I said so many people chasing yields
Vinny, saw this coming a while back, GDV-k is qualified and my largest equity holding in taxable account, and PSA-j largest in my roth because its ordinary income, both shouldn’t be called but “great cap gain” if ever.
Cripes, I bet that evokes a lot of memories. It must have seemed like hot sh*t when it first appeared on desks
Speaking of dinosaurs, in the 1970s my first computer was a Commodore 64, hooked up to my B&W TV and a cassette tape for saving my amateur attempts at data crunching. I would input the closing prices of the Fidelity Select funds and it would calculate the 1, 2, and 4 week ROC and other basic output. I had graph paper taped to the wall of my bedroom and I would plot the numbers every night. How the world changed in a mere few years…
Another forced sale. Not much not to like about PLDGP though retired the entire position back to the market over the last week, last few shares out today at $57.50.
Sports an attractive 8.54% coupon and Baa1/BBB+ rating though the recent price run-up against the 11.13.2026 maturity pushed the YTM into the 4.10%ish area. Trying to build and maintain the income stream but has become too low a YTM even for this conservative buy and holder.
geez. No joke. I just sold my shares at 58.75. They did not sit there at all and instantly sold. Thanks for the tip. It makes very little sense to be paying that much.
Are you saying the high price is ‘forcing’ you to sell, or is there something about the company or the issue that is forcing you to sell??
I think what Alpha meant was (and he can answer himself).. but lets say you paid 54.75 bucks per share a few months ago. It is callable in 2026. So that is 4.27 + 4.27 + 3.20 that could be paid as dividends when it will most likely get called. When called you immediately lose 4.75 as you only get paid 50. That knocks off a full year of dividends and some change. So holding for the next 3 years you can only really count on approx 7 dollars of dividends. So calculate that out for 3 years. What the average yield is. YTM. It is pretty low.
You could just sell it now for 58.75 and by a perpetual preferred paying 5% and come out ahead.
Basic math for trying to create an income stream says sell it. Now everyone is different with different goals but one can easily find an A rated preferred paying more then 5% and over time you will have more income.
That is how Alpha seems to operate. It is also why I sold this preferred that I just bought a short while ago. I got paid one quarterly div and now I am out with a nice cap gain as well.
fc, Yes many ways to approach it. My lane might be boring, laser-focused on increasing income stream with the highest quality issues available. Being “forced” out of some issues though because the YTM is just too low as Charles M pointed out lot of $$ chasing yield right now.
Related, we’re still nicking off sub-100 share buys of high IG, QDI issues with 5.50%+ current yields at prices substantially under redemption price. (picked up high IG, QDI small buys yesterday and today at 5.50%+). Requires patience, but these little buys are accretive over time and bring the reward of much better positioning as you mentioned. Due to their <100 share size, many of these trades occur “invisibly” between bid and ask book-ends and don’t immediately change the “last” price.
Because the market has tightened, also paying closer attention to accrued dividends, making some buys more appealing than the price would dictate. On high IG, QDI issues trying to hold the line at 5.5% yield (translates to taxable equivalent well over 6%) and that is more doable when factoring in an approaching dividend and when you know the correct ex-date 🙂. Applying this has broadened the market just a bit on the buy side.
Gary, fc nailed it. The 11.13.26 redemption price of $50.00 is $7.70 less than fc’s sell today at $57.70. Therefore, your dividends going-forward are dwindled by the $7.70 cap loss at redemption. Total remaining dividends of *$16.52 – $7.70 cap loss leaves you with a 4.10% YTM (for you 2wr lol).
Love PLDGP, but like fc we had around a $57.70 average sell price and were sitting on a substantial cap gain in a tax-deferred account. Carrying forward that 4.10% YTM to a 2026 didn’t make sense given today’s alternatives.
*$16.52: Divvies of $1.0675 for 15 quarters plus approx .51 adjustment at redemption.
alpha & fc-
I appreciate the elucidation- nothing wrong, just time to take a profit.
Good reminder for me- as I am up $3.16 as of close.
Perhaps you don’t see the price increasing?
On the third hand, as they say, the price has been over $69 in the last year, and is trending up. I think I can hold for now to see what develops- as long as there is no trouble on the horizon.
Gary, several years ago PLDGP was trading at a yield to maturity of ~ 1.0%. Several of us posted this YTM at the the time and suggested holders consider selling it. We held it in many accounts and sold it out of all of them. It was irrational exuberance at the time with people buying it based on its high current yield without without regard to its YTM. It is impossible to say if it will become irrationally exuberant again, but I agree with Alpha’s approach to sell it @ ~ 4.1% YTM. We have not held it since we sold the last group @ 89.99 on 8/10/20.
Do not own it or have any buy/sell orders in any account.
Tex, I have traded it often, and agree its a likely goner being it was an old legacy preferred and Prologis doesnt use preferreds for their cap stack. But that being said, this is a perpetual preferred and just reaches first call status come 2026. Quantum shows as a maturity date, its flat wrong. That being said it might as well be called YTM even though its a perpetual.
I don’t think in our current environment this has much room to run higher unless the company is the one doing the buying. Paying 58.75 for a share of this knowing there is a high probability you will lose 8.75 in approx 3 years will eventually become a weight around this preferred’s neck. As time goes on it has a better shot at 50 then 63.
Interesting article that touches on the job number last week, inflation, etc.
Somebody is dumping CUBI-E if you want to stack some dimes.
I like dimes, Martin. I had a lot of F but dumped them probably almost 2 months ago in 25.40s knowing it would be a dead money hold until divi. So I bought the E under 25.40 here, and still clip the almost 62 cent divi. I dont really want anything to do with this bank, but dangle ~ 10% and I mustered up a bit of interest again.
Hey there, anyone here have any thoughts on the old Teekay Shipping LNG Partners preferreds https://www.quantumonline.com/search.cfm?tickersymbol=SEAL-A&sopt=symbol Was taken private and the preferreds still trade nicely Seapeak LLC., 9.00% Series A Cumulative Redeem Perp Preferred Units Symbol: SEAL-A CUSIP: Y8564M113 Exchange: NYSE
I have held these since the IPO in 2016 and am having trouble getting any information (may be a good thing). Anyone else here hold this security?
I also hold the Seal-A, with no plans to sell or buy more. From what I have read in the WSJ, the LNG trade seems to be doing quite well with steady demand from Europe and Japan, and plans for more LNG terminals. My best guess is that they will call it in a few years if interest rates drop and they can refinance at a good rate.
Thank you for your reply coaster, this preferred has been callable since 10/5/21 and I figured they would definitely call it when rates were much lower this time last year. Sometimes it is good when things go dark and you don’t over analyze the financials, but I usually want to know the company/LLC/REIT is at least profitable and not taking on an inordinate amount of debt or liability. A few of us here own delisted Phoenix 7.45% debt paying quarterly due 1/15/32 https://www.quantumonline.com/search.cfm?tickersymbol=TEMP55&sopt=symbol and I keep buying this issue when I can as I believe the insurance company is strong and has a good amount of liquid and decent assets base… PLEASE anyone reading this do your own due diligence as these securities are right for my portfolio and may or may not fit for you 🥇💎🥈
AB, I own it and took a quick look before I bought it. The company that took it private does investments with I believe the Canadian employee retirement fund. To leave the preferred outstanding gives the fund if they own the preferred good income. Be interesting to see if we could find out who are the biggest holders of the preferred.
@Azureblue, @Coaster, @CharlesM – you guys know that Seapeak LLC (the company that now owns the ex-TGP / Teekay LNG preferred shares) discloses its financials with the SEC, right?
(Azureblue’s statement “Sometimes it is good when things go dark and you don’t over analyze the financials …” is why I asked.)
“We are committed to good corporate governance as a key to maintaining the trust of our investors. Although Seapeak LLC is a foreign private issuer, the Company has voluntarily chosen to comply in all material respects with the New York Stock Exchange (NYSE) domestic corporate governance listing standards.”
