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.
CTA-B has had an ask of around $70 per share (6.4% yield) today.
Current ask is $69.60 for CTA-B. There’s also a nice opportunity to switch from CTA-A to CTA-B for those who are so inclined.
Thanks Dick, Added to my already sizable potion of CTA-B
Thanks for the heads-up Dick.
I swapped all my CTA-A for the B at $69.40 and added more as well. Got $57.24 for the A. Hell of a deal!! Better than CD’s for me.
Crazy price action on the B, sitting at $68.63 and falling as I type.
Yes, very strange. This one is BBB rated and callable at $120.
The common stock of the parent (CTVA) looks to be trading strong. I’m at a very overweight position with this one.
I’m overweight as well, bought another bit down near current price. Price of this one moves alot, so looking to short term half of what I have for low $70 price range (assuming nothing crazy happens with interest rates)
Maybe this is the news that may be driving this reponse…
https://thehill.com/policy/equilibrium-sustainability/4456932-federal-court-finalizes-1-2b-forever-chemicals-settlement-involving-major-firms/
Could be I guess but comparing to the price action on the common, which shot up ~20% about a week ago, I’d think maybe this was a temporary dump. We’ll see. Thanks for posting link.
I would guess just a big player dumping to move into growth from fixed income. If it was company related you would think the “A” pref would be hammered as well. All is good for now (I hope!!).
I think you’re right Fryman! There was a ton of volume today on B.
The volume on A was probably driven by people like me switching from A to B.
It is weird seeing CTA-B yielding 6.5%, but SCHW-J is 5.3%, ALL-I is 5.2%, and CMS-C is 5.0% . How’s that for an efficient market?
I saw it while golfing. I only bought 100 at $69.19 and 200 at $68.72 couple of holes later in between shots. Didnt really have much cash laying around, so I had to buy on margin. I had a CD mature today that will more than cover it, but I always seem to get the proceeds a business day later.
Same here, lack of cash—-so dipped into my golden child that is SGOV and sold a bunch of that. I call SGOV my liquid CD.
Grid, et al – aside from the limited liquidity, has anyone experienced any broker related issues such as but / sell restrictions. I am with Schwab and assuming I can buy some, I don’t want to have restrictions on selling. TIA
Proto, the CTA preferreds are NYSE “Big Board” traded issues. There wont be any more brokerage interference from these issues than buying Exxon common stock. Of course bid/ask spread is a lot wider though.
Schwab can have goofier ticker symbols so you need to make sure you are using correct symbol to try to purchase.
Voner, No, this was just basically “par for the course” and expected long ago. Keep in mind Corteva had $2.5 billion in cash and marketable securities last I checked last fall….Corteva’s A rated senior unsecured already had this legal morass baked in… Note this from Fitch 6 months ago…
Per- and Polyfluoroalkyl Substances (PFAS) Exposure Manageable: Corteva’s anticipated $193 million contribution to the announced joint ~$1.2 billion PFAS settlement with The Chemours Company and DuPont de Nemours (BBB+/Stable) provides a well-defined level exposure that that the company can cover through its existing liquidity and/or cash flow. Furthermore, Fitch expects that the Corteva will maintain more than sufficient financial flexibility to cover any additional claims that may arise by state and/or federal claimants that were not party to this settlement.
Thank You Dick, I had a low ball bid sitting out there dreaming I could get 7% yield but I changed it and picked up some at 68.67 today . 6-1/2 is good enough.
Love your handle! Madmen fan here 🙂
LANDO up on a seekingalpha article at 21.2
LANDP same coupon trading at 19.75
just an FYI
Crazy ain’t it how O and P trade at such a gap and yet basically the same issue.
It sure doesn’t seem to be an earth shattering market mover of an SA article, does it.
Hard to swap when I only own LANDP. Ever since it was put on a exchange it has always been like this. Wasn’t LANDP that privately issued one that had an agreement to go on an exchange at a certain date? There was a website you could get in on it but I cannot recall what it was.
NG futures are down
https://www.fxempire.com/forecasts/article/natural-gas-prices-forecast-plunge-on-ample-supply-ahead-of-eia-report-1408238
Doesn’t look like they have seen the bottom of a black hole yet.
