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.
Schwab postpones retirement of Streetsmart Edge until at least 2025 tax season -they announced today ; I was scheduled for mandatory transition on Sept 13; and dreading it ; I was finding based on the tutorials that T or S was almost impossible to use ; at least for me
maybe the next shoe to drop will be – they are not retiring Edge but are retiring Sink or Swim ;
I got the E-mail this morning announcing this
Ted,
Back when schwab bought tda, one of the reasons was said to be that ToS was a better platform and schwab wanted to migrate everyone to it (from Streetsmart). One big problem was said to be that SSE is written/supported by a third party, and schwab wanted to move everyone to an “in house” solution.
Don’t know how much that is true, but that was the discussion inside schwab to the “worker bees”.
For Schwab users- got this email today:
” In July we notified you that StreetSmart Edge was being retired in late 2024. Since then, we’ve heard from some clients who expressed concern about the timing. Based on this feedback, we are moving the retirement of StreetSmart Edge to after the 2025 tax season.”
FWIW, I think there have been a lot of complaints about thinkorswin not being ready for the big influx of customers and having technical problems. I have about half a dozen open support tickets.
I wonder if those who already transitioned can get their Edge back ?
Ted and Private
What issues are you having with Think or Swim?
TOS is why I am putting up with the transition to Schwab
I like to see ; Monitor , watch list (one of several) ,trading , and high-low all in front of me ;
I use alerts extensively; but that screen I keep minimized – a message pops up if any alert is triggered;
I’m sure T or S is as good or better once you familiarize with it ,
but i have been using Edge so long ,I great facility with it .
Lots of issues for me. I used it with TD before. Trade history is wrong. Cost basis is wrong (even for new stuff). The backend trading validation is different and throws errors for multi leg trades where they didn’t occur before. Margin calculations are way different (this may just be because of Schwab’s rules but they are odd: e.g. some Eversource preferreds are marginable and some are not).
I was emailing with the one of the guys that started Tasty Trade (one of the other guys there, Tom Sosnoff, is the guy that sold it to TOS to TD) and I was told that they would be cutting off support to TOS down the road. Not sure if that will happen or not…
Oh, where to begin…
I am sure a lot of the issue is learning curve, but some isn’t.
I keep a very simple SSE format – current holdings (almost half screen), open orders, and small boxes for messages and watch list. i am happy to “pop open” windows for charts, trades, etc. when I need them (which isn’t every moment).
Nice thing is that I can use SSE “in the cloud” and have it look the same as the desktop version. With ToS, the cloud version is (apparently) a very crippled version of ToS, and it has to be configured completely differently (and separately) from the desktop version. Why would I want two wildly different configurations of the same tool?
I often have to use the SSE cloud version when I am in places with really slow internet or where I am tethering off my phone (on 2G – which is often) because the desktop version of SSE has to do lots of checks/updates EVERY TIME it launches, so it can take hours for me to actually get in. The cloud version doesn’t do all that – it just launches immediately.
Note that the ToS desktop does the same check/update thing – but because the ToS desktop and cloud versions are completely different from each other, it looks like I will have to pick the desktop (and hours of waiting), the crippled cloud tool, or just not have a trading platform. Helluva choice.
I definitely need more help with ToS, but its main screen seems way too crowded and (so far) I can’t “deconfigure” it to be simple.
I don’t need news feed, video, forex, futures, charts, etc. on my main screen (I have other places/sources for that – don’t need it on ToS). i also don’t need half a screen of a “trade” window sitting there. I realize I can “minimize” most of those things, but as I do that, they keep “anchors” on the main screen and end up with way too much wasted “white space” so I can’t get what I want to be visible – if I can get it at all.
I had someone who was supposed to be “helping” me configure, but she would tell me “Oh, it can do that. just look in x place and you can configure it”. So, apparently, all I have to do is go spend days ‘playing” with settings. Not helpful.
Also, she has told me more than once that something “isn’t available in ToS, but you can do it on schwab.com”. So, apparently I have to have ToS and Schwab.com open at all times to do/see (what I consider to be) simple things. In fairness, there are things I can’t do in SSE today (trade mutual funds/money markets/bonds, etc), but they promised ToS would be better. certainly doesn’t seem to be (to me). I gotta find a better help person.
Also – because they can’t get me into their “paper money” system (part of my ongoing access problems), all the “experiments” and “learning” I do are in my live accounts (scary).
Oh, and I learned the other day that even if I could get into “paper money”, none of the configurations I do there can be carried over to my “live” accounts. I would have to reconfigure everything a second time (manually) in the live accounts. who was the idiot who thought that up?
FWIW – I am also still having access problems with ToS. Thought they had them fixed, but they are back in a slightly different form. Tech team acknowledges them, but other than comments like “wow, that shouldn’t happen” I am not getting a lot of help. My frustration level is growing.
All of these issues may be one more reason they are postponing transition – if they forced me to transition today, I would be gone this afternoon. I realize my accounts aren’t big enough to “move the needle” at schwab, but I suspect I am not alone.
A chat agent told me yesterday that word had come down that no accounts could be migrated back to SSEdge, no exceptions. Of course that was before they decided to postpone the “retirement”.
I use ToS for the charts and the ability to place alerts and orders on the charts. All of this works well.
Today’s comments on the SSE / TOS issue also hit home for me.
My cut-off was this week, and we all know about the extension.
Today , on my active SSE , in attempts to enter / alter Alerts, get jibberish on my typed entries, UNLESS, I log off SSE and then resign-in, then it takes about three Alert entries and back to junk !!! Schwab has to be in a tough spot. with this TOS switch.
Jim I had no trouble with Edge this morning ; as i said here my transition date was for the 13th
Opinions on KIM-N ? New 52 wk high @ $61- looks like it tends to get there and fall, but not often. Wondering it’s time to sell at a nice big profit, and wait to buy again. Worked it’s way up to the $0.90625 ex date on 9/20 — but over done being up 1.71 today.
thx
Gary, I have a large position in KIM-N (Kimco Realty). I took advantage of the run up yesterday and sold a third of my position and bought some more REGCP (Regency Centers). Both grocery anchored REITs, but Regency sort of stuck in the ~6.5% yield area whereas KIM-N has moved into 5.9 ish territory. REGCP isn’t rated but if it were it would be BBB-
Gary and pig pile –
Can’t fault anyone for selling some of their KIM-N after the huge run-up, but at 6% it is still yielding 40-50 basis points more than KIM-L and KIM-M.
And as you know KIM-N is convertible into 2.2963 shares of KIM common.
So owning KIM-N is a way to have direct exposure to the REIT rally. I own another REIT convertible preferred issued by EPR that has also got jammed higher as the REITs have moved up. And if KIM common eventually trades to $28.30 and stays at that level for 20/30 days, KIM can finally redeem it. But by then you will be looking at $65/share for KIM-N.
So I’m holding on for now and it remains one of my favorite property REIT preferreds.
Doc, yes I have kept around a sizable chunk of KIM-N. It took awhile but that recent run was pretty sweet. Hope it continues, just thought atleast short term it had run its course, so pulled off a few shares to add to one I think maybe be underpriced a bit.
I bot some REG p formerly known as Urstadt Biddle today PP as well..given that CSR and O can/are redeeming their pfds, and Regency’s aversion to pfd debt generally, possible redeem if rates rampage lower in 2025. Moody’s did upgrade their credit. So possible cap gain if called and 6.55% in the Roth if not. thanx for note this AM on this.
Bea, REG solid company, I believe flying under the radar on this preferred, or maybe not, who knows. its like those pesky CEF discounts, once they trade lower then everything else they tend to stay that way for whatever reason.
PP, I see KIM did a big 10yr note at 4.85%, the usual language nothing about redeeming pfds .not a bad rate
I think there is more call risk in many pfds than we might all think yet again. With not much new issuance in the space it is getting more and more narrow in offerings and what to hold.
The CIO-A lookin tempting really have to do more dd on that one tho since ofc.; one Phoenix bldg San Tan is pretty empty overall ..they are hanging in there, rates coming down might help w drawn LOC and refi. Its not SLG that’s for sure.
Bea, yes indeed. The speed of the movement in the bond market has surprised me. It’s my impression that it’s been well overshot, but then I’d be in the prediction business and I don’t do that, lol.
