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.
5,522 thoughts on “Sandbox Page”
More pain for T holders- off over 5% today and about 25% since mid April..
Probably from Dish’s deal to sell services thru Amazon.
If I am counting correctly, today is the dividend determination day for BML-G, BML-H, and BML-J. With a 3ML today of 5.4631%, I get coupons of 6.21%, 6.11%, and 6.21%, respectively. The current yield on BML-G at a price of 19.74 is ~7.86%. BML-G and BML-J have the same coupon, but BML-G is trading at about 60 cents cheaper.
This is the last DD day for these three before 3ML goes away. The prospectus for BML-G states that ” If fewer than three New York City banks selected by us are quoting rates, LIBOR for the applicable period will be the same as for the immediately preceding Dividend Period.”
Does anyone know if BAC has announced just what will happen when 3ML ceases?
Thanks for recent Fltr post.
BoA has indeed. Take a look:
…though it’s a little annoying that they only use CUSIPs here and not the actual tickers for the publicly traded stuff.
Fitch puts US debt on “Credit Watch Negative”
I know you are working on the site.
Just wanted to let you know that it appears that your top level posts after “BDC Gladstone Investment Selling New Baby Bonds” are no longer visible.
I am pretty sure I saw something this morning after that post, but I could be completely mistaken.
Anyway, no need to respond – just wanted to share what one ignorant user is seeing.
Interesting point from bank analyst Ric Whalen:
Just as there was nothing hideously wrong with Silicon Valley Bank or the other victims of the FOMC’s intemperate interest rate policies, there is nothing really wrong with PACW. The bank is relatively small and easily attacked by short-sellers, but the bank is well-managed. As we described last week (“Fed Asymmetry Threatens Credit Crisis”), the short selling trade against smaller regional banks has required vast amounts of derivatives.
As we’ve written previously, the repricing of bank assets and liabilities during the rest of 2023 will be an existential event for many lenders, but there may not be any bids for the banks in the event of failure. We see a growing risk that regulators will simply keep zombie banks on cash life support rather than incur the cost of a closure and sale. Bankers can take some comfort, however, that their clients in the world of commercial finance are suffering the same ill-effects from rising interest rates as the banks.
T2 here: The Fed single handedly has the ability to keep any bank open ad infinitem. Just give them unlimited access to “Discount Window” loans. Same for the Federal Home Loan banks. Ric’s point is that NOBODY wants to take over any of these potentially failed banks. Only way is for the FDIC to eat a large loss like they did with SIVB and FRC. So maybe “extend and pretend” lives on for a new generation.
I added PCG-C to my pile at $17.00.
Also started a position in URA an ETF geared towards uranium. I cannot imagine a green new world that actually functions without nuclear power. BOA/Merrill also has it on one of their focus’ lists.
Mark, I sold part of my D into C today and bought 600 at $16.80 today. Sneaky bastards had a hidden sell order at $16.80 about 2 cents above standing bid with a wide ask well above. I took advantage of wide bid ask spread on D and fired market sell orders at bid knowing the bots would intercept and overpay at $17.10 which they did. I now have 6 of the 7 series, all except the flagship A series.
What is a “market sell order at bid”? If it’s at bid, isn’t it a limit order?
WFC-Q’s YTC = 9.03% at 25.04. WFC-Q =
Wells Fargo & Co., 5.85% Dep Shares Fixed/Float Non-Cumul Perp Pfd Stock Ser Q callable 9/15/2023
Well here’s one for Alpha’s IRR calculator….. If you’re willing to enter the bank preferred market with a TBTF bank for a most likely to be a picking up nickels short term play, at WFC-Q close today at 25.04 today, and x-div date being 5/30, a purchase today at 25.04 gives an approx 9.03% YTC. I bet Alpha’s IRR gets pretty close to calculating the same yield as IRR….
Summarizing the story, WFC recently announced that their F/F rate preferreds will become FIXED on each of their first available call dates, at the original coupon amount + the original intended premium over 3 mo LIBOR as per the prospectus… For WFC-Q being coupon, that means that on and after 6/15/23, the FIXED coupon,, now 5.85%, IF NOT CALLED on 9/15 or any dividend date thereafter, will become 8.94%. Right now, WFC’s highest fixed rate preferred coupon baby bond is WFC-Y 5.625% that is currently callable and closed at 22.81 giving it a current yield of 6.165%. What are the odds that WFC will leave WFC-Q outstanding with such a high coupon given the market rate for the fixed rate issues? I’d say very slim…. And of course, if they do, well you’re going to be stuck collecting an 8.94% coupon until they do…Darn!!! So as long as the banking confidence thing remains a recent memory for the next 4 months, this looks like a heads you win, tails you win situation if you’re buying with a 4 month hold time frame and not looking for a long term sitch. Oh and BTW, unusually, a call notice has to go out “not less than 40 days [LONGER THAN THE USUAL 30 DAYS] nor more than 70 days prior to the date fixed for redemption.” That means that a notice of call for 9/15 should have to come out no later than AUGUST 7. otherwise WFC-Q will remain outstanding at least 12/15 providing accrued of 8.94% for at least another 3 months. I don’t see the odds of that happening to be very high……
I bot today at 25.03.
I snapped up a big bag of WFC-Q back in March @ $23.60 when there was speculation on what WFC would do with the floating rate after reset. Showed an XIRR of ~19% then based on expected call in September. Now that it’s cemented as to how WFC will set rate I’m happy if they call or not.
Nice one, FL…. Brave at the time I suppose but 20/20 right now brilliant.
The prospectus clearly, IMHO, called out the fallback rate and how it would be calculated should LIBOR not be available, stated as then being fixed. Didn’t feel like a gamble as worse case (excluding WFC going bust or did not declare dividend) the rate even with SOFR would still have reasonable. Guess I’ll see if WFC calls this in September. But took similar flyer with ALL-B and that remains outstanding with about 8% yield. Sometimes you finally just get lucky with one or two 🙂
WFC had a huge 8% issue WFC-J back in low interest rate environment callable 12/2017. They didnt bother redeeming it until Sept. 2018, so you never know.
If it goes to extra innings that more than OK…. just as long as it’s a “W” on the scoreboard. 🙂
I’m sure you’re correct, but I’m trying to see how a $0.55875 payment for the quarter gets you 9.04% YTC on 25.04 cost.
Looks like 2.23% on cost ( annualized 8.93 ? –not likely)
FIDO calculator shows 3.645%, but only 0.43458 accrued int., so not all of it.
I’m not the brightest bulb here, but I’m adequate at numbers.
If WFC did not call or change the dividend, then you would get,
$ 2.235 annual div divided by 25.04 = 8.92
I like others here expect a call 9-15.
Anyway I slice it, it’s still better than a CD for 3.5 months
If they call it in Sept or not. Great!
I believe you are looking at forward yield, which you are correct would be 8.94% based on WFC’s announcement as to the fixed rate after call.
However, 2WR was looking at YTC, so if you bought now and figured in your dividends collected (74 cents) and with # of days (115), and offset by the 4 cents now purchased over par….. XIRR% calculates at 9.26% (so even sweeter return on YTC).
I am expecting this to be called come September – but I was also expecting ALL-B to be called and yet it remained outstanding paying 8%, at least for another quarter.