There are winners and losers in these trades. Right now, going into the spring I don’t see this fully reflected in the drillers / suppliers stock prices. Mid level the pipe lines will have mixed results. The end users, the utilities are going to benefit the most. See for example yesterday’s qtr. report for DTE.
I would be careful with overseas LG shippers this year. perfect storm of lower commodity prices, excess gas, new builds hitting the water, expiring contracts and lower demand with warmer weather coming.
Charles, for most utilities I am aware of ultimately its the consumer that should be the one benefitting from lower gas prices. As the commodity cost is largely a “pass through”, though typically delayed both ways.
Both the consumer and the utilities are benefiting. It takes a lot of gas to melt 8 million pounds of lead a month.
The cost of fuel is a pass through charge. A utility does not make a profit on it.
Is cheaper nat gas a benefit to fertilizer producers?
R2S – my understanding is that lower NG prices should benefit fertilizer producers. I haven’t been in them for a a couple of years, but that is my recollectionm
For preferred stock that that shows “Variable” for QDI, is there a good way to determine what percentage of recent distributions have been qualified? I’m wondering today about PRIF-K, but I’ve had the question several other times. I didn’t see any mention of this in the annual reports I checked. Is there some better source?
Nathan–all I can suggest is scrutinizing their website closely (which I haven’t done) – my investing is virtually all within an IRA so I don’t worry about it personally.
There is not a good way 🙁
After I look on the company website for a tax information page, I check the press releases for January-February and see if there was one about tax characteristics. If that doesn’t work, I send email to IR, but they often do not reply.
In the case of PRIF-K, all I could find is a document from 2022, which does say that the distributions that year were 100% NQ, but not if they were QBI or not:
https://www.priorityincomefund.com/literature
https://assets-global.website-files.com/5dd730c4b9c85c11ca7a9558/63ff70fb4105ca8f4a3e8b92_Web%20Site%20Disclosure%20-%202022.pdf
Thank you, that at least sets my expectations and gives me some good search terms to use.
all the ones that how variable, they are all Fund preferreds, so they mirror the underlying investment.
if the fund has 100% in common shares, it will be 100% qualified.
if it has 100% in debt, it will be 100% Non-qualified.
Absent massive portfolio turnover, those numbers remain static year over year.
Barings BDC notes pricing at 7% due 2029
https://www.bdcinvestor.com/bbdc/202402/barings-bdc-inc-prices-public-offering-of-300-million-of-7-000-notes-due-2029/
Does anyone have an opinion on SAR and its baby bonds SAJ SAY SAZ? SAR has underperformed recently and the chart looks ready to break down. If SAR has to cut the common dividend, the common price will suffer.
I’d like to know if the baby bonds are at risk. Don’t own.
China Stocks In Freefall, Government To The Rescue
https://realinvestmentadvice.com/china-stocks-in-freefall-government-to-the-rescue/
Anyone here have a strong investment strategy or opinion for China, China, China? Crisis = Opportunity
AB, I saw Josh Brown on CNBC ditched his NYCB stock with a wish it goes to zero. Have you visited NYCB yet? What is your friend’s reaction that strongly supported NYCB? Looking forward to the update!!
Josh Brown could just be lying to make the “news” more interesting…. Never bought, never sold. Or just a token amount to say he did so he is “honest”. CNBC is pretty much just an entertainment show that happens to use news as a back drop.
But that is just me being my normal skeptical self when it comes to people in the entertainment industry for the most part.
fc:
“CNBC is pretty much just an entertainment show that happens to use news as a back drop.”
Truly an understatement on that one. I turned off the mute button for a minute this morning and heard their main circus showman (Jim Cramer) say “this is the greatest economy of all time”, and after ARM Holdings ran up 55% today on the back of a good EPS report, quipped, “This is why it is stupid to hold 5% yielding CDs”.
Almost hard to believe there are sheep out there who give him $400/year for access to his “Investing Club”?
But I do often record and watch CNBC’s one hour show “The Exchange” (10AM PST), which to me is their best offering since most of that show is the host talking to various industry and financial market leaders that are out there in the trenches and who tend to give more honest views and opinions.