I own CIO-A, have actually thought about offloading but thats just me being Pavlov’s dog and instinctively selling after hefty gains. I’m willing to admit at this point there may be no good reason to sell and take profits.
The call game has already begun in my account as fully half my CD holdings (and a few bonds) are eligible this fall for call with some already announced. I guess more TVE’s, and TVC’s to buy for the future. What am I going to do when TVA has no babies to buy?
Pig Pile, when your holdings are called you can buy KRP.. unless your petroleum engineer friends tell you to avoid it that is.. btw I am long that again. I did nibble/buy for 2WR parlance/ CIO-A a little bit. Office attendance trends according to Kastle have continued higher too. oh and Thanx AzureBlue
Bea, always preferred the term “snagged”, Grid used it alot to describe his purchases. As in, I can’t believe I got it at this low low price!!!!! Snagged. 🙂
Thanks, I like the REGC issue but I like the O issue better than P. I am willing to give up 15 bp’s for an extra dollar of discount.
Some ideas:
1. Sell TRINI price is now $25.90. Take capital gain and move on to a preferred selling below issue price.
2. Buy ATLCL good yield, $1.80 capital gain in November 2026 when it matures.
3. BWBBP and FGBIP both have good yields and are trading below issue price. Should go up in a decreasing interest rate environment.
good comment.. fgbip/pff pair has seen fgbip outperform for the last year..it was 2 sigma rich in february and 2 sigma cheap in march…currently .5 sigma rich
bwbbp/pff pair has also seen bwbbp outperform for the last year.. currently trading near fair value
atlcl/sjnk pair trading near fair value..
You would buy ATLCL in the wake of the AllY scare about weaker consumer borrowers? Too risky for me
Bonds been risin’
– Bought MAIN 6.95% maturing 2029 back in March for $100.54, now trading $105.11
– MAIN 6.5% maturing 2027 bought late May for $100.13, now $102.60
– BBDC 7% maturing 2029 bought late Feb for $99.51, now $104.58
– O 4.875% maturing 2026, bought early July for $99.14, now $100.72
These falling interest rate environments can be good – that is until I need to roll forward…
Myrmikan Research: Spiking the Punch Bowl 🤐
https://www.myrmikan.com/pub/Myrmikan_Research_2024_09_10.pdf
Be brave and take calculated risks and steps toward your own success
I took a look at the charts in there. Perhaps Milk has not been inflating so much because the federal government controls milk prices through Federal Milk Marketing Orders.
Most milk does not trade on a commodities exchange it’s around 1 or 2% on exchange), so those marketing orders influence butter, cheese and whey prices
There;s a 96% correlation between these products and milk just by looking at exchange prices.
Could be more tailwind for preferreds?
https://ca.finance.yahoo.com/news/jpmorgan-leads-wall-street-capital-103309127.html
Good afternoon my income loving brothers and sisters. I went back to buy at the tax free bond window: New Hampshire State Housing Finance Authority 4.45% due 7/1/2044 Rated AAA Moody’s, callable 1/1/2033 Mandatory sinker 1/1/2044 @ $100.682 YTW/YTC 4.35%, YTM 4.398% YTS 4.388% duration 6.864 and convexity .556. ALL housing bonds have extraordinary calls and this bond can be called at any 30 day notice. I encourage each of you to do your OWN deep due diligence as only you decide what the risk and reward will be in your portfolio.
“For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill.” – Sun Tzu
I am Azure
CUSIP 64469MUJ8
Priced 9/5 at par, multifamily. Is there a state or federal guarantee?
New Hampshire State Housing Finance Authority Moody’s AAA; state implied backing. Have to read the municipal bond initial offering indenture my friend
The offering doc wasn’t on emma yet. Multifamily usually seems to be 1 credit level below single family. I have never seen one of these default but there have been some throughout history so I’d consider the guarantor inportant. For example I don’t like NY State deals backed by SONYMA. I favor deals where a fed govt agency guarantees part. The rate you received on this is about 45 bps above sfr.
And yes, in case anyone wonders about the screen name I did lose a mill short GME options
Isn’t GME the next Blockbuster or Redbox?
Blockbuster and Redbox didn’t go from $16 to $480 in a few days. The 800 call went from pennies to $100. Vols to 2000
I havent invested in munis. Probably something I should be looking at. My tax bracket is 35% and hence a tax equiv yield is 6.85%… Something like this is more than likely lower risk than some investments I have.
Thanks
Tell me what state you are in and I’ll recommend something CONSERVATIVE for you. I’ve been reading offering docs for many years. I’ll keep you out of AAA monorail deals .
Losingtrader, I would appreciate the advice!! I reside in TN so no need to worry about state income taxes. I have bought some TN housing bonds which I consider to be safe.
TN housing bonds are great . I own a bunch of Texas school bonds too. These are all AAA because they are backed by the Permanent University Fund, established in the 1800s. PUF holds $35 bill in assets and cannot insure more than 5x it’s assets versus a company like MBIA or Ambac that used to insure 100x and still get a AAA. There’s never been a default on an underlying insured Texas school bond as far as I know. These are non call for 10 years.
That;s a starting point.
I look for AMT bonds because I calculated I’m unlikely to face AMT. You might do that calc because many port and airport bonds are subject to AMT and pay rates .2 to .5 above non amt bonds. Port of Washington, Freeport and Galveston ,Texas are port bonds I own. Lowest rating is A-
TNT, don’t go nuclear on us being close to ORNL, which combined with Los Alamos to make the first nukes.
An off the beaten path muni that is possible. Definitely NOT for everyone.
Literally bankrupt Puerto Rico Electric Power aka PREPA bonds that are insured by Assured Guaranty (AGMC) which is rated A1/AA. Without insurance these would be D rated as AGMC has been making all principal and interest payments for many years. Eventually PREPA will come out of bankruptcy if/when they get a competent BK judge and competent management board.
CUSIP 74526QLY6 matures 7/1/29, but will likely be called at par if/when PREPA exits BK. The insurer has the right to call non-callable issues when they take over responsibility. Also this issue has annual sinks starting 7/1/25. Floater with a current coupon yield of 4.27%. Triple tax free under normal circumstances, but have to consider de minimus rules on cap gains.
Currently there are 65 pieces offered at 96.5, which gives a YTM to maturity ~5.0%. If called or sunk earlier, YTC/YTS would be correspondingly higher.
We have a max allocation to this CUSIP and are not the sellers here.
Just as a side note I think the last report was that 16 pct of PREPA’s power generation is stolen through illegal hookups. (Or my memory is faulty and it’s 6%, but I saw this stat back when I owned COFINA paper, and was looking into living there to avoid US income tax. They were willing to sign a 35 year contract to not charge PR income tax.
Too humid and corrupt for my taste.
North Carolina comes to market on a multifamily today. ’44 maturity indicated
at 4.40 YTM
I made mention this weekend of banking stocks preferred. Yesterday I looked at Tim’s list and it surprising how much of the list was in the red while his MREIT list was heavy in the green. Today the bank preferred are back in the green ( at least for the morning) I did just a little quick research this weekend and here is one tidbit I found.
https://seekingalpha.com/article/4372859-cnb-financial-corporation-new-7_125-percent-preferred-stock-ipo-from-one-of-smallest-regional
I have no interest in the bank mentioned as its value to debt is too high.
What I found of interest is the charts. It’s tedious but pulling up the various preferred listed and using Quantum you can find which have been called, delisted (BK) and which still are trading and their current yield.
Most bank preferred are perpetual and non-cumulative so DYODD
RILY up over 10% this morning. Sold RILYM and RILYZ last week at a gain. Bought back RILYM this morning on news. RILYM matures 2/28/25.
https://finance.yahoo.com/news/b-riley-financial-provides-strategic-110000836.html
Anyone want to borrow against their securities for 5 yrs +3 months at 3.95 ish?
https://www.boxtrades.com/SPX/21DEC29
it will show on tax forms as 60% LT cap loss 40 pct stcl
Losingtrader,
I am very interested in this. It looks like the trade has worsened a bit. Do you monitor this?
TNT,
I think you could get this done around 3.80-3.85 as the 5 year treasury is 3.48.
Perhaps better.
If you do not have access to CBOE’s complex order book, which I do not, you’d have to just enter a price on the box corresponding to a specific rate and wait awhile to see if it fills. If it fills instantly you’ll know you entered it at a bad price.