See https://www.seapeak.com/who-we-are/ , which has a link to their governance page https://www.seapeak.com/who-we-are/governance/ which in turn has a link to its “Corporate Filings” on Edgar https://www.sec.gov/edgar/browse/?CIK=1308106&owner=exclude .
Simply FWIW in case you weren’t aware. The preferred share ETF PFF owns a pretty good slug of each – see https://www.ishares.com/us/products/239826/ishares-us-preferred-stock-etf and filter by the old symbol, TGP.
OUTSTANDING, thank you for letting us know ⭐️
TECTP on sale this am. callable 5/15/24 YTC just over 7%
TECTP Looks like over 8% to me.
Longest dated 5 year CD that i could find with yield over 4% . Cusip 40434AC31 YTM yield 4.22 % ( Current yield 3.35% at $94.15 paying monthly ) . It’s callable starting 11/23 , but it will increase YTM to 11.3% if called . There are only few available . No Bond risk
McChicken Preferred(Baby/term) rule. Our friend Justin had an outstanding statement of what should be a fundamental rule of preferreds to avoid, or at least study carefully. Kind of like a fourth Newton’s law of motion. He stated the rule in regard to CORR suspending payouts on CORR-A. The rule has two parts for issues for issues to avoid:
1) Common price less than a McDonalds McChicken sandwich. Current price in Manhattan is $4.49 without tax and without DoorDash, so I rounded it up to $5.00.
2) Preferred price >= 5X the common price.
Results from issues that ARE still paying out, excludes convertibles:
Preferred ticker, preferred price, common ticker, common price, ratio of preferred to common
Sorted from highest to lowest ratio of preferred/common
QRTEP, 50.84, QRTEA, 2.51, 20.3
CCLDP, 27.52, CCLD, 3.42, 8
POWWP, 25.8, POWW, 2.31, 11.2
DSX-B, 25.41, DSX, 4.21, 6
CCLDO, 25, CCLD, 3.42, 7.3
SB-D, 24.83, SB, 3.25, 7.6
OXSQL, 24.82, OXSQ, 3.66, 6.8
DLNG-B, 24.75, DLNG, 3.01, 8.2
SB-C, 24.75, SB, 3.25, 7.6
SCCB, 24.51, SACH, 3.89, 6.3
SCCC, 24.25, SACH, 3.89, 6.2
OXSQZ, 24.15, OXSQ, 3.66, 6.6
MDRRP, 24.13, MDRR, 0.97, 25
AIC, 24.11, AAIC, 3.02, 8
SACC, 24, SACH, 3.89, 6.2
CNFRL, 23.71, CNFR, 1.72, 13.8
SSSSL, 23.43, SSSS, 4.02, 5.8
DLNG-A, 23.17, DLNG, 3.01, 7.7
GGN-B, 23.15, GGN, 3.78, 6.1
AAIN, 23.1, AAIC, 3.02, 7.6
AAIC-C, 22.75, AAIC, 3.02, 7.5
NYMTM, 22.48, NYMT, 3.06, 7.3
FGFPP, 22.44, FGF, 2.94, 7.6
NCV-A, 22.42, NCV, 4.08, 5.5
SCCG, 22.35, SACH, 3.89, 5.7
OXSQG, 22.24, OXSQ, 3.66, 6.1
NCZ-A, 22.18, NCZ, 3.36, 6.6
SCCF, 21.99, SACH, 3.89, 5.7
SCCD, 21.92, SACH, 3.89, 5.6
SACH-A, 21.9, SACH, 3.89, 5.6
PRE-J, 21.75, PRE, 1.55, 14
SCCE, 21.68, SACH, 3.89, 5.6
NYMTN, 21.55, NYMT, 3.06, 7
SQFTP, 21.3, SQFT, 1.19, 17.9
LFT-A, 20.24, LFT, 2.32, 8.7
FBIOP, 19.8, FBIO, 0.84, 23.7
GEGGL, 19.51, GEG, 2.08, 9.4
AAIC-B, 19.5, AAIC, 3.02, 6.5
NYMTL, 19.46, NYMT, 3.06, 6.4
MHNC, 19.1, MHLD, 2.56, 7.5
NYMTZ, 18.78, NYMT, 3.06, 6.1
SNCRL, 18.44, SNCR, 0.97, 18.9
TELZ, 17.85, TELL, 2.06, 8.7
AUVIP, 17.51, AUVI, 1.33, 13.2
MHLA, 17.15, MHLD, 2.56, 6.7
CDR-B, 15.9, WHLR, 1.74, 9.1
QVCC, 15.73, QRTEA, 2.51, 6.3
QVCD, 15.7, QRTEA, 2.51, 6.3
LFMDP, 15, LFMD, 2.03, 7.4
AULT-D, 13.95, AULT, 0.14, 103.3
DHCNL, 13.44, DHC, 0.71, 18.9
CYCCP, 13.15, CYCC, 1.04, 12.6
CDR-C, 12.5, WHLR, 1.74, 7.2
DHCNI, 12.25, DHC, 0.71, 17.2
IMBIL, 11, IMBI, 0.82, 13.4
DSHKP, 10, DSHK, 0.4, 25
SLHPF, 8.5, SLHGF, 0.21, 41.4
DSHKO, 7.4, DSHK, 0.4, 18.5
DSHKN, 7.2, DSHK, 0.4, 18
HCDIP, 6.01, HCDI, 0.43, 14
GMBLP, 5.25, GMBL, 0.09, 58.3
GREEL, 4.5, GREE, 0.74, 6.1
Several issues on the list are ones that we have discussed as having high non-payment risk, which is not surprising. What is surprising, at least to me, is how many we HAVE not discussed.
BLACK BOX warning! Which common underlies which preferred likely has some errors. For example, take all of the utes that are subsidiaries of a larger holding company. The holding company shows as the parent, but might not be legally on the hook. You absolutely, positively MUST do more due diligence to make sure the parent common is correct and backstops the preferred payout. BTW, I show 100 issues that do not have a common that trades.
Thanks again to Justin for adding a fourth rule of motion!
The sort is in error and it will not let me edit it. My apologies. The numbers and sequence are all correct, so the last number is the ration of preferred to common.
Tex.. I believe PRE-J (PartnerRe Ltd merged with Pillar Ltd., and is no longer the old PRE) and PRE (Prenetics Global Ltd.) are two different companies. PRE-J is BBB/Baa2 rated.
Lucky, thanks for catching that. Unfortunate than Prenetics Global had the PRE ticker which threw me off. Like I said, out of the 888 issues I track, I was sure that I have some of the parents wrong. I will change PRE-J to not having a publicly traded parent. .
With QRTEP being a $100 issue shouldn’t the printed number of $50.84 be divided by 4 to make the ratio comparable to the other $25 “par” issues on the list?
2WR, you are probably right that I should have normalized all of them to $25 par. My data includes all pars, from $3.13 to $100,000. Yes, those are the real numbers. In addition to QRTEP’s $100 par, CYCCP is $10 and GMBLP is $11 made my list
Recall when we are living the good life debating which issues would be called, I started publishing lists of issues that were at risk of major capital loss if they were called. I normalized all of them to $25 and it caused a lot of confusion. We will have to think through how to make this data be more consistent and useful. . .
I thought SB-D had been called. Obviously not. I had some of that one for a while from 6/21 to 2/22. I didn’t get rich, but I did get more cash out of it than I put into it,
Part of sb-c was called last year I believe.
Easily solved by the issuers with a reverse stock split 😉
While I agree that most of the issues you listed are in dire straights the price of common and $25 par for pfd are just a matter of convention. In many countries a lot of common stocks are priced at pretty low prices like a Pound a share in the UK.