Gary – No matter how you slice it, if you buy Q today you will receive 2 full quarters of dividends for a total of $0.73125. Q goes x-div on 5/30 so buying prior to that entitles you to the 6/15 div as well as the 9/15 one. The key comes from inputting the data correctly. Using FIDO calculator https://digital.fidelity.com/prgw/digital/priceyieldcalc/ once you’ve figured out how to get around the inputting of ANYTHING that they have created by not yet corrected, you’ll see in the upper right a box that says, “Accrued Interest.” Today, if you use an amount of 100 for Amount, you’ll see it says, $28.438. That’s the amount of interest/dividend that you’re entitled to but the calculator doesn’t initially give you credit for since Q like all baby bonds trades without accrued. That means the for a price of 25.04 you have to SUBTRACT the .28438 from your initial purchase price and recalculate using 24.756. Now you discover that your actual YTC today at 25.04 is 9.116%. Think about it for a moment and make an estimate in your own mind. You are getting a total of .73125 in dividends by holding a $25 par issue for less than 4 months, not the full 6 months 2 quarterly dividends would imply… If you estimate .73125 as 4 months exact (it’s actually shorter than exactly 4 months) then that’s the equivalent of what you’d receive in 1/3 of a year, not 1/2. That mental estimate will get you to 8.775 annualized multiplying .75125 by 3 and you know it’s even better than that because it’s shorter hold period than you’ve just mentally estimated… Make sense or have I complicated it further? LOL
Darned good 2WR.
My bad being sloppy on total div. Your figure is annualized, so it makes sense.
For something like this, I can’t consider annualized as yield to call (if called).
Of course, if not called, it’s a whole diff ballgame.
But, thanks for your approach.
–I can’t understand why FIDO can’t correct that piece of crap calculator- disgraceful. I use two others most of the time.
Gary – “For something like this, I can’t consider annualized as yield to call (if called).” Why?
For something very likely to be called like this one, I simply ask what percent will I make if I buy now, and collect any payment until the call date. No annualizing needed.
But, again, I understand.
Sort of like options – annualizing IF you could repeat it several times vs a one time deal.
Are you participating in the bond ladder strategy so popular now using Treasuries and CDs, Gary? Or looking at what you can get in a money market fund? That’s the yield comparison, not options……
Not really laddering, just buying some CDs for 3 months. A large part of my investable money happens to be in a money market- but sprinkling a little in CDs.
My options reference was an analogy. EX: I make 5% on a one month option, hence, it’s 60% /yr annualized- -IF ONLY I can repeat it another 11 times.
I think we are on two different tracks of thinking about how much one is likely to make by Sep 15th on WFC-Q. I think it’s a small amount- you are looking at an extension into the future by annualizing- but it is more likely to just end on 9/15.
But- that’s ok.
My point is that it’s the same calculation that leads you to buy your 3 month CD….. When you buy that CD at 5% or whatever, “you are looking at an extension into the future by annualizing” that 5%. It’s the same thing here… You’re buying a 3 month CD that goes away in 3 months, not providing you with an actual 5%. If you’re in the market for a 3 month piece of paper or even allotting funds to money markets, why not consider something like this for the same time period with that same money?
And as far as repeatable, alternatives such as these are perhaps more repeatable than you may think… As another example, there always seems to be some publicly traded issue that is being called that provides repeatable opportunities to far exceed the annualized yields you get when looking at yields in money markets or CDs…. TANNZ for example, has provided some surprisingly good annualized yields since it was first announced it would be called on 6/15. For example I managed to buy 400 @ 25.12 on 5/18 and 400 @ 25.13 on 5/23. providing annualized YTCs of 13.17% and 14.45%. COWNL was another example before it was delisted. To me, once the call has been officially announced, the funds for calling have already been allotted if not escrowed and the risks of it not happening are very small. So why not grab the annualized yield for the timeframe if you’re using funds you would have kept in money markets or short term CDs anyway? Sure if you’re a successful flipper constantly trading in and out and capturing single day trades for similar amounts of profit as you are limited to over longer time periods with this strategy, this strategy sucks. But if you are unwilling to be that active in trading or are just not successful at it, then this works quite well for a portion of your investment funds. ”
Q of course, is sort of a hybrid animal in this scenario because it’s not officially called, but it’s a good candidate because imho the probability of call is so high and the consequences of it not being called can be so favorable if you’re wrong that it makes it work. However, yes, you do also take on the added generalized high risk that all bank shares now seem to have as well but one must evaluate that in DYODD.
Hi 2WR, I’m not questioning the validity if your exercise here, but what’s the motivation to calculate everything on an annualized yield? I’m going to be sloppy with my numbers here, but you’re going to get $.75 / share if this is called on 9/15. Whether that’s an 8% yield or 14% annualized yield, the payout is the same.
Does the annualized return calculation give the portfolio a “boost” in it’s performance? Or is it just a fun exercise to do?
Don’t get me wrong, I’ve embraced this strategy on more than one occasion, including a small taste of this WFC-Q variety. I’m just trying to understand the benefit of calculating the annualized.
Mark, Given a constant $investment, and assuming alternate investments are available, how would you compare a $0.75 distribution in 60 days to $1.00 in 90 days? Likewise would you be just as happy with $0.75 in 50 days v. 100 days?
You may have your own valued reasons for negating time value, though ultimately annualizing the yield provides a time-sensitive apples to apples basis for comparing investment options. #YTM #XIRR
Mark – I suppose the best way to answer you is to profile what kind of investor I consider myself to be… Overall, I’d call myself a “reluctant investor,” meaning I tend to be overly conservative, willing to take some credit risks that maybe I shouldn’t but overall, an unwilling and self doubting kind of investor reluctant to do much trading in long term situations having to do with taking advantage of potential beneficial interest rate or sector directions changes. I’ll save that kind of investing for equities and quite honestly not with any braggable overall results in that arena. That means I’m always going to have too large a portion of my available trading funds in cash and cash alternatives to balance out overall performance…. When you think of these cash alternatives, what you’re getting in way of return is always figured on an annualized basis…. When your money market fund is paying you near 5%, you’re not getting 5%, you’re getting 5% annualized for however long you stay in it and for however long that 5% lasts without being changed. If you buy 10k’s worth of a 3 month CD at 5%, you’re guaranteed to only get $125, right? No matter how you slice it, if I’m taking my dedicated short term funds out of money market or CD devoted funds, and I consider my credit risk of being in a WFC for 3 months to be acceptable and the likelihood of call to be very high, then what would have earned me $125 in the CD will earn me an extra $100 during the same time period without much difference in risk….. If I buy 10k of TANNZ at 25.12 and am guaranteed to receive 25.333 one month later, I will earn 85.12 with funds that would have only earned 41.66 during the same time period had I let them sit where they would have been alternatively. You see where I’m coming from? That’s why this is called a picking up nickels kind of strategy… None of this will make you rich, but overall, at least in my mind, I am maximizing what I can achieve with funds I’m always going to be too reluctant to use for more potentially profitable investing/trading using a more adventurous approach….. So in summary, the motivation to calculate on an annualized yield basis is to properly compare returns for funds that would always be dedicated to short term situations only in the first place…. Make sense?
Sorry if you got the impression I don’t own WFC-Q — it’s a good deal.
Also- I haven’t done options in years, no intention to do again.
thanks — to some extent, we both are pocketing nickels 🙂
What about the WFC -R , -S and -U preferreds? They are being set at similar or higher rates but with later starting dates in 2024 and 25. Wouldn’t they just call them at maturity?
I don’t know what WFC-S or U is, but yes, R is being set higher as well but not until 3/15/24…. The problem is that if you’re assuming a call will take place on 3/15/24 , the achievable YTC using 3/15/24 as the call date just doesn’t yet seem compelling….
2WR, After reading your post and all the following discussion I nicked some WFC-PQ today also. Thanks for the post! Always ready to pick up nickels as long they aren’t in front of a steam roller! Since WFC is a TBTF let’s hope the FED doesn’t renege on that!