I’m at a 3.67 yield and did not get filled today. Perhaps in the morning…or it goes the other way, which I see as more likely given how every number has caused rates to drop (I am in at a credit price of 418.70 for a 50k SPX box for dec 29, It should not matter which strike you use as long as they are 500 apart for a 50k box)
Does anyone have an opinion on SNCRL Synchronoss Technolo 8.375% 06/30/2026 Baby Bond?? I am considering it for my IRA.
The common stock had a 1:9 REVERSE stock split on 12/11/23, the long-term debt-to-capital ratio is 84%, and the common doesn’t pay dividends. They won’t get my money.
Can you say, B.Rily? Guilt by association I suppose but one of their infamous underwritings gives reason for close scrutiny
I have a very small position and like the short duration.
Fannie Mae and Freddie Mac preferred jump 5-7 percent on Friday. – was there any news?
The Like Button – Tim – Do we have the ability to specify what costs are to covered by the money we donate individually? If so I’ll gladly make an additional donation to cover the apparent UPGRADE cost for a year to bring back Unlimited Like buttons per page… It looks as though it costs $8/mth to go from Pro to VIP, right? I find the Like button to be so useful in determining what people like to read, I miss when the counter on Likes is no longer available to view.
I would like to eliminate the like button I like that. 👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍👍🐈🐈🐈🐈🐈🐈🐈🐈🐈🐈🐈⬛🐈⬛🐈⬛🐈⬛🐈⬛🐈⬛🐈⬛🐈⬛🐈⬛🐈⬛🐈⬛🐈⬛😸😸😸😸😸😸😸😸😸🍿
Bea, you old termagant!
“termagant” – I had to look it up… Having done that I understand why I didn’t know the word……….lol
many white roses to you and all the curmudgeons! and as Paul Kangas used to say.. to all of you I wish the ‘very best of good buys!’. 🌹
I was hoping you would get a smile out of that one
I just now understood that
Funny, I have only seen the like button once (when I looked in from someone else’s computer). I think my browser is probably too locked down for it to work.
2WR, Personally, I’d prefer a Mute button, but I guess that’s easy enough to do independantly
Bought FTAIN on ex-div day in IRA at 25.30 (CY 8.15%) , below yesterday’s stripped price. Gave up trying to buy at par and broke my rule of not paying above. Likely to be called June 2026.
rocks2stocks….. I own FTAIP, which floats 9/15/24 and can also be called on that date. You may get an excellent read on FTAIN being called on 6/15/26 based on what Fortress Aviation does with FTAIP. In the last quarterly phone call Management responded to an analyst question about the preferreds that float with a statement they were looking into calling them on the float date. Guess you also saw the comments about Fortress Aviation is a Passive Foreign Investment Company (PFIC) a couple of days ago. Everything I read about PFICs indicate if you hold them in an IRA account only you avoid all the downside of holding a PFIC.
I like that whole series ; if you dont have to pay too much over par
hold 200 FTAIM at 25.32 /sh in my IRA ; I consider it a core holding
Funds With $350 Billion Are Exposed to S&P’s New Index-Cap Rules
https://financialpost.com/pmn/business-pmn/funds-with-350-billion-are-exposed-to-sps-new-index-cap-rules
As I read the article, the new rule appears to hurt Microsoft and Apple and benefit Nvidia more than the old rule. Effective date is Sept 20. Just guessing, but since the Mag 7 seem nervous lately, the selling required to rebalance the indices might trigger a sell off by the computer algos.
I’m trying to understand this article, but I’m still not sure I’ve got it right. I think the main point is that the rules for the “caps” on the S&P indices are changing. In particular, the rule change affects which stocks are sold when the “50%” concentration rule is exceeded.
Currently, the 3 largest stocks (AAPL, MSFT, NVDA) comprise 60% of the index. Under the old rule, only the smallest of these 3 stocks (NVDA) would be sold to get the number under 50%. But under the new rule, all 3 will be sold in proportion to their ownership.
In my quick thinking, the change doesn’t really affect the overall market that much, or rather, the new way probably affects things less than the old way would have. But the reminder that this rebalancing will occur seems major: all the big indices are going to be selling a lot of those big 3 tech stocks starting Sept 20.
The flip side, though, is that they’ll be buying something else in the same quantities they are selling. Does this mean that everything else in the index is going to have more than usual buying pressure?
SPX has three holdings > 4.8% of total cap: AAPL MSFT NVDA totaling 19.44% (less than 50%).
S&P 500 market cap $45.84T (sum of caps)
AAPL 3.39T (7.40%)
MSFT 2.99T (6.52%)
NVDA 2.53T (5.52%)
I believe this sentence refers to XLK:
“Right now, three stocks each made up at least 4.8% of the uncapped tech gauge: Apple at 23%, Microsoft Corp. at 22% and Nvidia at 19%. ”
The fate of the other etf stocks will be similar to past rebalancings.
Good clarification, thank you! It looks like the rules apply to all their indices, but XLK is the main ETF where it will have immediate effect.
do you see anything wrong with this?
There are 200 MSEXP offered at 684.
Nobody is paying interest on the short of MSEX unless its over 100K
I can buy a synthetic 65 short for March 25 at 1.35 with msex at 63, getting the effect of the short credit priced into the options, then buy MSEX and tender,
If this goes a full year I should be able to roll it to Sept 2025.
The margin required for this should be the same as the short stock, but I’m getting the effect of a market rate on the synthetic short and dividends are priced into it.
So, there’s about $70 in the spread.
LT – I like how you think. Forget NVDA, how was MSEXP trading at $100 or less for years? It’s up over 600% since this past July with the underlying stock up 18% that same window of time. Do you have the specific convertible terms, ratios etc. handy? This OTC issue appears to be a little more obscure.
It’s convertible at a 12-1 ratio to common, which, after you deliver settled stock to Broadridge, and send them a conversion demand I’ve posted under the illiquid stock category, will be delivered to Broadridge by MSEX in between 45-90 days. That stock will have a restrictive legend prohibiting sale until MSEX has received a certification from you that you have held it for 1 year (my read of 144 is that it should be 6 months but BR is using a year for now–and I’ve asked the company to comply with 6 months). At that time MSEX will advise BR that the restrictive legend may be removed.
So, you have 1 year holding cost on the long, but should get dividends is my understanding, plus 1 year holding cost on the short…which should be a short rebate.
OK – I’m replying to you over in Illiquid section as there is a good discussion going on over there now.
Stormy weather Westie here……
When unfavorable conditions arrive:
– falling interest rates
– undesired redemptions/calls
– falling prices
– possible recession
it is too late to react.
Hunker down, don’t trade. trust your long term strategy
Westie – I can’t help myself – your comment reminded me of a wonderful song called “The Cape.” It’s by Guy Clark who I also happened to have quoted earlier in the week. I like Patty Griffin’s version better than the author’s so here’s that link – https://www.youtube.com/watch?v=80J5s2KOy0s&ab_channel=PattyGriffin-Topic
the first verse = … Eight years old with a floursack cape
Tied all around his neck
He climbed up on the garage
Figurin’ what the heck
He screwed his courage up so tight
The whole thing came unwound
He got a runnin’ start and bless his heart
He headed for the ground
… He’s one of those who knows that life
Is just a leap of faith
Spread your arms and hold your breath
And always trust your cape
Fitch on Banks – https://www.fitchratings.com/research/banks/us-bank-cre-lending-dashboard-august-2024-04-09-2024 – from August 9
Does it seem like there’s a stampede to enter fixed income right now?
I have difficulty buying a 6% BBB+ perpetual prfd when I can get 5.5 on a 5 year annuity.
OTOH my average remaining lifespan is 17 years. That’s why i buy 40 year munis v 20 or 30.
Comments?
LT you are correct. The herd is rushing to lock in what they think are rates that will be good for the future as the Fed starts to cut. Move down one level in the credit rating and you can still get 6.72% on some of the BBB- rated BHFA series. You along with the herd will be helping with the capitol appreciation of the ones I hold in my accounts.
how about ETF JBBB ; yield 7.7%
Not saying my line of thinking is correct, just sharing… and I’m a dummy when it comes to annuities.
I love 6% qualified from a high quality issuer. From a credit perspective, I prefer a high quality Ute over most insurance companies. I rather lock in the 6% yield (for a long time) than risk having to invest in 4% yields if rates drop. I can live with the price volatility if rates rise, knowing I am getting my 6%.