As for Josh Brown, his macro views tend to be decent, but I learned long ago to steer clear of his stock picking! Check out CHPT (Chargepoint Holdings) for one of his truly disastrous long ideas.
FWIW – I believe he mentioned he took a 20% hit on his trade having bought as a trade 6 days ago and tried to rationalize why he bought it, basically took a flyer.
https://www.youtube.com/watch?v=LQFKQw0NjiU
Also, I recall him mumbling something about going to zero but I didn’t think he wished it would go to zero, but could be dead wrong.
We sold any exposure to Chinese companies a few years ago. I consider what they have is government run capitalism with the emphasis on government run. Not for me.
With the deficit spending out of control, its government run capitalism here, just a different form. Just not as obvious of a linkage to the proletariat.
I would refer to the technicals and not the politics as the source of truth.
My strategy is to pop some popcorn, pull up a nice comfy chair, and watch the fireworks. There are plenty of investment opportunities elsewhere you can lose money on (or make money)…. We think our markets are rigged, but compared to China they are shining examples of capitalism. Now I will go give myself 10 lashes for violating Tim’s no politics policy, which I think is an excellent idea.
A strong short position should work.
However, depending on the exchange or holding company it may be difficult to get the monies / assets out of the China sphere.
Be careful here folks.
Much like our debt, this is a multi-generational disaster.
This is why I never invested in the China growth story. Towards the end of the B.R.I.C hype, China was building cities that were not being populated which were being described as ghost cities. I think Bloomberg had a few articles on this.
Inflating prices on an increasing supply never made sense.
Be Well
Stay Safe
AB,
Elon, Tim Cook, Jack Ma, Bao Fan and a few missing CH CEOs are asking the same question.
Hi AB,
Long post ahead–
The ARI writer is pretty late to the party. I have been living with and writing about (on this board, among other places) the meltdown of the Chinese economy for years.
I still have a few businesses in China, and we consult with a bunch of companies involved in China, so we live it every day. The best thing for a western investor to do (imho) is to just stay away from China right now.
In fact, I suggest people who are investing through broad-based funds/etfs go look at their holdings and consider moving away from holdings in China. I don’t recommend specific funds, but you can find “except china” funds out there (someone just asked me about DAADX just this morning. I have no opinion on it, other than it is a “except china” fund.). To me, investing in any security for a Chinese company/fund that is available to western investors is like playing in a casino where the games are all rigged. The only way to win is not to play.
There is SO much bad data (truly faked data) coming from the gov. and its outlets that there is no real way (IMHO) for an investor to play in the Chinese economy. We monitor a plethora of local and regional press in China and it is almost funny how much stuff gets reported based on info from /interviews with local and regional gov. entities that is withdrawn and “corrected” within a couple of days to align with the data being published from Beijing. Some of the data swings from the corrections are almost laughable.
Beijing has been slowly trying to release data to start moving away from the house of cards they have built with years of fake data, but it will take a long time to get things moving the right direction. Simple example – China finally admitted last year that they are having negative population growth (something they have actually been experiencing for years, and for much longer in the richer, coastal parts of China). Huge implications – their housing construction bubble (and supporting borrowing) was premised on the growing population forecasts the gov. kept issuing year after year. There has been a huge surplus of housing (built, under construction, and proposed) that is financed with massive amounts of borrowed money and not finding ways to be profitable – largely because there just isn’t the population to support it. If you look at some of the big players, the numbers are staggering. China Evergrande, the biggest developer, has outstanding debt that is greater than the country of Portugal or Switzerland. There is also a huge “shadow” debt problem out there that is equally massive – in which many local and regional governments are key players. If that blows up, it will be very difficult for Beijing to bail out everyone – so Beijing’s big focus is on keeping it from blowing up (first priority) above fixing the problem (distant second priority).
China has had a (obviously not publicized) policy of trying to fix part of their financial problem by fleecing western investors. Beijing has “allowed” company after company to IPO in the western markets (bringing in billions of dollars of foreign currency), only to fail pretty quickly and leave the western shareholders with very little. Luckily for Beijing, the pandemic masked a lot of those failures, but that “cover” is disappearing.