NLY recently did a 4 for 1 reverse stock split. Perhaps the more insightful comparison would be market capitalization of the common divided by liquidation preference of all the preferred shares combined, or current market value of all the preferred shares combined.
Rvert and RS, I agree that the easy fix would be to do reverse splits. But I suspect we all agree that having low common prices in the US is frowned up. So NLY did it, but many others on the list have not done it yet.
I show 337 different commons that are currently paying out on their preferreds/babys/terms. 43 of those are trading <=5.00, so they have not taken NLY's lead and done reverse splits.
Instead of doing a market cap approach, I would next look at comparing yields. I would guess that any common yielding greater than X%, maybe 10%, would have increased non-payment probabilities for their preferreds. .
Interesting article one of my old clients send to me. States want more money “State Experimentation With Wealth Taxes”Taxes.https://www.forbes.com/sites/davidherzig/2023/01/31/state-experimentation-with-wealth-taxes/?sh=1ae8206f1499
The scary thing about wealth taxes is that everyone talks about only taxing the “super rich”, but pretty quickly the tax man will decide that everyone above the poverty line is “super rich” and should be taxed.
Everybody is wealthy compared to somebody. Where does it stop?
To me the scariest part of a wealth tax is the cost of compliance, the cost or periodic valuation of privately held assets like family companies, artwork or even jewelry. Surely the proponents of wealth taxes don’t care about efficiency ( nothing is more efficient than a sales tax?) and probably don’t care much about net revenue. Back in law school in the ‘90’s, the estate tax professors emphasized that estate taxes rarely generated more revenue than they cost to administer!
The scariest part of this is that the real objective is to resolve inequality of outcome by penalizing success. When he was asked about the small increase in net tax revenue from capital gains tax changes, Obama replied that the appearance of fairness was what was important.
Please declare your jewelry, Bea.. oh I have none….wait..isnt that a 4ct D flawless platinum set sparkler on your finger there?? no no no, that is a cubic zirconia..oh…ok. What about that other stuff there??? no no no, it is paste.
If they come for the jewelry, I am screwed. BeaDazzled
Damn Bea, I hadn’t thought about jewelry.
my wife has a LOT of good jewelry, most of which she (we) got when we were living outside the US.
She will make me defend it to the death.
Not a political statement, please no one respond with political comments.
Decidely not a supporter of the wealth tax and expressions like “fair share” make my blood boil especially when orated by those whose path was paved with financial or social entitlements.
In our household we earned every penny, worked full time jobs through high school, 100% put ourselves through college, grad school etc., scrimped, saved, built, disavowed victimhood and share with humilty we are now of means. We all have our own story. Just the same, have to agree with a few others here that have subtly alluded to the gross and rapidly growing of wealth inequity in our country and the apparent consequences of continuing to looking the other way.
Referencing a milenia of history as a guidepost; if we don’t resolve this, social unrest will. The first vestiges of this are already apparent. The “squad”, broad acceptance of smash and grab, defund the police (in part), recent insanely anti-landlord and (property) confiscatory laws in cities like Los Angeles, bailouts and ongoing handouts under the cover of covid, inflation checks, no cash bail, incomprehensible election of polarized social activists.
How is that NOT a political statement, Alpha. U say social unrest will happen and the signs are “he “squad”, broad acceptance of smash and grab, defund the police (in part), recent insanely anti-landlord and (property) confiscatory laws in cities like Los Angeles, bailouts and ongoing handouts under the cover of covid, inflation checks, no cash bail, incomprehensible election of polarized social activists.” That’s pure politics. You don’t like the squad (political), u don’t support defund the police movement (political), no cash bail (political). Talk about people’s paths being “paved with financial or social entitlements” (political). So if your comment is not a political one then this comment is not a refutation of your “gee I did so should everyone else no matter what societal inequalities are holding them back.” Seriously.
Cut it out, guys! PLEASE.
yeh sorry blkrahn. comment was meant to be tangential response to wealth tax discussion was trying to underscore that we may see more of this type thing and that it’s probably an acceptable alternative to what’s currently developing. all facts and I saw it as a-political but can see how others might not. all good.
Hi Franklin, It appears I have offended you. So sorry about that it was not my intention to offend you. On re-read I can see how you might have taken exception. My interest in writing was related to the new taxation – how it affects all of us and that we should probably embrace some form of remediation in that area to avoid more consequential outcomes to our future taxation and assets. Appears I could have stated it differently. Best to you and my apologies to you and anyone else taking offense.
hi alpha and thanks for that comment. all is good. i just hate when politics creeps in because it is so divisive and i value your financial knowledge and that of others here. so i do apologize because my response to your was harsh and i should have worded it better. peace.
franklin, handshake, one-armed embrace and hope you didn’t buy my PLDGP. 🙂
Ray Dalio, in his book “Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail”, he talks about the wealth gap, and how a long “super-cycle” contains the normal booms and busts of the “business cycle.” It is more socio-economic than political. It centers on debt, a favorite topic of III’ers. His contention is that the normal business cycle consists of debts becoming too much to pay so the central bank prints money to monetize the excess debt. This, in turn, does two things; 1 causes inflation, hurting less affluent people most and 2 raising asset values, helping affluent people more, since they hold the most assets. It keeps happening with each business cycle and the wealth gap grows. At some point this leads to major changes, some peaceful, (start of social security and laws allowing union formation in the 30’s) some not,(Communist Revolutions in China and Russia) or a restructuring of some sort leading to a loss of reserve currency status. (Netherlands, where the central bank did QE and then forgave the debt). He brings up examples of this through history, including the Dutch and British empires, Chinese dynasties, and others. He claims we are seeing it in the U.S. now. Lends some historical perspective to discussions of this type.
lol alpha, nah i didn’t buy that one. I have plenty of other mistakes i bought without any help at all!
From Chrmn Powell interview ….
His genial demeanor during the conversation with David Rubenstein was also construed as a comforting factor. That demeanor never changed, but the tone of the market did after Mr. Powell said late in the relatively short conversation that the Fed will react to the incoming data and will do more rate hikes if the data suggest that is necessary. He also said that the Fed has a significant road ahead to get inflation down to 2.0% and that he doesn’t think it will be a quick move to 2.0%.
Treasury yields, which moved noticeably lower initially, reversed course abruptly and are back roughly to where they were when the conversation started (4.45% for the 2-yr and 3.65% for the 10-yr).
There seems to be a concerted effort to make a lot out of his view that the Fed will raise rates more if the data suggest that is the proper course, yet the fact of the matter is that he has always provided such a disclaimer in discussing the policy outlook.
Accordingly, the subsequent selling in response to that view is an overreaction. The market should have ultimately returned to where it was before the conversation started because there weren’t any real sticks or carrots provided by Mr. Powell.
That means the market will be left to contend with the idea that valuation is stretched, earnings estimates are still declining, and the Fed could possibly raise rates more than expected and keep them higher for longer.
great comment, Jim! oh for the days of Greenspan and the briefcase size monitor tho! lol.
((When you get Bostick and Kashkari who were more dovish now more hawkish, I think at least 2 more hikes and then higher for longer.
I see SPAXX yield is up to 4.11% for the FIDO sweeper. What if we sit at FED funds 5% for a year or so to quash inflation, reign in infl expectations back to 2% etc.? Lots to think about– at least now if you are conservative you have options and some yield without having to stretch risk to get something!!)) Bea
Bea, you said it. The media drumbeat is always on a cadence that rates are too high and are counting the days for a cut. I dont think everyone thinks rates are too high. Savers, as you mentioned, probably are not opposed to higher rates. And businesses forced to deal with an actual real cost of capital and smoke out those zombie companies to purge the system isnt such a bad thing either.
Bea, For some time have had a focus on Active, qtrly reset, LIBOR Fltrs.
ALL-B … C-N …. NLY-F …
Guess the mkt liked it after all. Hit ~ +340pts- closing at 264.55
But- still ended down about .4% for me.