I had picked up some preferred shares of FHN in anticipation of a credit rating upgrade after the merger with TD Bank. When the bottom dropped out, I was in the house of pain. I added to my position during the major selloff at 16 and some change. Fortunately, I was able to exit my position today at a very slight profit- plus a coupon or two. Yeah! Happy dance!
Not sure if anyone here is following the debt ceiling negotiations, but there are some interesting rates being estimated for short term treasuries and CMBs. Diamond Nest Egg has an easy to follow 10 min video on how to buy them at Fidelity and one other broker. There is a 21day CMB auction with an estimated rate ~5.3% closing the morning and more to follow.
Tempting to buy and then sell when a resolution is announced. Though I don’t like to bet based on politics.
Thanks for posting. The CMB up for auction on 5/23 is now showing an expected yield of 5.422%. There’s definitely some nervousness out there!
So it looks like the 21 day CMB auction closed yesterday with a rate of 6.326% and the 156 day CMB auction closed at 5.440%. Those are great short term rates for very little risk, and a low minimum ($1K) to boot.
My confirm on the 6/15/23 maturity claims purchase was at 6.3089%…. should be more interesting than the usual paint drying routine for Treas buying
Gone but not forgotten, I see your still in purgatory Grid over on SA. Tried looking you up, but they almost have you completely blacked out. Next step would be to kick you off the site and erase you. Hope you don’t let that happen.
Almost completely, Charles? It seems 100% wiped clean as far as I can tell…. Search for “gridbird” under People and “no results found.” Search for me and I’m there… That makes me ashamed that personally, I’ve recently been released from SA purgatory (with warnings) and no longer have my comments pre-reviewed before being posted… I must have sold out……
We’ll soon know, I sent him a PM see if he can log in to get it.
There are always ways around the system.
This link will get you to Gridbird’s SA page. It looks like he has not commented since end of April.
Ha, Nope the chains are still on… And they only feed you week old bread and warm water down in the dungeon too! Does the sun still come up each day? Actually I guess its just the opposite. I can see everything including messages. I just cant respond to anything. Though am allowed to post and insult PennYless and Moron on TV’s site though, ha.
Keep up the good efforts….those two guys are doing real harm all the while reaping huge monthly subscription $. Perpetual pimping of high current income !
Brother, can you spare a dime? (Actually $870, but who is counting?) I posted a list of the most price depressed bank preferreds on the “Nice Bounces In Banking Issues” thread. I stated my opinion that it does not seem reasonable that most or all of them will fail. A few yes, but most no. The question that prompts is how an aggregate group of them will perform over the longer term? I compiled a list of the lowest price/$25 par for each bank, i.e. only choosing one preferred/baby for each bank. The list has 48 issues with a total closing price of $870 for one share each. The total annual dividend is $66.06 which give a current yield= 7.59%. Obviously some like PACWP have much higher yields. At $870 current price versus a par of 48*25=$1,200 for a price/par= .725.
We do not currently own any of these in any account, but I am thinking about risking $870 and setting up a new account to buy one share each of these. It would be a real world test of the expectation that most of them will survive and continue to pay out. If the whole sector is depressed, then it is also reasonable to expect the principal values to rise as the herd gets culled. If anyone else is interested, I will publish the list plus a few more details. . .
Hey Tex, Great idea!
Looks like you could get a better current yield than form a preferred ETF?
In that population, there is going to be a number of issues that go to $0. It might be interesting to build that into your model. A few will get called as well. Might want to bake that in as well?
Maybe look at a 2 year time frame and assume that 5% or 10% go to $0 say at Dec 31 2023 and assume a further 5% or 10% get called say at Dec 31 2024?
Those seem like conservative assumptions.
For the purposes of analysis it’s probably ok pick the ones that get called and zeroed out at random.
It is interesting that the yield you report on that basket seems similar to the coupon on the new ALL-J. Says a lot about the value inherent in that issue at par. Says a lot about MS E&F trading at 7% current yield as well.
Risking a significant percentage of my net worth, this portfolio is a DONE deal! It took $872.20 to buy one share each of 48 bank preferreds/babys. The intent was to buy one $25 face issue for every bank that has an issue(s) outstanding. These were ranked by 5/19 close price/$25 with the lowest ratio chosen for each of the mother banks. All orders were placed with limits like we talk about here on III. I ended up overpaying for a few of them just to get a fill today. This is contrary to our regular advice where you must be patient to get the right price. I decided it was better to have a clear cut start date for the portfolio instead of dragging it out for days/weeks to save literally $1 to $3 total.
This portfolio is setup in a separate account with zero excess cash, so it will be simple to track the performance. I used one of the commission free brokerages that allows automatic dividend reinvestment on preferreds. Watch that compounding grow like magic when those 30 cent dividends get reinvested! There will be no sell orders placed and/or any new buy orders. If an issue gets called, we will leave the proceeds in cash.
The bogie for comparison will be PFF with dividends reinvested. So we will see.
To be clear, the purchase of these 48 issues is NOT an endorsement of any of them and/or bank preferreds and/or preferreds in general. This is not the first time I have set up a real money portfolio to run an experiment. It takes the guess work out of backtesting and Heisenberg effects. We have a few portfolios like these that are ~ 10 years old and still cranking along.
BTW, Justin gets the credit for this idea!
Tex, You must have a bit of free time on your hands today, ha. I only have 3. I repurchased WAFDP for another go around the other day at $14.65 and ASB-F at $15.57 today. Still own TFINP on a third go around. Most odd duck, maybe because it isnt a normal “bank”. The common is up 8% past 5 days and actually up 11% YTD. While the preferred is flat past 5 days and down almost 22% YTD. I doubt I buy any more and I will follow your little “fund” with interest!
Yeah, maybe just maybe, nobody pays attention to it, letting the “smart” crowd like us snap a bargain.
Ha, in all seriousness, my assumption is that a large block of this is sitting buried on an insurance company or banks balance sheet.
It’s a $45m issue and was only issued a couple of years ago, strange to be so illiquid.
In the long run, as the bank stays viable and/or doesnt suspend divi, we should be fine. But in the long run we will be dead too, so maybe I shouldnt be thinking in terms like that, ha.
Grid, it was either work on this portfolio or spend the hour watching TikTok videos. Decided to sacrifice the hour for the team today! Have to catch up on the video’s later I guess. . .
Actually what took the most time was setting the price on issues with up to a ~ 1.00 bid-ask spread. And when it didn’t fill after a few hours, walking the bid up to get it filled. The spread ranged from a few cents to 1.00+ and this was AFTER I excluded issues that traded less than 2,500 shares/day. I should have taken a spread snapshot today but did not.
Other than this experiment I did not and would not have bought any of these issues at this time. . .
BTW, watching TikTok videos was the number one online time consumer for young folks. Many reported spending 4+ hours A DAY watching them and doing other social media stuff. Pretty eye opening study that was recently published.
Tex, I saw that too. 4 hours daily, I havent been on it yet. I think I also saw something like 70% of younger people surveyed would give up their right to vote in order to keep their Tik Tok.
Man – wish we could take them up on that. Someone who spends 4 hours a day on tik tok probably doesn’t have the right aptitude to vote – LOL
Here is the study that Grid and I are talking about:
The TikTok Challenge: Curbing Social Media’s Influence On Young Minds
The average teen TikToker spends more than two hours daily on the app, with 29 percent of young girls and women using the app more than four hours a day.
There is a strong relationship between the amount of time young people spend on the app and whether they perceive the content as trustworthy: 42 percent of heavy TikTok users said the information on the app is “reliable,” compared with 23 percent of those who use it less than an hour a day.
When asked to choose between suspending their TikTok use for one year or giving up their right to vote for a year, teen users overwhelmingly – 64 percent – said they would give up their voting rights.