Maine, couldn’t agree with you more on the long term horizon. I guess that is why Fido is saying my mix of holdings looks short term. My crystal ball is in the shop as things look cloudy more than 6 months out.
Here are my alternatives:
BBB perp prfd at , say 6-6.25
AAA muni due 54 non call for 10 at 4.15
A+ muni subj to AMT 20 yrs at 4.37
I’d net perhaps an extra 1-1.4 pct on the prfd
Q: Is the risk of default to get that yield worth it?
(I don’t think I’ll be subject to AMT most years)
losingtrader ;
Funny you mentioned that. I recently read the average lifespan for a male in the USA is 75 years and 81 for a female. I am currently a 75-year-old male and thinking of making the change to pick up 6 more years 🙂
So you’ve already hit 75? Congrats! But here’s the good news: once you hit that milestone, your “average expectancy” gets a little upgrade. On average, women at 75 may live to around 89, while men might live to about 85. But hey, those numbers can vary based on things like health, lifestyle, and how many vegetables you sneak into your diet. So, plan accordingly and just keep doing what’s working!
I wonder if we’re heading back to an environment where the prevailing current yield is 5.0-5.5% on high quality QDI issues.
Here are some current yields based on last price traded today:
ALL-I – 5.19%
BAC-S – 5.37%
CFR-B – 5.30%
JPM-J – 5.14%
MET-F – 5.39%
MS-L – 5.28%
NTRSO – 5.29%
SCHW-J – 5.13%
USB-S – 5.26%
Just something to think about. Perhaps 6.0% in BBB+ could be a strong buy…time will tell.
Term SOFR and Treasury Forward Curves
https://www.chathamfinancial.com/technology/us-forward-curves
SOFR projected down 200bps in 2 years, mostly in one. OTOH, the 5-year yield has mostly bottomed according to the chart, an interesting thought when applied to 5-year reset preferred buying plans.
I have no idea how these forward curves will compare to reality. The trends seem reasonable, the timing is something else.
Along these lines, can someone tell me if I’m interpreting the “1-month Term SOFR swap rate” correctly here: https://www.chathamfinancial.com/technology/us-market-rates
I think this is saying (for example) that the market currently thinks a 3 year maturity floating rate security that pays at 1M Term SOFR is equivalent to a fixed security that pays 3.3% over that same 3 years.
Is this the right interpretation? I think this agrees with the Forward Curve link, but is a lower rate than I would have guessed off hand.
FWIW: TLT ishares 20yr ETF, was 96.18 the day before ex date of 8/3 — on the ex it opened at 97.56, closed up 1.57 @ 97.75 and now is 98.73 ! Quite a jump- a change in the wind? Current yr low 85.90, 14.93% gain since May.
anyone have any good money market alternatives? i have a big stack of cash in MM’s from selling preferreds and baby bonds and since i expect MM rates to fall as the fed eases im looking for other very short term investments.
Check out the first post on Reader Initiated Alerts
Sorry, I read that wrong.
JAAA 6.57%
Jack Atherton;
Looks pretty good, just happen to have a 5K 5.25% CD maturing next week, probably will put the 5K into JAAA. Was thinking about another Agency bond but they seem to be getting called at under 6% now. Was going to add to my SCE-N position, but it is over $26 now.
Has anyone done some deeper DD on JAAA types? The super tight trading range going back to inception since late 2020 is most impressive including the yield meltdown of 2022.
JAAA has paid out over 40 distributions (monthly) since late 2020. For the first two years distributions were all under under 10 cents (.05 cents monthly average lands annualized yield in 1.5% range)
Then going into 2023, a big uptick, an average of 25 cents per month on 20 distributions to present day hence annualized 6.60% range.
My point is now with an imminent return back to declining interest rate environment on a go-forward basis, what kind of visibility is there say for the next two years of distributions; has this yield peaked?
Dunno. If the yield drops I’ll sell. It is a very liquid position.
rdking647…… You can try playing with preferreds that there are indications / rumors they will be called shortly that aren’t overpriced. I have had some luck with this as short term investments. About the worst I have experienced is you get your capital back and maybe a percent over the current MM rate. My latest target has been the Fortress Aviation preferred FTAIP. The last quarterly meeting CFO or CEO (don’t remember which one) responded to an analyst question by stating they were looking into calling them. I bought FTAIP just a few cents over par and waiting to see what happens. It is 8.25% fixed and floats 9/15/24. Maybe I will get lucky and get one quarter or so of the floating dividend if they don’t call it also on 9/15/24. but the worst is 8.25% plus I get my capital back. Just a thought on very short term investing……. There are some other possibilities out there that have been posted on, but I haven’t followed as my available cash is very low right now. Basically fully invested……
I hope you are buying the FTAIP in an IRA.
Justin…. Roth
Justin… Fortress Aviation is a Passive Foreign Investment Company (PFIC). A real no no to own outside of an IRA.
I know this has been discussed before but can you explain? Are there really NO tax implications or complications at all if bot in an IRA? I thought I remembered there were still complications to your tax reporting if bot in an IRA..
fine for PFIC in IRA /401k which was updated to be ok by IRS I believe in 2014. Not tax advice! ok to hold small amounts in a taxable w/o filing the forms but your broker has to cooperate too! I have two PFICs in my Roth IRA. https://help.taxesforexpats.com/en/articles/6740252-passive-foreign-investment-companies-pfic-form-8621
again not tax advice but same all over the internet including from PWC the big acctg form. B
Bea, without realizing it I bought a PFIC a few months ago. It’s value is only around $6,000. I plan on selling it before the end of the year. I’ll collect around $100 in dividends. Do you think I’ll need to file form 8621? From the link you provided it seems like I might not have to with the De minimis exception. You also mentioned something about your broker needing to help. What does that mean? Thanks for any help.
mp
Reading Bea’s form, there is a De Minimus exception – form not required if holding under $25,000
I forgot to mention it’s in a taxable account.
Being skeptical of any tax issues, what sticks out to me in the link is
“If a PFIC investment is held within a qualified pension plan, such as an Individual Retirement Account (IRA) or a 401(k) plan, the taxpayer is not required to separately report or record it for tax purposes. The tax treatment of PFIC investments within qualified pension plans is typically deferred until distributions are made from the plan.”
To me that implies that what’s really happening is not a NO PROBLEM issue if owning a PFIC in an IRA – it’s a delayed (aka deferred) issue that will still happen, but not until you start hitting on your IRA or when you have to do RMDs, yes? And if you continue to hold in an IRA for multiple years after you start RMDing, does it cause additional reporting headaches every year????
Forgive my cynicism… hopefully it’s misplaced… I have liked FTAIP but took it off my list after prior discussion re PFIC…. Different tax problem but I remember unloading AATRL in response to Justin pointing out the potential tax ramifications there too.
Does this ease your mind?
https://www.irs.gov/pub/irs-pdf/i8621.pdf
Instructions for Form 8621 (Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund
Who Must File
……
Generally, a U.S. person that is a direct
or indirect shareholder of a PFIC must
file Form 8621 for each tax year under
the following five circumstances if the
U.S. person:
.(blah blah blah) ….
However, a U.S. person that owns
stock of a PFIC through a tax-exempt
organization or account described in the
list below is NOT TREATED AS A SHAREHOLDER (emphasis mine)
of the PFIC.
• An organization or an account that is
exempt from tax under section 501(a)
because it is described in section
501(c), 501(d), or 401(a).
• A state college or university
described in section 511(a)(2)(B).
• A plan described in section 403(b) or
457(b).
• An individual retirement plan or
annuity as defined in section 7701(a)
(37).
• A qualified tuition program described
in section 529 or 530.
• A qualified ABLE program described
in section 529A.
Note the wording. You’re NOT A SHAREHOLDER. To me, that means there are no onerous consequences down the road because YOU NEVER HELD SHARES OF A PFIC in that account … even though you did.
I’d say the IRS has tossed us a bone; take the win. But, I’m not an accountant. Read the source document and let me know whether you
agree.
Cheers.
Justin – You want to weigh in?
for very short term, you could look at TRINL and SACC. They have 1 more payment left before maturity. A little further out, you can look at SBBA
647 – Not sure how short term you are looking for. But maybe find a few preferred or notes that are coming to maturity soon, buy near par and bank the dividend until maturity. As an example, MDRRP trading at $25 with 8% coupon and matures 2/19/25.