Accumulated more capital losses in 2022 than I could claim on taxes, so I’ll carry these losses forward. I’m using a taxable account and buying very low coupon treasuries maturing in 2024 or 2025 with YTM of 4.8%+ for the capital gains to offset the capital losses.
i should do that as well. can you tell us a few examples of the stuff you are buying
bob – I just bought $10,000 of US Treasury NT 0.125% coupon CUSIP 91282CBE0 at $95.70 and maturing 01/15/24 , so capital gain should be about $4.30/note or about $430 for 100 notes. There are many low-yield coupon treasuries maturing in early to mid-2024 with YTM of 4.8%+. Offsetting 2022 capital losses doesn’t quite make this tax free, but it helps to take some of the sting out of the 2022 capital losses.
Pretty sure you are going to owe ordinary income on the discount accretion, not a capital gain.
JD – Thanks for the post. I’ll talk with my accountant when she gets back from pickle ball.
JD and Mike – thanks for the posts and the attachment. I’ve read Baird’s Tax Treatment of Bond Premium and Discount, and I think that the $4.30 discount on the treasury note that I referenced to Bob is capital gain because the note was not issued with an OID (original issue discount), so the $4.70 discount is entirely a market discount (it dropped from the original issue of $100/note to the current price of $95.70/note entirely due to rising rates), and there should be no annual accretion (although there will be investment income from the 0.125% coupon). When the bond price rises to $100 on 1/15/2024, the $4.30 rise in price is entirely capital gain. Therefore, just by sheer coincidence that the note was originally issued with no discount, I still think the method to my madness is valid: It is possible to buy treasury notes with no OID (no zero coupon treasuries) that have dropped in price, and use the capital gain upon maturity to offset 2022 capital losses. Please correct me if I am wrong.
I’m glad I picked engineering as a career where the rules are based on the laws of physics. The laws of the IRS are too confusing and arbitrary.
True that you don’t have OID. But you do have Market Discount on a debt security and the amount of that discount is not less than the de minimus threshold (.25% times the full number of years to maturity of the debt security). As such, you will have ordinary income to accrete from your purchase price to stated maturity date.
Your brokerage firm SHOULD be catching these situations and applying the correct tax accretion of the discounts. I know Vanguard generally does. I can’t speak for others.
Mike – Thank you. Good things to know.
g2c, just a reminder to everyone that if you don’t have capital gains to offset your capital losses, you can use a capital loss as an offset to ordinary income, up to $3,000 per year. If its more than $3,000, it will be carried forward to future tax years.
Steve N – You are right. Thanks. I’m trying to offset all of my 2022 capital losses as soon as possible in predictable ways (e.g., treasury notes with market discounted prices and no Original Issue Discounts) rather than drag it out at $3,000/year for several reasons:
1. The market has provided us with capital gains using safe treasury notes. There are few other methods of low-risk capital gains.
2. I could have future capital losses, and I don’t want to stack them on top of the 2022 losses.
I’m looking for safe methods to entirely offset the 2022 losses this year. It might be possible to accumulate capital gains this year from some high quality preferreds that have taken a beating, but I’m looking for ideas that have a higher probability of success.
remember that capital gains/losses are “bucketed” into short and long term, and they are treated differently.
Private – Great point. Thanks for the reminder. My losses are almost entirely short term, so I’ll search for short-term gains. Unless something else comes up, I’m still thinking that ultra low-yield short-term treasuries with no Original Issue Discount (not zeroes) will work.
US Debt Default, BOA CEO Comments, & Preferred Stock Prices
For those with more experience trading preferred stocks, how have preferred stocks performed in the PAST as we run up to another debt ceiling crisis in Washington? With BOA Brian Moynihan saying his bank is preparing for a possible US default this morning, was wondering how preferred stocks have typically responded in prior scenarios. I understand that default is very unlikely, but looking for any knowledge of preferred stock trends going into debt ceiling crisis.
Appreciate any of your thoughts & wisdom!
Your crystal ball is as good as anyone else’s. Since this is a widely predicted event, I think the effect on preferreds will be minimal, since many are corporate paper. Maybe a temporary drop in price if rates bounce up. (Disclosure: I’m not a day trader. I just close up the storm shutters and ride out the storm.)
I expect a default of some sort on the debt.
I’m considering temporarily moving out of MM funds since the default choice (unintended pun) at the big brokerages is usually a government fund. Without the ability to roll over their paper, the funds could grind to a halt and perhaps limit withdrawals if there is a panic. The funds could again bust the buck, 2008-9 style. Its in the fine print.
I think the biggest risk is the now-unknown, but highly leveraged and interlocked players out there, somewhere, who will simply implode. Counter party risk, deja vu all over again. Just my opinion.
Agree the $70+ trillion of offshore Eurodollar dark money getting unwound could get messy.
We have defaulted once before during the Carter administration, but that one was a technical default, and lasted only a few hours.
This is completely different. this is the Treasury completely stopping all the millions of payments that it makes. There is no prior history even remotely close. Every other sovereign default was because of an inability to pay, not because of a political disagreement. The markets could shrug it off, react positively, or negatively and nobody knows what will happen, but one thing markets don’t like is uncertainty.
Preferred stock price will not be affected in the short term. As US Treasury will turn off the taps on all transfer payments. Governement worker payrolls, office rent, and entitlement programs (pensions) will be withheld temporary. Non-essential governement offices will be closed. While health and safety (police/fire/army) will work without pay before US defaults. More problematically pensioners requiring their entitlements will be without healthcare, means to pay rent, or purchase necessities of life.
Hopefully all of this drama can be avoided.
For world ending financial calamities. Japan has been performing QE infinity which has nicely suppressed rates across the curve. Would it not be nice to have discovered the bank reserves held by major JPN banks have been swapped by major US banks into US dollars to be loaned out to Chinese real estate developers. Essentially if the never ending bank reserves stop getting generated by the Japanese government the whole house of cards implodes. (total speculation as this money is all dark)
Greg, I live in a suburb of Ft Lauderdale and my frustration is with the democrats. They shut down the government for 3 days in 2018 and then the longest shutdown EVER of the Federal Government for 35 straight days in 2019, some 380,000 Federal employees were furloughed (not getting their paycheck to feed their families, pay their mortgages etc) and this cost the economy $5 billion plus dollar; we survived and I will remind you that the S&P 500 Price index returned 30.43% in 2019. Using a better calculation including dividend reinvestment, the S&P 500 returned 33.07% in 2019. Please stay off the political cloud here as it’s certainly not welcome, I am Azure
Please keep political statements your off this site. It really is not productive. Thanks
PSA trying to pay up for additional properties and then increasing common dividend by 33% !!!
Long term, good or bad for the preferred issues?? I’m thinking credit rating may take a hit.
Was thinking of adding to my sock drawer issues as set and forget but this give me pause.
Is this too good to be true. Limited duration due to the possible call on 9/15/23, but this is what I got from IR.
“While we have not commented on updated fallback language with regards to SOFR, what we can point you to is the prospectuses. With the series Q, if LIBOR is no longer being quoted the dividend rate will be reset to the fixed rate + the reset (the original fixed rate dividend of 5.85% + the 3.09% reset floating spread resulting in a dividend of 8.94%).”
If above is true, given its trading below par, it has a YTC of 8.1% or a reset rate above 9%! What am I missing here and why are these trading at a relative discount to other fixed/floating?
I do have positions on this, hence my inquire. But the scalp seems too good to be true.
Joshua – Take a look at the prospectus https://www.sec.gov/Archives/edgar/data/72971/000119312513292504/d568311d424b2.htm Start on p S 15 under “For the purposes of calculating any dividend with respect to any dividend period beginning on or after September 15, 2023:” See if you agree with IR………
Thank you for the response. I did read the prospectus, which matches what IR said.