I was listening with a professor (from USC, IIRC) about TikTok data collection . In addition to the “usual” stuff websites grab, tiktok records body movements, facial movements (through the little games where users make faces, etc.), voice info (users words in videos and words from survey/game responses) answers to quiz questions that are sometimes used as security questions and that place your age (“what was the slow dance song at your prom”) – the list is really long.
So, the Chinese gov. ends up with this massive trove of personal and biometric data on millions of US citizens (and others too). With the explosion of AI, the amount of bad stuff the Chinese gov. could do with that data is staggering. Do you lock your phone with your face image – they have it. Use a voice ID – they have it. If they want to create a deep-fake of you doing anything they want – they have your face, voice, body size/shape/movements and the AI skills to invent any video they want.
You may recall that Tiktok offered to sell the US branch to a non-Chinese company, but the deal fell apart because Tiktok insisted that while it would give up control, it had to continue to get the full data stream.
Truly scary to see how much young folks give away without thinking.
Disclosure: I am accused of being paranoid because I won’t use voice or face print (or most “new” technologies) for any kind of security. I work with too many tech companies to trust technology for security.
Sorry Mav, but as this video shows Ben couldnt get to the papers and rip them up and as a result stupid people were allowed the right to vote.
Tex the 2nd,
Tik Tok is amazing.
While you tubing, I came across Sofia the electro-swing dancer.
She got me started.
Well, that was in December last. Since then, I did due diligence and found enough entertainment for 1-2 hours most days.
For those of you who don’t know what Electro-swing is, You’ll be pleasantly surprised. It’s a neo version of the 40’s swing era, but fused with many genres of music. I call it my GYM workout. It makes you want to dance.
I have been watching TSC (possibly the origin of the dance moves, but using hand moves as much as the legs!) and JSM improvise dancing while playing world famous Parov Stelar’s “Catgroove” in the background.
European bands are the major players.
For those that need a diversion from the current crisis, I highly recommend
it. It is so delightfully infectious.
btw, TSC is a professor of of physics.
He got a video camera from his dad and experimented with it in his basement.
Here’s a couple of you tube uploads.
https://youtu.be/twqM56f_cVo (raw) 13 years ago
Some of the girl dancers are amazing too
ok, I just bit the bullet and bought 1 of each of the partial list you posted….gotta put your money where your mouth is…hahaa.
I can post the entire list to a google drive spreadsheet.
Here is the complete list of the 48 issues including price paid:
BLACK BOX WARNING: This is NOT an endorsement of these particular banks, any bank preferreds or any preferreds. This is a real money experimental portfolio to see how it compares to broader preferreds like PFF. I expect one or more of these issues to go belly up, but hope that enough others head up to compensate for the sinkers.
Six-Month Treasury Yield Begins to Price in One More Rate Hike
Federal Farm Credit Bank has secondary market bonds with YTW of over 7.4%. I understand it’s an agency, but I doubt either party wants to see a default there. As an example, bond with Coupon 3.960% and Maturity 08/17/2026 yielding 7.417%. It is callable, but do I care if it’s called? Interest from this GSE is free of state taxes. Seems like a good deal. Please tell me what I’m missing.
What is the Cusip on the Federal Farm Credit Bank with a 7.417% yield?
Roger – Where do you find these? I’m on Schwab, and a 3.96% FFCB bond at $97.75 (CUSIP 3133ENZY9) maturing 07/12/2027 (callable 5/27/2023 at $100 and issued 7/12/2022) has a YTM of 4.56% and a YTC of 4.56%. I can’t imagine FFCB calling a 3.96% bond in the near future when they have several recent issues above 6.0%. Thanks.
Sorry I didn’t respond sooner. The CUSIP in question is 3133ENF96. I put orders in two accounts before posting the comment. One shows executed. The other says “rejected”. When I called about the “rejected” order, I was told the dealer pulled the order. It seemed like a good deal, and I wondered what I was missing. But the fact that the dealer pulled the offer tells me it was too good to be true.
And, I just got a call from the second brokerage, who showed “executed” but now says it was dealer error. My account shows “executed”, but they say it is cancelled. Oh well….
I bought this FFCB bold last November 15th, very likely to be called this coming November 15th, the first eligible date. But at 6.4% it was worth doing.
I’ve purchased several FFCB and FHLB bonds over the last year or so with call dates out 3 months to a year and coupons of 6% +/- (little lower on the FHLB bonds). Sure they usually get called but I look at them as potential short term CDs at 5-6% +/- with a state tax advantage. If they don’t get called, I can live with the 5-6% +/- for longer term too. Not sure how these might be effected by a government default as they are semi independent banks and not guaranteed by the treasury.
Hi Roger – I consider Agencies to be as good as FDIC insured CDs for what that is worth. I buy FFCB, Fannie, Freddie and FHLB notes. There is a high call risk on FFCB and FHLB notes from experience, but you are correct YTW is 7.6% for a AA+ credit then its a great deal.
Agency paper has been trading at a discount (IMO) for a while now. I am not sure why, but I suspect it has to do with general issues in the banking sector and the Fed’s QT program. This kabuki theatre over the debt limits does not help either.
Can you get a better coupon than 3.6%? Yes.
Does the YTW make up for it? Also yes.
I would wonder why they would call those. Given the 3.6% coupon they would have to pay more on any paper that they issue to replace it.
Don’t take this as advice, but for what it’s worth I would buy them if I had a gap on the 2026 rung of my ladder.
AIRTP – sharply down , What is all about ? ” DENVER, NC / ACCESSWIRE / May 18, 2023 / Air T, Inc. (NASDAQ:AIRT) (“AIRT” or the “Company”) today announced the official commencement of an exchange offer for up to 138,000 of its shares of common stock, $0.25 par value per share (“Common Shares”). As first announced on March 28, 2023, the Company will acquire Common Shares in exchange for consideration consisting of newly–issued shares of Air T Funding 8.0% Alpha Income Trust Preferred Securities valued at their liquidation preference $25.00 per share (“TruPs”) (collectively, the “Exchange Offer”). The TruPs are traded on the NASDAQ Global Market under the symbol “AIRTP.”
Nick Swenson, Chairman, CEO and significant stockholder of the Company, commented “Air T’s Board and Management are excited to formally present the 2023 Exchange Offer – hereby providing an option, opportunity and benefit to all of Air T’s common stockholders: those exchanging their shares as part of this offer will receive a premium price over the March 28 announcement day price; and those choosing to forego the exchange offer will own a larger stake in Air T, given the offer seeks to exchange and retire up to 138,000 shares which represents 4.9% of the Company’s common stock. I imagine you would like to know that I am personally, along with the entities that file as the Swenson group, choosing to forego the exchange offer in total and instead committing to hold on for the long term. Individual trading, liquidity, tax and holding periods vary widely. I encourage all stockholders to seriously consider the exchange opportunity for all or part of their holdings.”
Information on the Exchange Offer and “Modified Dutch Auction” Procedure
The Company is conducting the Exchange Offer through a procedure called a “Modified Dutch Auction.” For a common stockholder choosing to participate in the Exchange Offer, this procedure allows the stockholder to select the number of TruPs for which they are willing to exchange their Common Shares. After all tendering stockholders indicate their respective amounts, the Company will issue the lowest number of TruPs that will permit the Company to purchase as many Common Shares as possible, up to the maximum of 138,000 Common Shares. The proposed range for the Exchange Offer is 1.05 TruPs to 1.40 TruPs per share of Air T common stock. After all tendering stockholders indicate their respective number of TruPs, the Company will pay the lowest number of TruPs indicated that will permit the Company to purchase as many Shares as possible, up to the maximum of 138,000 Common Shares.(1) The Company currently anticipates that the offer will expire July 6, 2023.