Personally I moved a good amount into fixed rate and decent quality preferreds a while back to lock in rates and also capture some capital gains as rates drop.
I don’t own but have considered SGOV. Then there are short term BB’s and some short term ‘TERM PREFERREDS’ from CEF’s like EICA and PRIFG. So, I have some of my “Cash” allocation in those instead of in the MM, but it’s my cash reserve and not something I think I might need in an emergency.
You could look at Spire Series A. It is past its call date and has a current yield of 6.011%. It ended the day at 24.54 and has about 8 cents of accrued interest. It has a lot more liquidity than many utility preferreds.
I’ve decided to leave the site. We are either going to respect the position of the site to stop political posting or we are not. Apparently, we are not.
I will not sit silently with discussions of tax policies that are designed to favor a candidate that I disagree with. So, my options are to correct the record by discussing why a tax policy held by one party may be vastly superior to another. That means I become one of those that I criticize.
Bye, Bye – Enjoy
Over time, I’ve run into sites, threads, forums, people, ideas, opinions etc etc. Generally the advice of just keep scrolling works if one is to avoid a discussion of certain topics. Not sure why this is so hard for you (or others), but trust me, it works. There are many topics on this site that I have no interest in, I just move the mouse wheel and off I go. Don’t feel the need to address things you disagree with and perhaps you can relax a little easier. My opinion, which means squat, tax policy is legit financial discussion. Every forum I’ve ever visited this is discussed, politics and all, uncomfortable or at home with like minded people, it’s completely legitimate to discuss. Inherently, from my experience, most investors will try as they might to avoid taxes. This undoubtedly creates a situation where one side of the aisle’s approach is favored. Not always, but most of the time. You can’t make an argument by quitting the site because you had to read something you disagree with. My .02 cents, which is worth .01 cent.
“ My .02 cents, which is worth .01 cent.”
It might be worth .015 cents if you vote in the right candidate!
(ducks, exit stage left)
Can the moderator or site owner even legally control these posts? I’m not sure he can. Social media types are back pedaling on censoring disinformation, political statements, etc. If I owned the site I wouldn’t want to have to referee this sort of thing, and plus, it will all be over in a few weeks anyway.
Steve, I would like to continue hearing your opinions on investments. You reacted to my comment which included criticism of a proposed tax policy. Wasn’t intended to promote a candidate it was about the policy itself which definitely would affect investors. It’s been suggested in the past by others.
I checked on expecting to see no reaction to my post. I expected to see none. But since there were several to this and prior postings, I will close out my last post with the following.
Discussions that come about as a result of issues in a presidential campaign are political postings. There is no greater divide between the political parties than Tax or Investment Policy. This is not just a discussion of WHAT is taxed. This is also a discussion of who GETS taxed. It is a discussion about tax fairness and correcting the tax system. Who wants to deny that Republicans believe in supply side tax & investment policy and the Democrats believe that the most affluent need to pay their fair share? THIS ISSUE IS CENTRAL TO ALL POLITICAL CAMPAIGNS SINCE 1980.
Postings on this board about the democratic proposal were wrong ignoring that they only impacted those with 100M in assets. Having been corrected, they have morphed into Fear, Uncertainty, and Doubt (FUD) that asset limits could be lowered in the future. They are not based on anything but individuals expressing their views of what this could become in the future. I have my own concerns about what happens if we don’t increase taxes on those that could afford it. I think my concern is much more valid than the concerns expressed about this item. Is this what the participants on the board want to hear?
The policy on this board is no political discussions. It should be restated to reflect how it presently operates. No political postings unless most of us agree with them.
I am not going to participate having to bite my tongue by not answering political posts.
Good luck investing in the future.
That’s a bummer to see people leave as diversity in researched opinions makes us all wiser. It can be hard to scroll past things that offend us and I didn’t see the messages that triggered all this but there are some great ideas here that I really appreciate and try to add to.
I and I am sure many others hope to see you return if you see fit.
It is a bummer when people “leave.” But based on the volume of posts, and what a great website this is… I doubt anyone has truly, “left.” Why? Tim’s site along with many followers and posters are just way too damn smart. Leaving this site for me would be like me saying, “I am giving up steak for the rest of my life.”
I could go through a list of an easy 20 folks here that provide so much value, that I would rate it priceless. This is just a pebble of sand on a 20 mile beach:
– 2whiteroses will set you straight on the exact amount of dividend left or final payment of a called security.
– Grid can get you information on an obscure preferred created in the ’30s.
– Tim keeps everyone and this site running and has his posts of his thoughts on investments, lists, etc. Those spreadsheets are great.
– Charles posts daily with comments and thoughts. He is like having your morning coffee and reading the paper.
– Pig’s common sense on about anything
– Beas history and insight on topics, sage advice. I learned you can possible to an assumable mortgage.
– Martins posts about swapping A for B and his logic. He also has great common sense and feel about an investment.
– Azure posts on investments that are typically outside of most followers that provide a view into things like using land for advertisement, forestry, and of course various bonds.
– and many many others.
Take some time to cool off. Find joy in life’s simple pleasures, like enjoying some ice cream, going antique shopping, or watching an exciting UFC fight night if that’s your thing. When people are emotional, they often become irrational.
As we age, we often believe that our perspectives are nearly always correct. This can make discussions challenging when others don’t agree with our viewpoints, definitions, or ways of thinking.
Your bias is more political than anything posted. Don’t want us to speak anything that might oppose what your candidate proposes even if it’s not the intention to pimp for votes we’re discussing economic policy that affects investments no matter who you want to ascribe ownership to. That kind of policy is created higher up than any one candidate.
SteveA, The proposed tax change only affects taxpayers making more than $100M? Let me remind you of the Alternative Minimum Tax which was implemented in 1969 because 155 rich millionaires weren’t paying their “fair share”. The AMT was not adjusted for inflation so it resulted in a few becoming many. It has been out of concern since 2017 when #45’s tax cuts
implemented an exemption to significantly reduce the number of Americans that didn’t have to pay the tax. At the end of next year those tax cuts expire and the AMT which was put in place to only affect 155 people is going to affect 7 million taxpayers (4% of tax payers). I would expect that many people on this board are going to be affected. I read how investors try to purchase QDI shares to reduce their taxes. I also do that and make sizable conversions to Roths to keep the taxman at bay. So red and blue tax policies are an important discussion on this board. I’ve been away from the board for several weeks and it appears there was a healthy discussion on the tax on unrealized gains. If I’m repeating anything previously discussed, I apologize, but I’m not going to ignore major tax policy changes that will affect many of the interested readers on this board. Thanks
Steve , you continuing with you BS.bye, bye, bye hope not see you any more
Yes, I remember agreeing to no political discussions as long as I have free reign to criticize HDO 😀
The one platform position to unite all parties
What is worse?….a person that cuts taxes by $10 and cuts spending by $9 or a person that increases taxes by $10 and increases spending by $11?
Neither lead to real success.
Reminds me of the parable in Mt.21:28-31. I wish we actually had a real choice IRL.
Is this a doubly inappropriate post – politics AND religion? 🙂
-Neither lead to real success.
Correct, but with the ROI (see: waste/fraud/abuse) on government spending, any reduction in spending is inherently better than any increase. It’s hard to fight corruption, it’s easier to remove the conditions that allow it to exist in the first place.
The choices can also be described as: Do we put the glutton on a diet, but also allow them unlimited cake, or do we just skip the diet part and just shove cake directly down their throat? The glutton should start writing their will either way, the only difference is how fast.
Regardless of ones views, the goal should be minimizing and/or localizing government, and electing honest people who will spend our money only when truly necessary. History has proven that the larger a government becomes, the more it’s people suffer.
Steve,
I am the one who posted the reddit post about tax strategies. Buy, Borrow, Die thing. I stumbled upon it that evening via the constant political astroturfing done by Democrats on reddit. It is really hard to avoid there as the platform has become an echo chamber for them. They bring up this tax topic so often to slam the wealthy that I wanted to google how this theory actually worked in real life practice. Most people have zero clue how or even if it really works including the people on reddit who try to discuss it like they actually understand it. I try not to be so ignorant. My wife says I still need to try harder though.
With that said I dig for real information via google when I want to understand a topic better. It just so happened to take me to a recent reddit post. My link to reddit was a substantial amount of detail that goes beyond even what business articles get into from such places as bloomberg or the wall st journal.