“If the banks so selected by the calculation agent are not quoting as set forth above, three-month LIBOR for that LIBOR determination date will remain three-month LIBOR for the immediately preceding dividend period or, in the case of the dividend period beginning September 15, 2023, 5.85%”
I sent IR my inquiry because I wasn’t sure if they were going to use SOFR or the fallback language. For example, I also own SCE preferreds, which will be using SOFR +26bps.
That said, still dont understand the discount, maybe its due to the Libor uncertainty.
I know what you quoted from IR, but have you reviewed language in the prospectus yourself?
Curious, I took a look myself.
If the banks so selected by the calculation agent are not quoting as set forth above, three-month LIBOR for that LIBOR determination date will remain three-month LIBOR for the immediately preceding dividend period or, in the case of the dividend period beginning September 15, 2023, 5.85%.
What I’m not clear on is the first part “If the banks so selected by the calculation agent are not quoting as set forth above”. If SOFR becomes the accepted, then is the calculation agent then basing off of SOFR.
But if not…. the last part seems to state if LIBOR is not calculated then “in the case of the dividend period beginning September 15, 2023, 5.85%.”
So 5.85% does become the reset factor – at least that’s my casual read.
Until then, you get about 6% return on the chance of 8.94% coupon rate. Interesting.
So here’s a theoretical question on WFC-Q. Let’s say for whatever reason it lives on after the 9/15 reset and the language + the disappearance of LIBOR and nobody making comparable quotes makes the 12/15 coupon 5.85% + 3.09 or 8.94%. Then let’s say the conditions remain unchanged for the next quarter and SOFR is determined not to be an adoptable fallback based on the language. Would that make the NEXT coupon, the one due 3/15/24 calculated at 8.94% + 3.09?
A possible alternative interpretation.
The coupon for the period beginning 9/15/2023 is 8.94%.
After that, there is no fallback to 3ML “hardwired” into the terms of the security. So the coupon then goes to 3.09% plus the replacement for 3ML. (As I understand it, 3 month term SOFR + 26 basis points is not a done deal, but it sounds like it will be something like that.)
nh – Why do you say that? You of course, could be right, but if the language is “If the banks so selected by the calculation agent are not quoting as set forth above, three-month LIBOR for that LIBOR determination date will remain three-month LIBOR for the IMMEDIATELY PRECEDING DIVIDEND PERIOD or, in the case of the dividend period beginning September 15, 2023, 5.85%.,” why wouldn’t the language then become “If the banks so selected by the calculation agent are not quoting as set forth above, three-month LIBOR for that LIBOR determination date will remain three-month LIBOR for the IMMEDIATELY PRECEDING DIVIDEND PERIOD or, in the case of the dividend period beginning December 15, 2023, 8,94%?” I don’t have the definitive answer- this just sounds logical to me based on what’s there, of course, subject to the language passing a no SOFR as replacement test.
If this helps, here is the my email chain with WFC IR. You can see I pushed them further on their view regarding the adequacy of the fallback language, and they gave me a no comment.
We appreciate why you are asking, but we are not commenting on the specific fallback language provisions in these securities.
Thank you for understanding.
Sent: Monday, January 23, 2023 9:30 AM
To: Investor Relations
Subject: RE: LIBOR Transition for WFCprQ and WFCprR
Thank you for your response.
Just to clarify, with regard to WFCprQ and WFCprR, it is WFC’s opinion that those securities contain adequate fallback language, and therefore do not need to be amended to use SOFR as a benchmark as prescribed under the recently passed Adjustable Interest Rate Act.
On 01/23/2023 9:16 AM email@example.com wrote:
Thank you for your email.
While we have not commented on updated fallback language with regards to SOFR, what we can point you to is the prospectuses. With both the series Q and R, if LIBOR is no longer being quoted the dividend rate will be reset to the fixed rate + the reset. In the case of Series Q this would be the original fixed rate dividend of 5.85% + the 3.09% reset floating spread resulting in a dividend of 8.94%. In the case of Series R the dividend rate would be 10.315% (6.625% + 3.69%).
Sent: Friday, January 20, 2023 9:27 AM
To: Investor Relations
Subject: LIBOR Transition for WFCprQ and WFCprR
I am an investor in the above referenced WFC preferred stocks and would like clarification as to how WFC will handle the elimination of LIBOR for these FIxed to Floating preferred stocks. The prospectuses seem to contain “fallback provisions”, but does your company feel that this language is adequate?
Thanks for this ep.
This confirms that the WFC-Q coupon for the quarter beginning 9/15/2023 will be 8.94%. What is less clear is what happens after that, assuming that WFC-Q remains outstanding. It could go to the 3ML replacement for the preceding dividend period plus 3.09%, if the language in the prospectus is deemed not to contain a “hardwired” fallback for periods subsequent to the first floating rate period.
Another interpretation would be that the 5.85% becomes the replacement for 3ML for the quarter beginning 9/15/2023 and then afterwards the three-month LIBOR for the immediately preceding dividend period, in effect, fixing the rate at 8.94% as long as WFC-Q remains outstanding.
I suppose there are possible interpretations as well.
I don’t think it confirms anything for WFC-Q.
By not commenting on the specific fallback language provisions in these securities. WFC is potentially leaving themselves an out
I agree that if WFC does not amend the language to use SOFR, the coupon for the quarter beginning 9/15/2023 will be 8.94%
But by not answering whether it is WFC’s opinion that those securities contain adequate fallback language, and therefore do or do not need to be amended to use SOFR as a benchmark as prescribed under the recently passed Adjustable Interest Rate Act, they are giving themselves an out to possibly amend the language to SOFR if their lawyers give them the ok.
So no one knows for sure at this time
The reply states that “With both the series Q and R, if LIBOR is no longer being quoted the dividend rate will be reset to the fixed rate + the reset.”
As I understand it, LIBOR will no longer be quoted after 6/30/23. The quote seems to state pretty clearly what will happen if the Q and R issues are not called. I’m not a lawyer, but I don’t see how they could unilaterally change the terms of the prospectus to use SOFR if another fallback is already in place.
You are ignoring the rest of the exchange – including where he pushed them further on their view regarding the adequacy of the fallback language, and they gave him a no comment.
We appreciate why you are asking, but we are not commenting on the specific fallback language provisions in these securities.
If it was definitive as you claim, they would have said so, But they are leaving themselves an out if their lawyers give them the ok to use the approved alternative SOFR under the LIBOR act
I got the same response from IR when I contacted them. It all boils down to whether the prospectus contains “adequate fallback language”, and I think it does. I would think they would call WFC-Q (and WFC-R) as soon as they can. So why is Q not trading above par at a reasonable YTC?
Joshua, no idea.
By the way, I see that language shows in the WFC-R prospectus too.
WFC-R begins floating (unless redeemed on that date) on 3/15/2024 (6 months after WFC-Q).
Here’s a reprint from page S-16 in the IPO prospectus for WFC-R (link from QOL):
“If the banks so selected by the calculation agent are not quoting as set forth above, three-month LIBOR for that LIBOR determination date will remain three-month LIBOR for the immediately preceding dividend period or, in the case of the dividend period beginning March 15, 2024, 6.625%.”
So 6.625% + 3.69% spread = 10.315% coupon.
As you stated, this seems too good to be true.
While the prospectus is normally the end all answer to interest rate setting on adjustable preferreds, the Adjustable Interest Act gave the Fed the ability to change the rules. So I am not sure what is going to happen to any LIBOR floaters. I think the lawyers are figuring (scheming) what they can do. Generally, I think floaters will reset similar to the original plans, but we will see.
The Fed can’t change the language in a prospectus, unless it is vague or unclear. The language quoted above is neither, as there is a fallback provision.
With regard to the call provision, isn’t it the standard more than 30 less than 60 days notice on each payment date?
in that case, the rate doesn’t float until the NEXT dividend, so it likely won’t be called on the last time it is fixed, but the date immediately preceding the floating rate determination, so they get one more fixed rate dividend in.