Distributions on the TruPs Shares are cumulative at the annual rate of 8.0% of the $25.00 per share liquidation preference and distributions are payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning with the first payment to exchanging stockholders on August 15, 2023.
Thanks. I was just looking into this but I can’t figure out what the price of the newly issued AIRTP would be (ballpark)
Its the same issue that is listed. They are just making you gamble on the conversion price your willing to make in relation to common stock price.
For those complaining about paying US income taxes, here is your answer: Puerto Rico! As Azure mentioned it is a GREAT place for investors to legally lower their tax liability. A high net worth former employee of mine built a house there, complete with the electric/water ability to go ~ 30 days without any island support.
WSJ has a writeup:
Years ago, we helped set up some companies in Saipan in the Northern Mariana Islands, which is a (little known) commonwealth of the United States (NE of Guam). In many situations, it beat Puerto Rico for tax avoidance. Don’t know whether that still holds.
IIRC, income was considered “earned” in the US (because the Northern Marianas are a US commonwealth), so no subpart F problems or issues repatriating money to the US. Filing a tax return with the local tax authority met the requirement to file a US tax return (plus, you dealt with that tax authority, not the IRS) – and you got a rebate of something like 90% of taxes paid. Almost tax free. It also worked for individuals, IIRC.
I have no idea whether that still works, but I suspect it must have at least partially survived because a bunch of casinos have popped up on Saipan.
Private, wasn’t there something in the news in the past 10 yrs about private birthing hospitals being set up in Guam or another US territory around there that the Chinese were going there to give birth so their kids would have US citizenship? Not sure this is still going on, but considering they are building casinos there the gamblers have to come from somewhere.
OH, I wonder if any of the casinos are Chinese owned? great way to launder money into US dollars and transfer to US mainland.
I think the casinos are Chinese/HK owned.
Going to Saipan to give birth/get US citizenship doesn’t surprise me.
Florida neonate units were full of non-US “vacationers” that show up a week before they are due and give birth in the US…, mostly from Russia before the sanctions hit.
I’ve been there 3 times Tex. Its a real S—Hole. LOL
I’d say 30 days of subsistence is the absolute minimum. In 2017, an ex-military employee from PR working in my department got drafted by her family to ferry cash to the island after hurricane Maria so the her family could survive in the several _months_ after the storm. Some areas had a nearly complete collapse modern life and it was particularly bad out in the sticks. The family thought their elderly would never leave the island. Once asked, the old folks said ‘we’re done with this place; move me to Chicago or Kissimmee’.
I read not that long ago that power still wasn’t fully restored in all areas, and it is about 5 years later.
The PR government has always been incredibly corrupt. The PR people are paying for it now – in some cases with their lives.
Further to the DCOMP discussion yesterday and lack of insider buying….4 directors stepped up with buys on the common, including a $400k buy.
I ended up going long a chunk of DCOMP at ~13.60 yesterday and it played a little catch up with the commons today.
If bank market continues to settle I think DCOMP could reasonably trade back to an 8% yield near term which would be ~17
Adding slowly to EFSCP as well as I think this management team are rock solid operators. Averaged in at ~15.4. If it trades back to a 7% yield would be ~17.7.
RIP Sam Zell, he was 81.
I saw that ONEOK is buying MMP.
Any thoughts about how MMP owners should play this?
It looks like MMP owners will have to take the tax hit for MMP MLP shares whether they sell or hold and take the ONEOK shares. I will take quite a beating for that.
Beyond that, ???
Seeking Alpha is abuzz with discussions of MMP/ONEAK. The TLDR is:
– if you sell MMP now, and the deal falls through, you’ll take a tax hit for nothing.
– if you sell MMP now, and the deal is improved, you’ll miss out. The deal has already lost value due to a drop on ONEAK price. They may have to sweeten the deal to get it through. There’s rumors of a competing bid, too, but it’s early days to take such talk seriously.
– If you sell MMP now, you’ll miss out on the $25/share you will get.
– Retail unit holders will probably vote against it. However, it’s mostly owned by funds and institutions who are indifferent to the tax implications of the deal.
– It’s a good deal for ONEAK, not so good for MMP unit holders who have to pay taxes on this transaction. ONEAK stands to derive much benefit from combining the companies., accretive. MMP unit holders stand to get a reduced dividend/distribution.
– ONEAK + MMP will be more diversified … or is that di-worse-ified? No consensus. If you wanted strictly oil or strictly gas exposure, you’re out of luck.
Sorry you’re getting Kindered!
I imagine there are quite a few people like me who were never fearful of selling MLPs. Yes yes.. the tax implications but a profit is a profit. Eventually the tax man gets you one way or another unless you die holding these MLPs which is way too far off for people in their 30s-50s. Thus we probably have a lot more fresh holders of MMP versus the past. Back in 2014-2017 I let every single MLP I owned go. Honestly I am not sure why anymore but they were either treading water or slowly declining. I felt other sectors were more appealing. I sold, paid my taxes, and moved on.
But then after the oil debacle/covid time frame I was once again flush with MLPs. I was bullish on oil/gas. I had FENY up to my eyeballs. So last year I let FENY go with a solid double plus but held onto my MLPs. I saw no reason to sell them really.
But now with my MMP being up 70 plus percent (plus it is no longer the growth machine it used to be) I am neutral on this buy out. I don’t owe a terrible amount in tax due to distributions. I will get a long term cap gain. I have other choices such as adding to EPD, MPLX, ET, or just keep OKE and 25 in cash. I really do not care which way it goes as I profit nicely either way. I just have not held MMP long enough to make this a tax disaster and I bet many others are just like me.
Thanks Mystified. I really appreciate your time putting together the options.
fc – I am already getting ready to take my pants down for the tax whuppin’. I have been holding a couple of MLPs as part of my “core” that I hadn’t planned to ever sell. I am not very old, but the tax impact is bit (I have to buy a few shares periodically just to keep ahead of it).
I was hoping to hear from Camroc. I followed him into MMP a LOT of years ago.
Private some good comes out of this, ONEOK converted in 2019 from a LP to a C Corp. So your rate of return might not be as high as MMP but going forward you get the same when people got Kinderd.
Can agree wholeheartedly with your comment about “getting Kindered”. If there ever was a snake oil salesman, with SEC approval, it is Richard Kinder. I have lost track of how many times he has reshuffled the deck and come up with a new corporate structure with the same assets (KMI, KMP, KMR etc..). Of course each time he comes out ahead and the average retail investor gets taken by the IRS. I got burned when he did the KMP reshuffle. Never again, I wouldn’t invest in anything that Richard Kinder is involved in no matter what the supposed return.
At least your units are held in a taxable account. I understand it’s more complicated when MLP’s held in an IRA are sold. There are two schools of thought on MLPs in IRAs: yes and no. Conventional wisdom over at The Other Website is not to worry: the $1,000 protects small investors and, what the heck, you’ve got Turbo Tax anyway. However, recapture upon a sale may be a surprise that bumps some over the $1000 limit and into 990-T land.
Disclosure: I am in the “No” camp. Just my opinion.
At Schwab, I still can’t trade the new ALL/J (ALLJV) issue yet. Is there a different temporary symbol that is trading? Thanks.
Has been trading on Schwab since yesterday morning under ALLJL
I bought ALLJL at schwab on the morning of 16th from the “trade” button on the quote screen.
Dirty little secret at schwab – they have at least three trading system accesss points, and all of them apparently enable trading on new issues differently.
1. StreetSmartEdge. it is run by a vendor and it is usually last to enable a new symbol (but not always). Its trading system is also separate from Schwab.com (and has its own quirks).