So I thought of the users here. What a nice juicy informative article that person wrote on reddit. Let me share. I kept my post very short and brief with no political commentary. I cannot vouch how accurate the reddit post is without more research and I can see flaws (risk) in the plan as described in the reddit post like uh.. assets can sharply go down in value. Strange concept but it happens from time to time. The good ole margin call.
I am just saying you are a bit paranoid Steve. That I posted it with the grand plan to sway opinion, generate political conversation, or what have you. It was simply a high quality reddit post that delved into a complex tax topic that is not easily understood. Most likely any political commentary would have died on the vine if you simply ignored it instead of replying to it multiple times.
Thanks for posting that btw, it was a very good look at some of the tax planning and details that one might want to think about at the appropriate time.
Amen. FC
CIMprB….Went ex-dividend today ($.71) priced now at $24.47. Could be called at any time, but I don’t see any real downside. I added to my position.
I loaded up on CIM-B to keep some and hoping to flip some in the dividend capture. But 24.47 is too low and I still have all of it. I’ll take the 11+% until I get a price I like better.
Martin, A calculated risk? The glass is half empty or it’s half full? Buying a Mortgage REIT on the premise that if rates are cut then demand for mortgages goes up. Yet inventory of existing homes is tight because no one is willing to give up low interest rate loans they locked in several years ago. New homes are expensive due to land costs, labor and materials. With a possible slow down of the economy already started, real or imagined pushed by the news makes buyers hesitant to commit.
I think the pendulum has to swing completely the other way to show the drop in the economy has hit bottom and is starting to grow as evidenced by positive news stories before I would trust my money in MREIT’s. Next Spring by the earliest.
“no one is willing to give up low interest rate loans they locked in several years ago?” I am…. Still trying to unload my 2.25% mortgaged house with no success… Even though it seems everyone has nothing but wonderful things to say and nobody complains about price, I’ll be doing another price drop on Friday, the fifth one. Some of the buyer’s excuses I’ve heard have been amazing……
my dear 2WR, maybe someone would be interested in an assumable mortgage as an incentive to sell. ROAM https://www.withroam.com/
saw that yesterday on CNBC.. doesnt seem to fit your TN oasis. Probably more entry level homebuyers not sure.
Incredulous that some newly rich country star doesnt by that incredible gem. Turning into a buyers market in many places I heard. Sorry you have to go through this. I’d be callin that agent every day and screaming at her, but you know how I can be/Bea! lol. Hang in there.
SteveA, please just lurk for a month and rethink, i got my ‘BeeBea’ in a bonnet too in the past- but it is an election year and people are just buzzin w all the noise, it will settle down, and I took 2WR advice and PP’s advice and just scrolled past. The dam election cycle is 365days a year now and hard to ignore isnt it! it is hard. Take care. We are a good little community and need each other to help, the main goal. Bea
Bea love my sister dearly, but thank God I quit FB. My wife has been giving me weekly and daily updates about my sis’s political rants on her linked account. Yes I know you can put people on mute or un-friend them but with family you just have to suffer through. The elections will be over soon and we can get on with our lives.
Is the mortgage assumable?
Charles – I think it would have been a gigantic plus I would have remembered if it had been described as assumable at the time I refinanced, but I guess at this stage, it’d be well worthwhile to double check…. If I find out it is, a gigantic extra donation will go to III in your and Bea’s names…. lol
Dang 2WR, that is one low mortgage rate. That has to be the very bottom, I have 2.75 and I am ecstatic about that.
Renting not an option?
I paid for it, so APY as I remember was about 2.40% after points, but still, timing in hindsight couldn’t have been better………. I don’t have the mentality to be a landlord – lol… It’s home ownership I’m trying to get out from under at this stage of my life…..
You could let a rental management company to do all the work, screening tenants, writing leases, collecting rents, scheduling repairs, etc. In fact I’ll bet Caldwell either has a rental division or a good relationship with one in the area. You’d get a nice income stream plus a tax write off and the opportunity to move on with your life. In a couple of years you can sell it and still be eligible for the tax free $500K gains (unless the rules have changed).
Another idea might be to offer a ‘rent with an option to buy’ agreement to prospective buyers who like the home but are balking. Make it renewable for two additional years so you keep your capital gains exemption. Talk to your broker, she’ll know if its possible.
Good thought, CW, but first call would have to go to the HOA to see if rental is a possibility. There have been none that I am aware of in the 17 years I’ve been here.
As a retired real estate agent, you might want to take it off the market for a while. Buyers don’t tell the truth about why they fail to make an offer. Obviously the price was too high. Did you have several agents suggest a list price and take the highest one?
I’ve thought about that but it penalizes me as well to take it off… Maximizing proceeds is no longer important. Getting gone is….. No I did not interview other agents, I went with a woman who’s been my broker on several occasions and also the one most familiar with this area…. With Coldwell Banker behind her, I felt it was the right choice… What she did was research comparables (a very difficult thing to do for my house) and provide me with a CMA on houses that closed within 3 months…. Once she did that, I told her to price it 100k under the lowest number in the CMAs in hope that that would make it go quickly… 125k less later and there are still no takers….. I even had a looker show up in my backyard unannounced yesterday (yes in a gated community no less) and had my broker ultimately handle them on 15 minutes notice… yes, sure maybe people lie about their reasons, but what I don’t understand is why I haven’t even received a low ball…. Without that, I feel as though I’m operating in a vacuum on pricing.
This may be off topic, but at least it’s not politics…. lol
2WR, you don’t want to know what the 14,000 sq ft mansion that sits on 7.5 acres a couple of houses down from mine went for after being on the market for a few years.
The real estate market is hot here, but my guess is that there is no appetite for higher end homes. The ones I have seen seem to sit a long time before they move. Us Scots-Irish are cheap!
Charles, falling prices are not my main concern with preferred stocks. I get my dividends and make my trades whether the tide goes up or down. Of course I’d rather prices go up but the only way I really lose is if somebody defaults. I know that’s different than how most people think but it works for me.
Hi Martin, I had to scroll way back to connect your comment with what I said. I think a lot of us are opportunistic buyers and we hold because we get a good buy on the preferred and BB
I need the dividends and get nice returns when I buy at discounted pricing. Yesterday and today I have been a bird soaring high above the statues. I change my strategy depending on what I read and what I infer from what I read and my life experiences in the building biz. I just don’t expect to see a lot happening in the residential building biz. Rates come down there will be a modest influx of people refinancing the short term buy down loans that reset in one to two yrs and people are sweating as they start to come up on the reset date. School has started and parents have settled in and are not ready to make a move, the bad weather with fall is coming and shorter days affect people’s mood on making a big purchase. The economy is slowing and workers are not so eager to job hop when they see and hear about layoffs. I can think of more negative points than positive to stay away from investing in lumber companies, mortgage companies, building supply co’s etc. for at least 6 months or until I know what direction the economy is going.
I feel we are at that tipping point the glass is half full or it’s half empty depending on who is judging it.
would appreciate opinions on this tax “roll.”
as follows: Use spx options to borrow $500,000 for 5 years; presently the implied rate is about 4%.
“interest” expense would come in as 60 % long term cap loss/40% short term cap loss each year.
Take the approx $500,000 and buy BOXX for 5 years and only pay LT capital gains if I sell BOXX. Otherwise there’s no tax on unrealized profit, even though BOXX is just extracting the short term treasury rate plus approx 25-40 bps.
Is the only risk that short term rates fall too far, causing the ultimate gain to be less than the short and LT cap losses?
Alternatively I could use the proceeds of the short box trade to buy a 5 year target date treasury (or even corporate )bond fund? That’s a question because I’m not sure such a thing exists .
I would def need to have gains to offset the losses reported from the short boxes each year.
This was not necessarily meant as a series of taxation questions as I’m aware IRS may try to tax BOXX “gains” each year , at least at some point.
I’m just wondering if people think this is a good way to defer tax by taking advantage of the borrowing capacity of existing positions without incurring margin interest.
FYI From Barron’s:
BOXX ETF’s tax fumble. The BOXX ETF, named for its innovative use of box spreads, was set up to achieve a hard-to-obtain result—delivering a risk-free rate of return (that of a short-term Treasury) without subjecting holders to ordinary income-tax rates. The strategy worked for a while, and the fund grew to $4 billion, but in mid-August, it distributed some short- and long-term capital gains, disappointing some investors.
anyone surprised?