Perhaps. But the federal LIBOR legislation is signed into law providing a safe harbor. Until we see how specific companies interpret it, I don’t think one can say with certainty either way that SOFR can’t replace LIBOR in a prospectus. I suspect there are lawyers that could try and make the case for it based on the act and what is the definition of an adequate Libor replacement mechanism. There is a specific safe harbor for selecting a SOFR based replacement so it would not surprise me to see some company’s lawyer’s take a more liberal interpretation. Only time will tell.
The federal legislation targets the estimated US$15 trillion worth of existing “tough legacy” LIBOR contracts. A “tough legacy” contract is a contract that does not: (a) specify a replacement for LIBOR or (b) contain an adequate LIBOR replacement mechanism.
In addition, the federal legislation also creates a “safe harbor” for eligible persons (with the ability to select a benchmark replacement under the terms of a contract) who select a SOFR-based LIBOR replacement. The bill’s “safe harbor” states that no eligible person will be subject to legal liability arising out of their selection of a SOFR-based replacement for LIBOR. Likewise, the bill also insulates from legal liability eligible persons who implement contract “conforming changes” that are necessary to effectuate the transition away from LIBOR. An example of a protected “conforming change” would be replacing a contract’s references to LIBOR with SOFR. A late change to the federal legislation also created a narrow safe harbor for banks that had previously selected a non-SOFR-based LIBOR replacement. The legislation specifies that no supervisory agency may take action against a bank solely because of its selection of a non-SOFR LIBOR replacement.
Re: IStar Preferreds – Will they or won’t they be redeemed?
As the merger between STAR and SAFE has progressed, it’s been a question of will they will or will they won’t regarding whether the preferreds will be called in conjunction. On Jan 31 STAR and SAFE issued 424B3 which constitutes a combined proxy for shareholder vote on the merger which will take place on March 9 – https://www.sec.gov/Archives/edgar/data/1095651/000110465923008126/tm2230881-8_424b3.htm#tMECO. That document says (p110) – “Furthermore, at the effective time, each share of STAR Series D preferred stock, STAR 7.65% Series G Cumulative Redeemable Preferred Stock and STAR 7.50% Series I Cumulative Redeemable preferred stock issued and outstanding immediately prior to the effective time shall automatically be converted into the right to receive an amount in cash equal to $25.00 plus the aggregate amount of all accrued and unpaid dividends on such share of preferred stock as of the effective time.” It goes on to say an “exchange agent” will send out instructions to preferred holders 5 days after the “effective time.”
That seems to be pretty definitive as to a call happening IF the merger happens and that the merger and preferreds will survive at least until 5 days after the shareholder vote on March 9, probably slightly longer. And yet, both STAR-G and STAR-I at least are currently trading below “par” on a stripped basis when in all likelihood they will be outstanding at least until the next coupon payment on 3/15. Obviously, do your own DD as to the likelihood of this merger happening, but STAR-G and I with their 7.65% aND 7.50% coupons seem attractive to me because IMHO the likelihood of the merger closing is very high…. STAR-D has voting rights and an 8% coupon, so they trade a bit higher so I’ve concentrated on the other two. BTW, the cash to pay for this call has been sitting around internally at IStard waiting for this merger to happen os this is not subject to financing.
Yeah, I guess these are done for with the merger, and which is why they are priced right at par, so you have a guaranteed payment without the risk of the ex-dividend drop below par, since it is going to be redeemed at par about 2 weeks later.
I am having trouble seeing how the gain outweighs the risk (albeit very small). You could buy one of the Athene (or one of many other) issues and receive about the same amount at about the same time. It seems like the only gain is the time value that it takes for the issue to regain the drop after the payment of the dividend. How much is that worth?
It’s a fair argument, Mark, only imho, I would categorize the STAR preferreds in an entirely different bucket than I would any plain vanilla perpetual preferred. Granted, were the merger to fail, not only would the STAR preferreds all actually end up being perpetual preferreds again, they’d be perpetuals carrying greater credit risk than the Athene preferreds (but most likely less credit risk than they have now). However, given that risk to be minimalized in my opinion, then an investment in the STAR preferreds gets mentally categorized as a short term money alternative, not a long term perpetual alternative…. That being said, I am more willing to throw more coins at this situation than I would be willing to throw at a plain vanilla perpetual or even one that has short term call risk with no announced avenue for that short term call yet on the table.. If you can buy a 7.65% preferred that will be called @ $25 in probably less than 3 months (the longest conservative estimate from STAR is “in the first half of 2023”), then it’s tough to come up with a cheaper alternative for short term money. I’m willing to take short term designated money out of money market alternatives earning 4% annualized to assume the risks that this situation works out and earns over 10% annualized using 6/15/23 as the outside longest possibility max.
Ooops – adendum: “If you can buy a 7.65% preferred [AT $24.80 STRIPPED] that will be called @ $25 in probably less than 3 months….”
Thanks for responding. I see things a bit differently.
I think you should adjust for risk. Assume you have a 95% chance of the deal going through and that you will lose $1 if the deal falls apart.
You buy 1 shares at $25.11 and you receive .47 and $25 the middle of April. You will net .36.
If your do this trade 100 times you will make $34.20 (95 x .36) – $5.00 (5 x $1) or $29.20. So you average return is .29. That’s a little better than a 4% money market fund. So I get your point. I would not make that trade- but I understand it. Thanks. I appreciate your input.
I like how both of you think here. I dont tend to adjust for risk on each trade, but I will do probabilities in my head based on my assumptions which may or may not come from bizzaro world though. I tend to more to adjust for risk by taking money off the table into CDs and IBonds and be more aggressive with other monies.
Although I do love risk adjusted trade layups like yesterday. CEQP- went exD yesterday and some mental midget premarket was asking them for 2 cents less than previous day close. I let him have about a thousand at 9.35 and bought them back today at 9.12-.13 since I had no intention of selling anyways. I would have given him a lot more but they were in my other account that doesnt offer premarket trading.
Mark – Reasonable point for consideration… one thing on your math though – Barring total economic disaster by the company in the short interim period of time between purchase and fruition (which of course would make your downside risk far greater than $1 also ), I’d argue that you will still make your dividend/interest payment 100% of the time, not 95% if the deal doesn’t work out. So I’d argue your average risk adjusted return in your example should be .31 not .29. Sound fair? Of course, in practice, each situation has to be considered on its own merit anyway, so it’s kind of tough to assume 5% chance risk of failure across the board, but still, I understand what you’re getting at and it’s a decent point to be making,
Opinion on the iSTAR/SAFE votes? Likely my vote is insignificant, but I did not like the initial take on the merger, but now is all priced as if “done”. But I’m mad and that usually equals a “no” from me. But I didnt read it or the Caret program info yet. But if you did, any opinion?
An interesting c.d. is being offered by a local credit union that some III’ers might be interested in: adjustable rate certificate offered 1 and 2 year maturities. Resets on Jan. 1 and July 1. Current rates 4.81% and 4.86% compounded daily for APY’s of 4.93% and 4.98%. Rates are based on 6 mo.
T bill + .05% for the 1 yr., and 6 mo. T bill + .1% for the 2 year. Radiant Credit Union, Gainesville Fl.
5% 11 month Capital One CD https://www.capitalone.com/bank/cds/special-cd-rates/?06295_se002639=&gclid=Cj0KCQiA54KfBhCKARIsAJzSrdpoRFpPfEfmxoVC8-gGdAY9U3Sfvvjaok6WQnVWLfIAPKOnJ5_PXQIaAhEqEALw_wcB&gclsrc=aw.ds
I am a dividend & interest investor, I have been for all of my adult life. Could someone explain to me why my brokerage house holds back my dividends & interest until their computer system sweeps them once a week? It feels like their are making money by holding it for the float.