Beijing has also have forced Chinese companies to act irrationally to prop up the economy. Companies are not allowed to lay people off without government permission, they were (and in many cases still are) required to pay wages even when people aren’t working. Some of the companies are getting “support” from Beijing, but much of that is in the form of loans – making the companies even more controlled by Beijing. Most state-run enterprises are operating similarly. The craziness goes on and on. So many companies are still struggling to produce because they can’t get inputs from suppliers or their customers can’t take production. Very hit or miss, start and stop. Gov. is very careful to limit reporting of it, but we hear about it regularly from clients and friends. This is one of the reasons many western companies are looking to move out of/reduce presence in China.
Private – thank you for sharing your real world experiences.
Private, thanks for that update. I sold my FXI fund two years ago and since then it’s down 21%. Occasionally I read some positive news or opinion and consider reinvesting. I’ll reread your post as a reality check.
Largest 10-Year Treasury Auction EVER Sees Strong Uptake
The 10-year Treasury auction saw strong demand from investors on Wednesday despite its large size.
The $42 billion auction—the largest ever according to Treasury data—was awarded a 4.093% in yield, lower than the average yield of 4.290% seen over the past six auctions where new a 10-year debt was issued.
It was also 0.9 basis points lower than the yield awarded in pre-bidding deadline.
It indicates government didn’t have to entice investors with a premium over the market to buy its debt.
Indirect bidders, such as foreign monetary authorities buying U.S. debt, bought 71% of the debt that they were offered versus the average of 66.4%, according to BMO Capital Markets rate strategist.
The 10-year yield was flat at 4.104% after the auction.
It really boggles the mind who would lend the US government that kind of money for that rate for 10 years.
US has the cleanest dirty shirt. Flight to safety will eventually take hold.
What happens if the flight to safety is out of US treasuries?
Long term technically speaking, we should be looking for a pretty large relief rally in longer term bonds for some period of time. Once that is done, the ‘crash’ wave as you call it will take hold and make the decline in 2022 look like a birthday party meaning significantly higher long term rates. Probably when we start crossing 150% debt to GDP and for sure by 180%. Short term rates, US will have to go negative like most of the other indebted developed nations.
Thats how markets would work in the past. History rhymes, but necessarily does not repeat.
There is nowhere else to go.
Other places like precious metals and the Swiss Franc have markets that are too small, and the gold standard of government debt, the German bund, is also too small)
And Crypto is not the answer, since something like 80% of bitcoin is controlled by less than 100 accounts and if one of those big accounts sells all at once, bitcoin would fall off a cliff in the blink of an eye.
Justin,
The top 100 holders of Bitcoin control 15% of the current supply. A long way from 80% …
The top 10,000 holders control 56% of bitcoin.
The remaining 44% is spread across 706,310 holders.
https://bitinfocharts.com/bitcoin/
Jay
I think a problem with your data Jay is that is counting wallets. I doubt they track a majority of whale wallets close enough to merge them together to a single entity. Binance alone probably has a dozen plus wallets in the top 100. In the past they made some of those public information. While that could be user funds for the most part the point still stands that a single entity/person can control a lot more bitcoin then we think even if you analyze the blockchain for the amount held in individual wallets. Eventually the majority of bitcoin will most likely be held in exchanges, ETFs, and etc… I have no idea what future purpose it will hold. The original idea is long dead.
Question for the group…… I own MLP units (Sunoco) that I am thinking of selling (they have really appreciated to the point I can purchase more of something else that pays more, plus I want to get rid of them in my IRA). I have never had hardly any UBTI over the years from owning SUN. I have never had to pay any UBTI tax as it has been well under $1000. However, I suspect the sale of the units will generate some additional UBTI due to the way some deductions are recaptured. I think I will sell a very few shares this year and see what effect it has on the K1 I get every year. Has anyone here sold MLP units in an IRA and care to offer their experience the tax implications / UBTI?
Hi dj, and welcome to the “why in the hell did I have MLP units in an IRA” club!
I had units in an MLP in an inherited IRA. I didn’t realize the implications until it had sat in there for enough years to become a problem. When it dawned on me what I had, I started selling it off in small quantities so that the UBTI in that account was under $1000/year, including the UBTI from the recapture of the tax-deferred MLP payments upon sale.
It took me a BUNCH of years, but I sold the last of those units last month, so I am finally out.