2. the “all in one” trade ticket on schwab.com. It allows trading in new issues fairly quickly, but not always.
3. the little “trade” button on most quote pages on schwab.com. You would think it is on the same trading base as the all in one tool, but it apparently isn’t. It is usually the first tool to allow trades on new issues. Sometimes it is a full day or more ahead of the other two tools.
Also – Schwab doesn’t seem to have a way enable new issues automatically.They wait for a client to call and make a fuss about the new issue not being available. The call center folks will usually try to fob you off with some version of “just be patient and it will get in our system”, but that is not true. You have to push them to contact trading support to get the new symbol entered. Because I often flip new issues (or used to), I have been the guy making that call many times.
MONEY MARKETS RATES TODAY…
VMRXX ~ 5.04%
VMFXX ~ 5.02%
SWVXX ~ 4.9%
SNOXX ~ 4.79%
Admitted preferred newbie here…couple issues I’ve been watching with interest
Anyone have thoughts on $DCOMP? Yielding 10%. Dime common stock has been throttled but rallied 7% today. Reading their CCs things aren’t great but also doesn’t seem like they are going under. Seems like DCOMP could trade to an 8% yield near term if things settle down.
Secondly $EFSCP, trading around 8% yield. These guys seem like great operators and the common trades above 1 TBV. They managed assets well and seems no solvency risk. Also didn’t participate in rally today with common getting a decent bump.
Appreciate any thoughts
Haven’t looked into either one, but maybe there are some at decent yields that are rated IG or close to it? ( these are no longer rated).
ONBPP & O are Moody’s Baa2 /BBB
WAFDP Baa3 / BBB
Thanks, I suppose the fact they aren’t rated accounts for some discount.
I actually purchased some WAFDP recently in the 13s after reading their Q1 report, which was also not terrible imo.
Will take a look at the other you mentioned.
Yes, DCOMP and other small bank preferreds have been totally trashed. I own DCOMP, just bought a couple weeks ago and have been killed. Didn’t rally today with the common. I’ve tried to research DCOM up and down to find the skeleton in the closet but nothing yet. To me the biggest issue is that there have been ZERO insider purchases of the common or preferred, even with these depressed prices. That’s my biggest concern.
Yes I also have given DCOM a skeleton search and not finding anything, yet. I agree lack of insider purchases is a concern. also saw that Basswood had a huge position they were in the midst of exiting in the 30s when the SVB hit the fan.
And we wonder why something broke?
Speed of Fed interest rate increases:
DOGS OF DOW CURRENT YIELDS…
Verizon ~ 7.34%
Walgreens ~ 6.15%
3M ~ 6.13%
Dow ~ 5.48%
IBM ~ 5.39%
Chevron ~ 4.00%
Amgen ~ 3.91%
Goldman Sachs ~ 3.58%
Cisco ~ 3.35%
Home Depot ~ 3.03%
I would appreciate thoughts from those that have experienced delisting before redemption. The delisting notice states: TA has not made arrangements for the listing and/or registration of the Notes on another national securities exchange or quotation medium.” As the redemption date occurs later than the delisting date, will the brokerages have an issue carrying these delisted securities? I seem to recall an issue with one of the brokerage firms. Also, when those who have transferred these delisted securities to their ROTH accounts, did it matter if the securities were listed or registered on other security exchanges?
I haven’t had a problem with delisted securities staying in my account at schwab. I have done it several times.
I have converted delisted stocks from a traditional IRA to a Roth at schwab. they did the transfer just like any other stock (both accounts were at schwab).
I don’t know how they will handle the fact that the shares are already called, but I suspect they won’t care either
What are the values of the issues being shown at? It took a month for one of mine to become “stale pricing” and $0.00 showing. If it is still showing last reported trade pricing the conversion wouldnt benefit, I suspect.
I agree, Gridbird
When I did my conversion, the shares had been delisted for a long time (month or more) before they fell to zero in the broker’s system and I I waited several months to convert them.
I don’t see that happening with the TA shares because they will be redeemed so soon.
I remember you scoring nicely on that conversion, Private. I was happy for you, but I am human and thus was jealous because I didnt have that option owning only HSA, Roth and tax account. No IRA soup for me! TNT, I agree with Private. I strongly suspect (amateur guess) the clock is going to run out on you before you could get a shot to sneak a conversion in. These are going to get redeemed in due time. I doubt any brokerage would ever have a problem with an issue that went dark/private for at least a year.
GB and Private, Thank you both for your responses. The TA securities are held at Schwab and IBKR. Both show trading active and all prices are above par. My needless worry (no doubt) is a brokerage might have issue with holding delisted securities that are not traded on any exchange. The fact that it may take a bit of time to reflect delisting pricing is not so much of a concern. Others on here have posted their brokerage firm was not allowing trading on these. Schwab and IBKR certainly are.
You need to be careful I think with trading securities after the call notice holder of record gets the accumulated dividend. I was trying to buy more of the TANNZ and something caught my eye that I cancelled the bid
Only TANNL has that problem, Charles…. Date of record for L was 5/15 for the 5/31 coupon payment so on call date anyone buying L now gets only 14 days of interest instead of the full month’s worth…… TANNZ and TANNI have different payment dates than L with last payment having been 4/15… With the next scheduled interest payment to be 7/15 on these two and the call coming 1 month before that, you’ll get the full accrued interest for 60 days – maybe 61 but I think 60..
Are these worth posting? What’s the consensus? I suppose we’re going to be seeing a lot more of these in the coming weeks….. https://ir.usbank.com/news-releases/news-release-details/us-bancorp-announces-plan-transition-outstanding-us-bancorp
U.S. Bancorp Announces Plan to Transition Outstanding U.S. Bancorp-Issued U.S. Dollar LIBOR-linked Securities to Term SOFR As Replacement Reference Rate after June 30, 2023
BTW, USB-A F/F I think pays a 6.27% coupon July 15. Yes it’s one of those nasty word banks, but at its close of $709 it offers an 8.84% current yield…. Cheap enough? It’s still rated Baa1/BBB+ for what that’s worth in this banking environment.
USB-A yields substantially more than all other USB preferreds with the same rating. Any special reason other than it is a $1000 preferred?
Beats me, MFZ. The most obvious comparison would be the other F/F issue, USB-H. Both are 3 mo LIBOR + but H is $25 par and +0.60 and A is $1000 par and +1.02. A’s 40 basis cheaper in current yield. The highest coupon fixed rate issue seems to be USB-P and its current = 6.36%, so it sure does seem to be that the $1k par aspect of A is contributing to it being the cheapest.
I think the fact that this is a current floater with a pretty low spread hurts it here.
People are expecting rates to decline from here. Might be worth a nice punt, though, if they don’t. And if you trust USB (I’m not sure I do but I haven’t done any work on it).
If you compare USB-A to USB-H, considering that USB-H currently trades at $17.65, then USB-A would need to trade at $760 to give it a current yield that is equal to USB-H
USB-A (CUS:902973866) along with other USB preferreds, was downgraded by Moody’s on April 21 to Baa2, and by S&P to BBB on May 11. With the downgrade we sold off a truckload of USB issues on 4/26 at a tidy gain though was sorry to see them go. Replaced them with more CDs, Treasuries and FHLBs.
Interesting to note the price/chart action during that time as the risk premium was plowed into the issue. With that risk-premium now embedded, USB-A has regained a certain allure, though I’d still recommend caution as their cap ratios are not what they could be.
Thank you all commenting on USB-A apparent “mispricing” ; valuable input.
Looking at Tim’s master list of preferred stocks and seeing a lot of red. Definitely don’t like being down on my cost on a few I own. Hard to get enthused over buying more although the yields are looking good I have to ask if I will get better deals. Re-entered a position today in UBP-K I had sold out of. Looking at the past year it could still go lower.