John, it all has to do when they get the money/funds from DTC. If the brokerage firm intentional holds your money the SEC would investigate and fine the @#$&% out of them as it is a violation of the distribution rules. DTC does not necessarily pay at exactly the same time to each brokerage firm. Hope that helps, Azure
Why isn’t this process finite for all?
Once a week seems like a violation- but who knows- after the gray market plundering they condoned, they might be ok with it.
WHAT? this can’t be right. there are some instances where a broker can hold on to the float, but holding every payment for an entire week is not one of them. They would be sued out of existence if they did this.
Say the sweep date is every Friday, which it is. Any dividends or interest won’t go into my checking account until the following Firday.
Further explanation:They sweep all dividends up until Thursday and they are in my checking account on Friday. If I receive any new dividends on Friday I have to wait until next Friday.
I get around this delay by calling my broker assistant who has the dividends transferred manually in my account either same day or next day.
What broker? Edward Jones ?
Stifel but the same thing happened at Merrill Lynch
So they aren’t posting the payments to your brokerage account late? A sweep is a very different thing than an income payment. They are actually just about the opposite of each other, one is incoming and the other is outgoing.
Sweep rules are essentially at the discretion of the broker when and how they can be used.
if anyone knows of a broker that offers a daily sweep to an outside financial institution, post them here. I can’t think there are that many of them.
Thx….but, I am sweeping into a Stifel checking account. Does anyone else have this broker problem?
I am not sure that matters where it goes. Brokerage accounts are not designed like checking accounts, and the risk of the account going negative if a dividend is reversed (even temporarily) is why they don’t sweep daily to a different entity. (for obvious reasons, Stifel Bank and Stifel Brokerage are operated independently of each other)
This is a response to Maine over on the reader initiated alerts page (https://innovativeincomeinvestor.com/reader-initiated-alerts/comment-page-13/#comment-85421) who wrote:
“PFF SJIJ holdings down to 450k, which I think implies a sale of 80k shares on Friday.
I know we like to make fun of PFF, but at least they are trying to manage the wind down. SJIJ actually had a price spike up on large volume towards close on Friday. Assume it was a market maker managing the price.”
I agree, PFF seems to be handling getting rid of delisted (or soon to be delisted) issues a lot better than it has in the past. They got rid of 80,242 shares on Friday (15.13% of their total). What’s interesting about this (and supports the theory that they’re doing a better job) is that the two SJI issues that PFF holds were the ONLY sales in the fund that day – every other holding was a “buy”.
The late day volume spike and price jump you saw? I think that may possibly be attributed to a “Buy SJIJ today!” article over on SA by an author who is pretty widely followed. It was a pretty smug piece based on some dubious assumptions, I think: https://seekingalpha.com/instablog/957061-chris-demuth-jr/5835449-last-chance-to-buy-sell
Anyway, Gridbird’s and other investors’ railings against the PFF managers and their tee times may have been noticed by BlackRock fund managers. There is really no good reason for them to hold soon-to-be-delisted issues despite the fact that they haven’t (yet) been officially kicked out of the PHGY index they follow. See https://drive.google.com/file/d/1v-s_DOA3rdbZtiqITaeRZVNCF0e655gs/view?usp=sharing (February 2023 constituents of PHGY; SJI is still in there).
Esw3 – agree with you about that SA article. I think his mistake was thinking that Friday was the last trading day with certainty.
I think the message from SJI IR is that Friday “could” be the last trading day for SJIJ. He’ll find out tomorrow when PFF likely dumps more!
Most of the times PFF has dumped an issue because of the index change, they do one or two large, ~ 100K to 300K share block trades that get reported right after the NYSE regular hours close. The ishares/Blackrock/PFF traders are top notch as they have to be able to move large positions without bombing the price. They deal these large position trades every day. The large block trades are typically worked out amongst the “trader fraternity” members on Bloomberg. Back in the old days of the NYSE, if you showed up at the specialist station and wanted to do a large block trade, they would tell you to “take it upstairs” and find a trading partner privately. There are a relatively small number of buyers that will take 100K to 300K shares at a time and the PFF traders know ~ all of them.
So what this says to me is that this is a rare position that they could NOT find one or two buyers to take the whole position. They had to parcel it out in very small (for them) ~ 1k to 5k blocks to not crater the price. It it not like they could/would put an ask out there with 450k shares showing. And if they put out a market sell order, the price would literally go to 1 cent in about 1 millisecond.
My pure guess is that they have a plan to sell their complete position, one way or the other. Does not mean that individual investors would have access to buy any of them at firesale prices. I would not underestimate the PFF traders. They manage many orders of magnitude more shares than most of us.
Tex, this is all true. And they’ve done ok so far, but I won’t sing praise until their selling is done. it’s also true this is a 5 bps position for them, so this may not exactly be at the top of the list in terms of priority, but that is conjecture on my part.
I honestly think a lot of other SJIJ shareholders don’t even know the news yet and will find out once it hits the pink sheets. Ie the knife probably hasn’t hit the ground just yet.
Still can’t believe that SA author (Demuth) put out that article without looking into the otc aspect further.
The reply from esw3 was perfect!
I would die laughing if I was in Blackrock’s offices and they were cursing Gridbird under their breath, and no one else had any idea what they were talking about……
Never really played with short term c.d.’s before, but now that I am replenishing cash, which I drew down when rates were relatively higher, I notice one thing in trying to put together a short-term c.d. ladder: it is difficult to find a brokered c.d. that has less than 5 or 6 days to the settlement date. On a one month c.d., this factor lowers your “real yield” down lower than even the safest money market fund. Any thoughts?
I’ve noticed this too, lucky. It’s almost as if the issuers are attempting to take advantage by gaming the system that way should buyers not pay attention to the effect. That being said, these days, the money to pay for your new issue is most likely coming from a money market fund earning a high relative rate, so you’re not really losing (or gaining for that matter) that much on a net basis since your money will be earning a decent return during the dead days of your new CDs before settlement
I have a question about bond funds. I can understand why the price per share takes a hit during rising rates. What escapes me is why they’ve lowered the per share dollar payout. The funds in question are BBN and NBB which are closed end taxable municipal bond funds we use in our traditional IRAs. Obviously some aspect I don’t understand. Thoughts?
JV, both of these CEFs use a heavy dose of leverage, which is probably costing them a lot more. If they keep paying out w/o corresponding increase in bond income, they erode capital quickly!
Guessing too they will eventually replace maturing bonds w newer higher yielding ones to help with distributions going forward.. the bonds held are probably rising in value as the NAVs have been strong here since Oct. BBN has gone from 16.22 to 18.75NAV. Seems to still be a pretty hefty appetite for muni’s. BBN is paying out capital in its dist., NBB just income..Nuveen is pretty good about paying out income and adjusting distributions up and down to just income to not erode capital.
((I am not in either or any muni’s now, even taxable ones.. my only CEF is WIA which is a levered mostly TIPS fund which is pretty good at paying only income. It was a recent entry for me w basis now around 8.70.
I used to play heavy in this space but right now not much. )I guess this discussion is best in the CEF section actually. Stanford Chemist and Nick Ackerman, ADS Analytics of SA probably best for CEF resource imo. ) Bea
I didn’t realize we had a cef section. Ok, I can see where increased cost of borrowed funds would crimp money available for distribution. I knew there was some aspect I was missing. Thanks.
When I have bought they accept your request to buy but take cash out until a day or 2 before it goes into effect. That being said, I have taken my foot off those and have started buying 12-18 month ones. Would be nice to get one last inflation scare market jolt to push the 2-3 year end up more. I may start toeing in there anyways.
Grid…At Fido, seems like a request to buy would be treated as an open order until a day or two before settlement. Recently, they fill the day of the order, or maybe the day after. Schwab also fills fast. I have also been buying some one to two year c.d.s in the near 5% range recently, and slowly, over time, putting a bit to the long end, as a hedge against an eventual Japan type scenario.