As many people on this board will adamantly attest, I am far from an expert on this stuff, so please do not rely on what I write as tax advice. I hope it will give you enough of a “flavor” to either do your own research or to be able to talk intelligently to a tax professional.
Key concepts
(apologies up front – I am working from memory. Perhaps someone with more knowledge or better memory can expand or correct):
– You get UBTI on MLP units from three sources
1. The company actually has unrelated businesses that generate income and your share is reported on your K-1 (box 20v, IIRC).
2. Recapture of tax deferral benefits when you sell your MLP units. The distributions of MLPs are generally tax-deferred (not tax free), so you don’t get taxed on them until you sell your units. At that point “recapture” steps in and you get taxed on all that deferred income – and it is treated as UBTI. A couple of side notes about recapture – (a) if you hold your units until you die, your heirs get a step-up in basis and never pay the recapture UBTI, and (b) calculate very carefully how much you are actually up on your MLP units factoring in your recapture liability (once you pay the UBTI on the recapture, you may not be nearly as far ahead as you think).
3. (I can’t remember the label or exact details of the third type, but IIRC it involves acquisition debt financed property and is pretty uncommon nowadays)
-Your tax exempt account can receive up to $1000 UBTI per year and pay no UBTI tax. If it makes any more, the custodian (likely your broker) has to file a Form 990T tax return and pay whatever tax is owed (from money in your IRA). This is why brokers chase you every year to send them copies of your K-1s. Many brokers don’t charge for this service (a lot threatened to start charging a few years ago, but most backed down). Also, many (most?) brokers outsource the returns to an accounting firm. In my experience, they rarely get them right and rarely err in the IRA owner’s favor. If your broker files for you, consider getting the return AND THE WORK PAPERS so you can see what they have done. If it is incorrect, it is possible to file an amended return.
Also note that the $1000 exemption applies PER ACCOUNT, so watch what issues you group together in an account.
– keep track of all UBTI in your tax exempt accounts. Negative UBTI can be carried forward to offset positive UBTI.
So, with all that said, welcome to the club!
Private – Thanks! I guess I am an official member of the club too! I guess it is really not that bad as SUN has paid me a lot of distributions over the last ten years and will continue to do so if I hold them forever more till I pass them on. My biggest issue is trying to figure out exactly how much UBTI the recapture will create when I sell them. It is not that easy though I have the K1s from the first year I own them. The K1s have reported a couple of hundred dollars or less UBTI each year, but it is tough to figure out what was deducted and will be recaptured until a sale. My thoughts are I will sell a small amount of units (ten units?) this year and see what UBTI is generated from the sale. From that I can arrive at an estimate of how many units I can sell each and not trigger the $1000 limit. Is this how you arrived at how many units you could sell each year or did you manage to calculate the recapture from the K1s? Since the units I own are split equally between my IRA AND my Roth I also believe that qualifies for two accounts, which means the $1000 UBTI Limit is for each. That will help quite a bit as it doubles the amount I can sell each year?
Hi Dj. I hereby nominate you to be grand poobah of the club.
The UBTI you are mostly worried about is not the UBTI reported in box 20V (the few hundred bucks a year you mentioned), it is the recapture you will get hit with upon sale. The two aren’t really related. The UBTI for recapture is based on the distributions you received every quarter, not on the UBTI they paid you.
There is an article here https://www.investopedia.com/investing/benefits-master-limited-partnerships/ that gives you an idea of how to calculate recapture UBTI. Because you have held for a while, don’t be surprised if this yields a big number. It took me a bunch of years to sell mine all off because the recapture was fairly big to start with and kept growing each year, so it was like bailing a boat with a hole in the bottom.
I wasn’t smart enough to find an explanation of the calculation like that article when I started selling my MLP shares, so I did the “sell a couple and see what happens” approach you described. Luckily for me, it was Nov. or Dec when I figured out that I wanted to sell, so I only had to wait a few months go get my answer (you will have to wait over a year for the 2024 k-1).
Having shares in two accounts does indeed mean you get $1000 annually of “UBTI for free” in each account. I suggest you leave some “head room” in the $1000 to absorb any “operational UTBI” you might get.