RMH, If you read the entire article it explained what happened to cause. And it explained what Boxx has done to correct.
PetoskeyMI
Article has a paywall. Will the results of their corrective efforts allow them to go back to their no distribution policy? Thx.
they were using certain index option based box spreads and are now using etf based ones, which they suggested would not have the same tax issue that caused this recent distribution.
i’m no tax expert on this to know, but that’s what the article quoted someone as saying the fund was doing.
Hmm. So you’re borrowing via box spread to invest via BOXX. I think you’re correct on the tax treatment. But it seems like a very minor tax arbitrage, no? Even if we assume there’s no interest rate risk, what would you actually be netting here, in bps/annum?
“I’m just wondering if people think this is a good way to defer tax by taking advantage of the borrowing capacity of existing positions without incurring margin interest.”
It’s absolutely an incredibly powerful way. I have been writing boxes for years for various strategic purposes whether it be a 2-3 year/shorter term loan need or going long another position. A comrade of mine put half of his proceeds into NVDA. Presently you could get cash credit easily 300+ bps cheaper than a mortgage/personal loan rate or even a higher savings spread vs. current retail margin rates.
Just make sure you only utilize Euro/cash settled style. Get close to current market price and most likely two of your legs will be in the money. The max width I used was $100 in either direction but you could play around with this.
To give you an example I generally did mine in 10 lots so say you are credited with $98,000 and your max width is 100 either direction. That means you have to pay back $100,000 at expiration. (Remember only Euro style gives you no call risk, so you can count on entire duration)
All brokers work differently but if you have a good one, they will mark this entire position as a box and your up front margin requirement will only be based off the $2,000 cash you are effectively short vs. the credit you received; i.e. you were paid out $98K but have to pay back $100K.
I found from carrying some boxes last year-end, Fidelity does not mark SPX boxes correctly, while IB does. However IB told me I could not withdraw the money, while it appears I can at Fidelity. IB would allow me to buy something via IB such as a security.
I started selling boxes because the 5 yr box was around 3,5% at the time and I found a credit union paying 5.57 dividend rate on a 5 year certificate. So I did a million of that and decided I’d have to find some capital gains to offset the fact the tax reporting is that of capital losses.
I spent 6 months getting Fidelity to mark the position correctly as of 2023 year end. I am on the 4th 1099-c.
The whole discussion about buying BOXX with the proceeds would be a way to defer taxes until I die, then my heirs (my 3 beagles) could have a stepped up basis…I think.
LT and Theta,
Fascinating discussion. I am new boxes. Would appreciate an education. Do you have sources you recommend? Also any brokerage firm you have had a good experience with? Using these for investments, homes, etc. seems fascinating.
Sure.
First, I am willing to bet IRS decides to challenge tax treatment of BOXX because it seems to violate conversion rules. I am not a tax expert or even a CPA. I have a BBA in accounting which qualifies me ” not at all” to speak on taxes as the typical accounting grad has taken 2 tax classes unless in an MPA program. My comments about borrowing to fund BOXX are theoretical.
Start here: https://earlyretirementnow.com/2024/04/17/box-spread-as-high-yield-cd-alternative/
Next, take a look at boxtrades.com which will calculate the net debit or credit order price for a given yield or vice versa. Very helpful, but I only checked the calculations once and I’m not sure it takes into account the fact securities expiring on Friday morning, and settling the following Monday, are losing 2 days’ interest. In the scheme of a 5 year box I don’t think it matters much.
These things are not super liquid. All 4 options may get marked way away from theretical depending on the broker. IB marks it correctly. Fidelity does not . This only matters at year end, as all index options are marked to market at year end…and these don’t trade very often so you’re hoping the broker marks it as a spread.
A few weeks ago in the Sandbox, DJ, 2WR and I had a discussion about utility investments. DJ had held some Utes since 2008 and questioned whether to continue holding them or not. I proposed they might have a higher long term total return because of the “Gordon Dividend Growth aka GDG” model which adds current dividend yield to the dividend growth rate. I stated that many investors look for >=10.0%. I posted a brief summary showing that the Ute ETF XLU, had an IRR= 10.11% compared to the preferred ETF PFF= 6.90% over that time period.
The bigger question was how individual Ute holdings performed. I decided to take a more detailed look. It might be helpful to some III’ers as to the methodology involved. Many, if not most, back tests look at how all of the issues that trade TODAY have performed. This leads to a problem called “survivorship bias” because it does NOT include issues that traded at the start of the time period. My starting point for this study was to look at all SP500 Utes that traded on 12/31/2008, regardless of if they are still trading or not. Results:
35 Utes in the SP500 that traded on 12/31/2008
10/35= 29% have not traded continuously since 2008. 9 no longer trade= buyouts?
I am attaching data on all 35, but would have used the following criteria as the first screen for purchasing in 2008.
2004,2005,2006,2007,2008 divs>0 and increased every year which reduced the field from 35 down to 19/35= 54%
10/19 had current dividend plus 3-year dividend growth rate>=10.0% of which only 6 have traded continuously, but that was unknowable in 2008. Which means you cannot definitely say how all 10 would have performed since then. It is possible to determine how the 4 lost children would have done, but would take more work.
In any event, here are the 10 sorted by highest div yield + div growth rate
Format is ticker, type of Ute, 12/31/2008 yield, 3-year div growth rate, yield+Div growth, IRR from 12/31/2008 through 8/30/24, comment (in a CSV format to import into a spreadsheet)
WMB, Nat Gas, 3%, 69.6%, 72.6% ,14.5%
CEG, Electric, 7.6%, 15.1%, 22.7% ,NA% Bought by Exelon, public again in 2022
PPL, Electric, 4.4%, 14.2%, 18.6% ,5.5%
FE, Electric, 4.5%, 13.6%, 18.1% ,4.1%
EIX, Electric, 3.9%, 11.6%, 15.5% ,10.4%
SCG, Electric, 5.2%, 6.4%, 11.6% ,NA% No longer trading
FPL, Electric, 3.5%, 8.1%, 11.6% ,NA% No longer trading
TEG, Electric, 6.2%, 5.2%, 11.4% ,NA% No longer trading
PNW, Electric, 6.5%, 4.7%, 11.2% ,11.3%
SRE, Nat Gas, 3.3%, 7.4%, 10.7% ,12.4%
Here are the 9 that had div+div growth rate <10%
WEC, Electric, 3.2%, 6.4%, 9.6% ,13.6%
EQT, Nat Gas, 2.6%, 6.9%, 9.5% ,4.9%
XEL, Electric, 5.1%, 4%, 9.1% ,11.8%
AEP, Electric, 4.9%, 4.1%, 9% ,11.7%
D, Electric, 4.9%, 3.9%, 8.8% ,7.3%
SO, Electric, 4.5%, 4.1%, 8.6% ,10.5%
PGN, Electric, 6.2%, 1.8%, 8% ,NA% No longer trading
ED, Electric, 6%, 0.9%, 6.9% ,10.7%
PEG, Electric, 4.4%, 2.1%, 6.5% ,10.9%
Here are the 16 that would NOT have been considered because to lack of dividend growth through 2008
CNP, Electric, 5.8%, 19.3%, 25.1% ,9.3% Div cut in 2005
DTE, Electric, 5.9%, 1%, 6.9% ,13.7% No div growth in 2006
DUK, Electric, 6.1%, -7.9%, -1.8% ,11% Div cut in 2007
ETR, Electric, 3.6%, 10.9%, 14.5% ,6.9% No div growth in 2006
EXC, Electric, 3.8%, 11.8%, 15.6% ,3.8% Div did not grow in 2006
PCG, Electric, 4%, %, 4% ,-2.1% No divs in 2004
POM, Electric, 6.1%, 1.3%, 7.4% ,NA% No longer trading
TE, Electric, 6.5%, 0.9%, 7.4% ,NA% No longer trading
AEE, Electric, 7.6%, 0%, 7.6% ,10.1% Flat divs from 2004-2008
AYE, Electric, 1.8%, %, 1.8% ,NA% No longer trading
CMS, Electric, 3.6%, %, 3.6% ,16.8% No divs paid 2004-2006
EP, Nat Gas, 2.6%, 0%, 2.6% ,14.9% No longer trading
GAS, Nat Gas, 5.4%, 0%, 5.4% ,NA% No longer trading
NI, Nat Gas, 8.4%, 0%, 8.4% ,18.2% Flat divs from 2004-2008
SE, Electric, 6.4%, %, 6.4% ,NA% No longer trading
AES, Electric, 0%, 0%, 0% ,7.3% No divs paid 2004-2008
There is a lot to digest here. I will NOT definitely state what an equal weighted IRR would have been if you bought the original 10 because only six still trade. One aspect stands out to me and that is how many either paid no dividends and/or did NOT increase their dividends every year. This seemingly contradicts the commonly held notion of Utes are Ron Popeil “set it and forget about it” type investments. That said, many of the excluded ones did have high IRR’s. Maybe they were lost in the wilderness but found their way out post 2008.