2WR, based on your many posts about NEWTL/NEWTZ, I’ve been watching both issues carefully. I was able to pick up a partial lot of NEWTZ at 23.41 per share today. IRR is 8.21% if NEWTZ gets redeemed at expiry on 2/1/2026 and only gets higher if called early. Thanks for the tip!
Nice to know someone’s been able to play this correctly…. lol…. it looks like a good purchase to me, but as you know I’ve been far too aggressive in my approach and beliefs on this one… I am comfortable with NEWT as a credit and as a BHC, but they sure do seem to be willing to be forthcoming on every aspect of the new non-BDC company other than their plans for these 2 notes… They didn’t even publish an updated asset coverage ratio this quarter as they have been doing every other quarter… They just rehashed the ratio as of 12/31
ZOMBIE COMPANY BANKRUPTCIES are ramping up this weekend with ongoing credit tightening…(Bloomberg)
Athenex ~ biopharma
Cox Operating ~ energy
Envision Healthcare ~ physician staffing
Kidde-Fenwal ~ fire protection
Monitronics International ~ security systems
Venator Materials ~ chemicals
Vice Media ~ media
Kiddie is not what I would consider a zombie company. They filed for BK because of all the lawsuits over forever chemicals. You have 3M with dust masks and ear protection, Johnson & Johnson over Talc and Asbestos.
Kiddie is profitable just has to wall in the liability.
Was just notified:
DCP CUSIP 23311P209 MIDSTREAM LP
7.875% SER B PERPETUAL
QUANTITY CORPORATE ACTION
FULL CALL June 15, 2023
Sorry to see this one go 🙃
Dang Ab, I hold a large position of this in my wife’s and my accounts. Felt pretty safe with the major oil backing it
Now what to do to replace it? Is part of my blended dividend income that is helping me average 8% return.
Over all Oil stocks been good for the last few years. Course that isn’t always the case
And MMP is going away too. Lots of oil income to replace.
Big positive movement in CUBI & preferreds – something change?
Just back to where to where it was before it fell on the Pac West news. Which may or may not be relevant to CUBI.
In the past it’s been talked about here of moving a security that is being held in an account that the broker zeroed out and moving the security to a Roth account. I did a little reading this weekend and one thing I came across is you can transfer a holding to a Roth if your still working without selling because you can pay the tax out of your income.
I currently have COWEN showing in one account as zero value and a Roth with the same broker. But my wife is no longer working. Anyone here tried this?
I know when COWEN gets redeemed in a month the payment will be deposited in our account.
I’ve done several conversions after retirement- no problem. They show up on the form (1099-R ? ) provided by the brokerage, and it becomes income that is taxed. They will usually ask if you want tax withheld, but not necessary- especially if living in a state with no income tax, like NV.
If you are of an age for RMDs, those must be taken first, then any conversions.
Not sure how it would be reported- zero or your cost?? Ask brokerage?
Do your DD, as usual.
When you do a roth conversion, you get a 1099 for it, and you can pay the tax from any source.
However, if you are converting zero value shares, there is no tax to pay.
If the shares show as zero value in your account, you should be able to convert it into your Roth at zero. That means no tax is due because you moved zero value, so it doesn’t matter whether you are working or not because there is nothing to pay.
I did this a couple of years ago on a security that went dark and the brokerage eventually moved the value to zero. When that happened, I did the Roth conversion of those shares at zero value, and that is what flowed through on all the paperwork. The following year, the shares popped back up in value because they were redeemed, so I had a huge gain in the Roth account (zero basis redeemed at face value).
I hope to be able to do that again.
Don’t you think there is a nonzero chance that the IRS will challenge this in the next 6 years? It would be hard to make a case that you really believed the position had zero value.
I think the chance is so near zero that I won’t spend any time on it, and if there were a challenge, I think I would win.
The transaction was reported to the IRS by my broker, who issued a 1099 that I included in my tax return. Nothing I can see to trigger an IRS inquiry because there was nothing done improperly. The optics may look odd, but that is how tax law works.
There are lots of things in tax law that look kooky – look at gifts of appreciated property, for example, or “carried interest”, or look at all the crazy rules about oil depletion. the list goes on and on.
My point is that the tax system is like a game – you find places where the rules work to your benefit, and you use them.
To quote Judge Learned Hand in a landmark tax case (Gregory v. Helvering):
“Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”
(my boss had that quote on his wall back when I was doing tax work).
As I see it, the problem is that the broker issued an incorrect 1099, which means the taxpayer is responsible for correcting it. It’s not a matter of tax law, just incorrect numbers.
As far as I can see, the 1099 is correct. it reflects exactly what the broker did and the broker’s information with regard to the transaction.
It sounds to me like you this action somehow just offends your sensibilities. I apologize if that is the case. As I said above, there are a lot of things in the tax code that offend some people’s (or almost everyone’s) sensibilities (like “carried interest”), but they are allowed.
Just to play out your idea of changing the 1099 – what would I change the 1099 info to?
-I can’t simply make up a number. No way to support that.
-I can’t put down what the shares cost (no support for that number either).
-Should I put down the number that I hope the shares might be worth someday (if everything goes my way and company management takes actions in the future that are beyond my control)?
I believe the answer is no to all of those.
I think my best course of action (i.e. the one I could defend to the IRS from the broker’s records) would be to just leave the 1099 stand as it was reported by the broker.
If I wanted to give more to the government. it wouldn’t be by jiggering a 1099. I would just make a donation https://treasurydirect.gov/government/public-debt-reports/gifts/
With all of this said, let me say that anyone contemplating doing a similar transaction should not rely on my contributions to this thread. Tax is very fact specific – so go do your own research/get your own advice.
No, of course I am not offended. It’s just that when I have a dispute with the IRS, I like to have both logic and law on my side. I don’t see how I could defend a value of $0 for a delisted security in the absence of other evidence that it was worthless. That doesn’t mean I know how to value it in a way the IRS would accept. (Although if someone held a gun to my head, I would probably use the last trade price.) I don’t know of any IRS or Tax Court rulings that apply. I think the prudent course is not to do such a conversion.
Charles – I just tried to convert my TANNI and TANNZ shares that are showing zero on my Fidelity positions page. When I opened the conversion page the values shown were $25.10. Ahh, poop!
Sounds like that”s a brokerage snafu- maybe call them (if truly at zero).
I did this with WRTEP and converted at 0 value, no tax due. When it was redeemed, the value showed in the Roth account.
TA preferreds – And the mystery continues….. It looks as though along with the common no longer trading that TANNZ, I, and L aren’t either this morning… Yet no official word as to what is happening with them? Anybody been able to find out?
2WR, This is pretty normal and expected. When the common stock of the company goes, the ETD of the company disappear too. Since TA stated they had no idea what BP’s plans are, that didnt help. If being left outstanding that typically is mentioned here, but it wasnt. My lawyer brain is pretty small. But does this below possible mean they are being wiped out and paid off?
On May 15, 2023, the Company, Citibank, N.A., as administrative agent (“Citibank”), and Delaware Trust Company, as collateral agent (“DTC”), entered into a payoff letter agreement, which provided for the termination of the Company’s indebtedness and obligations under the Credit Agreement, dated as of December 14, 2020 (the “Citibank Credit Agreement”), among the Company, as borrower, the lenders from time to time party thereto, Citibank and DTC upon the Company’s payment of all outstanding loans thereunder. Upon Citibank’s receipt of the payment, the Citibank Credit Agreement was terminated, and DTC released its security interest in all of the assets securing the loans.