Lucky, that may be true for newly issued brokered CDs but if you buy brokered CDs on the secondary market, they trade and settle that day.
That all said, I have been buying treasuries in the secondary market on Fidelity with the funds I allocate to this part of the portfolio as they are even more liquid and have been providing the better return for a while now (although it looks like CDs are finally back being competitive )
Mav, secondary market CD buys normally have the same t+2 settlement as bonds/equities.. Only time I see same day settlements is when the brokerage messes up and lets you buy something they should not have. Very rare and not the norm.
Tex – ok maybe I shouldn’t have technically used the word settlement. I was talking about contrasting the issue Lucky pointed out where he said to find a brokered c.d. that has less than 5 or 6 days to the settlement date.
Secondary CD orders execute the same day. They are in your account immediately just like a stock is (even with the t+2 settlement ) – which differs from the issue Lucky pointed out with new brokered CDs
Tex….Even though the trade is not settled, would you start accruing interest the day after the trade executed?
Lucky, you do not start accruing interest until the trade is settled @ t+2. That said, they do not pull the money from your cash account until then, so you are still earning interest on it. I think most brokerages have reasonable yields on their cash accounts, so it is not a major loss.
BTW, the SEC is pushing to change to a one day settlement. Recall it was three days until September 2017.
Tex….Thanks for your reply, it brings clarity to the whole discussion, and reconciles with the fact that when I look at positions at Fido it shows cash consisting of available cash + the cash for unsettled trades, and the executed, unsettled trades as pending activity debits.
Maverick61….Very true about the brokered c.d.’s faster settlement, and I looked at that and it seemed that their yield was slightly better at the ask price than the new issue at 100 with the little lag time, but when you add the commission to the ask price, they get you either way about equally. This was on a comparison between very short term maturities. Several people have mentioned the unusual spread between c.d.s and treasuries, and I have noticed this myself, but that seems to be ending, as you mention.
The annual percentage yield you are earning on your Bask Interest Savings Account has been increased from 4.15% to 4.25% APY*.
TINA has left the building…I’m getting 4.02%.
SJIJ – left it behind in the rear view mirror,. Didn’t like it going dark. Don’t like the risk of relying on the kindness of strangers who might find it advantageous to borrow from me at 5.625%.
“In other words, we may declare at our discretion up to a ten (10) year interest payment moratorium on the Notes and may choose to do that on more than one occasion.” (… deferred interest accrues at5.625%…)
“If we defer payments of interest on the Notes, the Notes will be treated at that time, solely for purposes of the original issue discount rules, as having been retired and reissued with original issue discount for United States federal income tax purposes.
“This means you will likely be required to include in your gross income for United States federal income tax purposes the deferred interest payments on your Notes (including interest thereon) before you receive cash interest payments, regardless of your regular method of accounting for United States federal income tax purposes. ” – Page S-5, SJIJ Prospectus Supplement, 9/19/2019
DYODD. Just my opinion.
SJIJ seems to be holding on tight to $15/share. I have an order in to buy a small number of shares at $10/share. My confidence is low that I will be able to buy.
It is just me or is someone buying quite a bit at the end of market each day for the last 4 days? That keeps soaking up shares that are not getting dumped in frustration as the clock ticks down to going dark. I have to admit buying at 9-10 seems worth a risk.
FC, for grins and giggles I threw out a order for 100 shares at 9 If I get it great if not no loss. Too many of these are being scooped up by traders in the expert market. A year from now after the dust settles you can probably put in a sell at market order and some expert will buy it at 12.00 thinking they got a deal.
5% 11 month FDIC insured CD from Capital One https://www.capitalone.com/bank/cds/online-cds/
Thank You for that.
I had 15K in Truist just sitting around.
Now, it’s working for me.
Enjoying our heat wave today? 86* expected in Ft Laud.
I’ll be buying SPF50 to save face.
Tim, Thanks for the heads up re ALL-B reset.
With the mid year LIBOR fade, I have been tracking
3Mo. TERM SOFR, that I have seen comments as to a replace to LIBOR.
Wed ##’s = LIBOR @ 4.79629% ….. 3Mo. TERM SOFR @ 4.684%
Hi Jim, remember it’s LIBOR = SOFR plus 26.1bps
Good times over at Silvergate https://en.ethereumworldnews.com/doj-probes-silvergate-fraud-ftx-dealings/ In Latin we say fures, ubique mendaces nd scumbags. Cave in mundo plenus periculo
I bought 1000 AGM-D at the end of the year at $21.40 and sold it today at $24.40. It was 5.7% fixed, callable 7/24, with no maturity date. I think it was Tim who mentioned it on this site and I want to thank him or whoever it was.
It is not often a preferred stops paying, sinks down to 7, and then in a few days pops back up to 11 plus per share. You can probably guess I am referring to SI-A and I have been taking the opportunity to slowly unload. Actually sold off a nice chunk at 11.85 today which is pretty darn close where I bought a bunch not long ago. I will take that gift and run.
Anyone holding it might want to consider eating any loss and reduce your stake. It appears Blackrock brought some optimism back into the mix but I get the feeling it will be dead money for quite a long time with a good chance of sinking lower over time.
Correction. 11.45 is what I sold some for. Not 11.85. Just trying to be accurate. I missed the edit time out.
Went thru Allstate’s report and transcript; get ready for higher ins rates yet again w liability and property damage claims/reserving soaring.. stock up but no thanx. My reason was any hints on ALL-B which some of us own and is floating nicely near 8% now w the float adjustment. It trades slightly over $25 too now.
There were no hints of redemption which would run $500mil..who knows what goes on in the backrooms of the CFO’s juggling returns in these companies.. anyway decided I am fine holding it. Of course if it runs way over par for some reason, I’d probably sell it. Just thinking out loud.
Pruned more ofc REIT risk, many have run up a lot from their lows where I was lucky to buyin and I am narrowing my risk overall anyway. More T-s in the 4.6-4.7 3/6mo in mostly w the Discover savings a/c money. Sweep a/c is near 4% today. Risk on, not for me, for others happy for them! Bea
Rarely Bea, do we ever know what they are thinking on these things. But they do have a marker out there. A 2067 6.5% junior subordinated debt issue last trade today at $102.77. So if they dont want to float 8% they can do better if they chose to. Who knows. I also will ride it while not being surprised if its redeemed soon. But am placing no odds either way on it happening.
Bea, I also have some ALL-B & have been looking for the Reset ##’s ….
have been unable to find the qtr reset .
If you have any source, pls advise. Thanks for the ALL comment.
Jim – the 3 month libor number on the 1st day of the floating period is added to 3.165% So January 16th (Monday) is the date and 3 month Libor was 4.79%+3.165% would be 7.955%. I don’t believe that they will announce since it is debt (unlike a preferred dividend which they have to ‘declare’). I assume this will move to 3 month SOFR later this year as Libor goes away in June.
(I love once they reset Fidelity lists it right on the ticker till the next fix. here is what comes up when you look at the ticker.
ALLSTATE CORP 7.99471% 01/15/2053 PFD
here is what comes up when you look at NSS another one of mine in reset..
NUSTAR LOGISTICS L P SB NT FX/FL 43 11.52643% 01/15/2043 PFD
but not infallible though! here is what comes up for another one where we need Tim’s site and expertise to know the correct curren rate (7%).. LBRDP
LIBERTY BROADBAND CORP CUM PFD SR A 5.00000% 03/14/2039..thankfully we have this resource here!! lol. B)
Tim, Thanks for the heads up re ALL-B reset.
With the mid year LIBOR fade, I have been tracking
3Mo. TERM SOFR, that I have seen comments as to a replace to LIBOR.
Wed ##’s = LIBOR @ 4.79629% ….. 3Mo. TERM SOFR @ 4.684%
Anyone know how much longer we will be able to trade PSB’s delisted preferreds? Thanks