After going through this exercise, I still maintain that using the GGD model approach is a good approach. My bias is that it will have higher long-term returns than most preferreds/baby bonds albeit with a different risk profile.
Amazing work, as usual, appreciated. The only monkey wrench in the future will be no 40yr decline in interest rates, we shall see what the slow march higher brings as the cycle turned. Same time as the CAPE is near an all time high. One thing is for sure, we will need heat, light, electricity, a/c, water. One difference is the emergence of ETFs and indexes which dominate trading which happens in milliseconds. And often takes no prisoners and leaves things in ruins in its wake.. so… Place your bets!
Should I point out Ron Popiel is dead? There’s actually a Korean doctor across the street from my neighborhood named “Ron Koe.” Everytime I drive by his sign I think of “he slices, he dices.”
Seriously, if you just used XLU would it still matter (Stupid me, I don’t know if this is an index or can actually be bought).
Your post and our recent experience with MSEX preferred have prompted me to find the growth of MSEX since the first thing I read in their 10-k was “51 consecutive years of dividend growth.”
If you know off hand and can save me time, what has MSEX div growth rate been over that period?
LT, XLU is an ETF that replicates the the SP500 utes which makes for an easy comparison to other assets. (I need to do another post on this because it and several others are TERRIBLE indexes/ETF’s.. . . its a long story.)
MSEX did not make the cut because it was not in the SP500 then or now. Additionally it would not be on the buy list because it had a 4.1% yield and a 3 year dividend growth rate= 1.5%, which fell short of the 10% minimum for the sum. Yet, it did have a 11.7% IRR over that period, which is good. It was one of the 74 utes in my database that were not in the SP500. MSEX had a $231 million market cap then.
Tex
thank you for the calculations above. Just one point which is that WMB is not really a utility rather it is an MLP which owns a range of assets. Including it though may warp your figures. Just an observation, you may have had a reason for including it. Thanks again SC
SC, I double checked and SP showed it was classified as an ute back then. They only have 11 sectors so had to put it somewhere. I wanted to be very precise with what I presented and NOT omit any company based on my personal bias, so rightly or wrongly I left it in.
Thanks, T2
Tex
there are no right and wrongs in judgement issues. My point is only to make people aware that the strong numbers that they generated really are not from
traditional utility activities. In all events the point is made so readers can keep it in mind.
I would also add , that it is quite likely that utility growth rates over the next decade are very likely to exceed those we have seen in the recent past due to the power needs generated by data centers. That said,time will tell about that one. Thanks again for all your efforts. SC
Tex #2, I like they way you are thinking and the effort put into research. Thank you for sharing. Div growth commons of wide moat companies have a good chance of outperforming our preferreds and BBs. Lots of the utes have some variety of a monopoly = moat. After my ute preferreds and baby bonds to build some quasi-guarantees I have begun building positions in dividend growers with some being utes/commodity related including EXC and CVX.
Good post. It’s interesting to see that some tickers that stopped dividends for a bit or didn’t increase had some of the highest IIRs overall. This could mean good management looking at the long haul instead of taking on debt to pay out divvies. I didn’t do the research so just speculation.
Perhaps the GGD could be modified to look at free cash flow vs expected dividend payments (growth) as an additional filter.
The CEG Exelon merger was announced in 2011.
https://blogs.constellation.com/customers-community/constellation-energy-to-merge-with-exelon/
SCANA (SCG) was acquired by Dominion, with the deal closing around 1/2/2019.
https://www.spglobal.com/marketintelligence/en/news-insights/trending/Qw7lje92dBpkkIQqfbTvAA2
When the deal was announced around 1/3/2018, the offer supposedly represented a 30% premium to the pre-news SCG price.
https://www.prnewswire.com/news-releases/dominion-energy-scana-announce-all-stock-merger-with-1000-immediate-cash-payment-to-average-south-carolina-electric–gas-residential-electric-customer-after-closing-300576938.html
FPL renamed itself NEE around 2009.
https://newsroom.nexteraenergy.com/FPL-Energy-to-change-name-to-NextEra-Energy-Resources?l=12
Using the NEE Total Return Calculator
https://www.investor.nexteraenergy.com/stock-information/total-return-calculator
and putting in 12/31/2008 as the start and 8/30/2024 as the end, the site says that total return with dividends reinvested is 924.91%.
If my calculations are correct, the NEE IRR for that time period is 15.26%. With the help of Excel Goalseek, (1.1526)^(15.667) = 9.2491.
TEG (Integrys Energy Group) was acquired by WEC in 2015. For each share of TEG stock, the holder received 1.128 shares WEC plus $18.58 cash.
https://investor.wecenergygroup.com/investors/news-releases/press-release-details/2015/Wisconsin-Energy-completes-acquisition-of-Integrys-to-form-WEC-Energy-Group/default.aspx
It appears that all four “lost children” did ok.
Tex the 2nd…… Wow what a ton of information to digest! I will put it in an Excel spreadsheet and go through it. Thanks for spending the time to do this. FYI… After starting the discussion a few days ago I have not done anything concerning the four utilities I own. They are just sitting there giving me almost $300 per month in dividends worth 2.7 times what I invested in them in the 2012 period. I did DRIP them for about eight years, which is where some of the increase in value came from.
anyone buy DG after the big “hit” ? I did at 86
I’m looking for a big capital gain on this one ; we shall see
Brokerage Bonus Merry-go-round:
Is anyone playing this game? I’m wondering how often I can get a bonus .
I did the Wells Fargo $2500 for $250k in assets because it only has to held 90 days and they raise your ATM limit to $4000. That can be useful.
I see Tasty Trade offers $3000 for $250,000 in assets if held a year.
I suppose if you had no fear of brokerage failure you could dump a lot at Robinhood, but I fear their tax reporting on bonds would be a nightmare.
I’d like to have a year where I can say I made a decent income on brokerage bonuses alone.
losingtrader – I know someone with too much time on their hands and they are doing this merry go round annually. It definitely will add to your bottom line yield.
I will just mention this to you though; once you step outside the realm of the more full platform type securities capable brokers such as Wells, JPM, Etrade, ML etc. the Robinhoods, Webulls, TTs etc. cannot hold nor will they let you transfer over any individual bonds, mutual funds and I believe preferred stocks in many cases.
And be sure to read all the fine print. Recently there was an incredible WeBull 3.5% offer for new opened retirement accounts and transfers of any size, but the bonus is paid out divided up into 5 annual payments over 5 years and you can only hold equities or options.
Lastly, Robinhood I believe always has a 3% contribution match in play for ROTHs and traditional but it’s only if you are a gold member which costs $60 annually and most likely that cost will rise over time. $60 now adays will get you lunch and McDonalds and not much to stress over but my point is, it drops the effect RH contribution match closer to 2%.
Theta,
If you are with a good broker why move? Could you face restrictions if you try to move accounts back.
The list of Full platform brokers is limited. We have heard the recent complaints that Vanguard plays nanny and limits buys and I had the same problem at T Rowe not having a bond platform and any trades had to go through Pershing’s bond desk.
Charles M – I could never have nor want an account with T Rowe/Vanguard based on my style of high risk trading and the type of instruments I utilize.
I personally have not flip flopped for the bonuses but I do know people who are doing this, especially one in particular who has several bucketed accounts based on style/holdings. But remember eventually this gravy train runs out because it’s only for new customer accounts.
I did it last year with tasty and had major problems with their interface so I ended up just buying bonds and bond ETFs and letting it sit. Depends on what your needs are but 3K on 250K is 1.2% on top of whatever yield you get.
When I look at the stock indexes, I think turducken. Or maybe it’s this…
https://x.com/ChitownKid5/status/1827498879962480785