That would coincide with what I thought was the implication I the language I had previously quoted from https://www.sec.gov/Archives/edgar/data/1378453/000110465923022894/tm237083d2_defa14a.htm p58, but it always seemed to be open to interpretation….. guess we’re just going to be in wait and see mode until they make some sort of announcement or we see cash in our accounts where the notes used to be……. Here’s the link to what you found https://www.sec.gov/ix?doc=/Archives/edgar/data/0001378453/000110465923060301/tm2315684d1_8k.htm
Since nothing was mentioned even today on the SEC delisting notice, it certainly seems that way. It certainly wasnt explained either way in typical merger fashion. BP is paying for all of this with cash on hand so they certainly have plenty of cash to wipe this all out and set up TA going forward in a manner they want to be as a wholly owned indirect subsidiary.
If so, this will be another example, ala IStar preferreds that are redeemed without any visible 30 day notice….. I’m sure all done according to Hoyle, but still ….
I see where the TA notes all began trading again at about 2 PM Eastern…. yet who knows what…
Well I guess one thing is certain for the minute anyways, the market isnt concerned with delisting to expert market does it. The damndest thing is all they had to do was mention what they were going to do…or not do. Most unusual.
> But does this below possible mean they are being wiped out and paid off?
That reads to me like the bank line of credit is being paid off, not any of the publicly traded stuff.
The point for me being question is the DTC. Why would they be mentioned if it was just the bank line of credit?
Well, if the loan was syndicated you might have a trust company in the mix to handle certain payment details.
I went and looked it up. Here’s what’s getting paid off.
$200MM term loan.
Good info. But the quandary remains. I can only revert to personal experience and watching 3 previous ones. All of the previous ones that were delisted left a snails trail of what was to happen in merger agreement. This one hasnt . Obviously financials wont be disclosed going forward, so if it is not redeemed, it will either be dark, shuffled to expert market, or dumped on the bond desk. The redemption of the bonds was clearly not a precondition to the merger as TA IR told me they have no idea of BP’s intentions with them.
Oneok (OKE) to acquire Magellan Midstream Partners (MMP) in a cash and stock transaction.
“Each Magellan unitholder will receive $25.00 in cash and 0.6670 shares of ONEOK stock per unit. This represents a current implied value to each Magellan unitholder of $67.50 per unit, for a 22% premium, based on May 12, 2023 closing prices.”
Compare the 22% premium cited above to the typical ~10 – 20% drop in valuation of preferred shares when a company is acquired. With a cash and shares transaction typically associated with a MLP being acquired there are no issues with being delisted, surprise credit downgrades or the board “choosing” it will not pay the dividend as seems to be the norm when dealing with preferred shares.
What would you rather have, a generous premium or a typical drop in valuation upon the acquisition of one of your investments?
There doesn’t appear to be any preferreds or at least any listed preferreds associated with either, are there? Oneok debt = Baa2/BBB and Magellan Baa1/BBB+
Magellan debt to be assumed in this transaction according to Barrons – https://www.barrons.com/articles/oneok-magellan-stock-deal-3ddc2d8d?mod=Searchresults
My concern with MMP being bought is that it will be a taxable transaction to MMP unit holders.
Where is Camroc? We need his sage advice!
The Pain of Silicon Valley Bank’s Collapse Is Being Felt by These Depositors
Customers that banked at SVB’s Cayman Islands branch have had their funds seized by the FDIC
Two months after the failure of Silicon Valley Bank, the lender’s depositors in the Cayman Islands have been left out in the cold.
The California-based bank’s American depositors were protected when the Federal Deposit Insurance Corp. took control of SVB on March 10 and guaranteed all of their funds. SVB’s U.S. branches, as well as its loans and deposits, were acquired by First Citizens Bancshares in late March.
It has been a vastly different story for customers of SVB’s Cayman Islands branch, which was left out of the First Citizens deal and placed under FDIC receivership. The branch in the offshore tax haven was set up to primarily support the bank’s activities in Asia, according to SVB. Its depositors, which include multiple Chinese investment firms, haven’t been able to access their funds—and have been in limbo since SVB’s collapse.
The FDIC’s notice surprised customers who had thought an earlier statement from U.S. regulators that said all SVB depositors would be made whole also applied to them.
Foreign branches of US banks NOT FDIC insured for almost 10yrs:
But- why FDIC receivership?
I am always humbled by the brilliant commentary of Myrmikan Research and realize I still have much to learn even after a lifetime managing institutional money…
Live as if you were to die tomorrow. Learn as if you were to live forever.
Having never heard of Myrmikan Research I found their “Introduction” on their website to be interesting:
Myrmikan Capital LLC
Ecclesiastes tells us: “The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.” Myrmikan Research applies this principle to the subject of credit bubbles.
The ancient Greeks discovered that debt could magnify wealth. The debtor feels richer from the use of the borrowed property, while the lender feels richer from the compounding interest yielded by his claim. Both indulge in consumption more freely. As long as the accumulating claims remain contingent, the bubble grows. But, eventually, someone asks to be paid, and the expanding claims on wealth must be reconciled to tangible wealth, much of which has been consumed.
The first recorded credit bubble popped in 594 B.C. Athens. Threatened with a civil war of creditor versus debtor, the Athenian ruler Solon pulled down the mortgage stones to free the debtors and devalued the drachma by 27% to relieve the bankers. Every credit collapse since – from the Panic of A.D. 33 to John Law’s Mississippi Bubble to the Great Depression and many others besides – has followed Solon’s template of debt default and currency devaluation.
“The natural remedies, if the credit-sickness be far advanced, will always include a redistribution of wealth: the further it is postponed, the more violent it will be. Every collapse of a credit expansion is a bankruptcy, and the magnitude of the bankruptcy will be proportionate to the magnitude of the debt debauch. In bankruptcies, creditors must suffer.” – Freeman Tilden, 1936
And against what is currency and debt devalued? Carl Menger, founder of the Austrian School of economics, was the first to explain that money is liquidity and that gold is the most liquid asset. Thus, gold has served as the reference point of value since the origins of money and is that against which currency must be devalued to relieve debts. Paper promises depreciate.
“The faith is lost. All with one impulse people rush to seize the gold itself as the only reality left—not only people as individuals; banks, also, and the great banking systems and governments do it, in competition with people. This is the financial crisis.”
– Garet Garrett, 1932
Myrmikan Research chronicles the collapse of the current, global credit bubble – the largest and broadest in history – analyzing current events from the perspective of Austrian economics and placing them in historical context.
yes, interesting. I wonder if Ecclesiastes could be transported to present times if he would still think that there was no new thing under the sun? Myrmikan Research lays out their reasoning for being “gold bugs”, which makes you wonder if they are also “talking their book” a bit too. If Ray Dalio is correct and we are heading for some sort of restructuring/devaluation due to debts becoming excessive, or some other type of money printing to monetize the debt, there could be something to it. As an income investor, with gold not having any payouts while held, you wonder what might react favorably to a restructuring/devaluation..I bonds? Also more broadly, what explains the timeless appeal of a shiny metal with little practical use? Perhaps its’ no tarnish, always shiny appearance mirrors the suns’, the source of all life, thus the ultimate value? In any event, it even screams for attention on the periodic table ” A (yo)U” lol
@Azure have a look at pg.7 ff. here.
Qniform, thank you for your post. I always am interested just where Money Market fund assets are and realize these have ballooned to a record $5.3+ trillion, with inflows surging by $588 billion over the past ten weeks, according to a recent note from Bank of America. Do the Fed, Janet Yellen and ( ) know how to properly run the worlds largest economy; are we headed for default http://www.usdebtclock.org Just who will the “winners” be in a default or even if we go onto a recession?