So, its a pain, but (to me) worth doing because I didn’t want my heirs to have to deal with it. Also, my units were mostly up since I started selling (like 3X), so having to sell slowly made me more money than if I had sold all when I figured out I had a problem. I count that under “its better to be lucky than good”, but maybe it should be under “pure, dumb, luck” instead.
Private, Thanks so much!! I accept being the “Grand Poobah”, but only if you will be my advisor of the club! Maybe we need to get the headdress with horns to wear at the meetings…… I will look at the article link and see if I can calculate an estimate of UBTI before I do a small sell. As you said I have plenty of time! My units are up about 2X, so my holes in the boat may not be as bad. Having them spread equally in two accounts will also be a big help.
However, I have been getting almost $2000 per year in distributions. It will be interesting to see what the additional UBTI will be.
I will get to this over the next few days. Right now I am canceling our one week in Hawaii vacation we we leaving this Saturday on. My wife’s 95 year mother just fell and shattered a hip. She survived the surgery, but will be in the hospital and then to rehab. Life has a way of throwing vicious fast curveballs in the ninth inning with the bases loaded, and two out when you’re the batter on the team behind by one!
Again Thanks! and bet you will look good in that headdress!
We are in the same boat; forced sale of MMP – in a Roth account. There will definitely be significant UBTI.
I also had MMP in a taxable account and sold the day or two b4 the merger.
You will need to add all your distributions for UBTI but will be able to adjust your ordinary income with the suspended losses so that should help.
It really hurts being in a Roth account.
I will post back once I do my taxes (taxable) and see what Vanguard comes up with in the Roth account.
Sorry to hear you got hit in the roth, Barb.
I certainly am not happy about MMP, but at least I had it in a taxable account.
dj,
I think I still have some buffalo horns around here somewhere from when I was a kid. I will have to look.
Terrible news about about your MiL. It is hard with elderly parents.
NYCB/U Another tax implication question.
I am considering purchase.
Reading the tax implications (see page S-71-72) https://www.sec.gov/Archives/edgar/data/1171612/0000928385-02-003424.txt
It seems one could disagree with the pro rata between preferred and interest. Certainly today the statement:
“We will report the fair market value of each preferred security as $33.18 and the fair market value of each warrant as $16.82. This position will be binding on you (but not the IRS) unless you explicitly disclose a contrary position on a statement attached to your timely filed United States federal tax return for the taxable year in which you acquire the BONUSES unit. Thus, absent such disclosure, you must allocate the purchase price for each BONUSES unit in accordance with the foregoing ”
Qniform posted these are cumulative. The language states they can be deferred but seemingly with potential “phantom income” due to accrual of interest?
“So long as no event of default under the debentures has occurred and is
continuing, we can, on one or more occasions, defer interest payments on the debentures for up to 20 quarterly periods. Under applicable Treasury
Regulations, if the legal terms and conditions of an instrument are such that there is only a remote likelihood that a company will not make its stated interest payments on time, such contingency will not be considered to result in the creation of original issue discount (“OID”) within the meaning of section 1273(a) of the Code. We believe that the likelihood that we will elect to defer interest payments is remote, and have made a representation to this effect to our counsel. Accordingly, we intend to take the position that the stated interest payable on the debentures will not be taxed as OID. Therefore, except as set forth below under “deferral of interest,” a securityholder will generally be taxed on the stated interest on the debentures as ordinary income at the time it is paid or accrued in accordance with such securityholder’s regular method of tax accounting,
S-73
securityholder either (1) takes the position that the stated interest is OID
and discloses this position on its tax return or (2) makes an election to
accrue all interest on the debentures on a current basis.
If, however, we were to exercise our right to defer payments of stated
interest on the debentures, the debentures would be treated, as reissued (for the purposes of redetermining OID only) and such stated interest would become OID at that time. Each securityholder would then be required to accrue such stated interest on a daily economic accrual basis (as described below), both during and after the deferral period, even if the securityholder otherwise uses the cash method of accounting and such stated interest would not separately be included in income when paid.
The Treasury Regulations dealing with OID and the deferral of interest
payments have not yet been addressed in any rulings or other interpretations by the IRS, and it is possible that the IRS could take a contrary position. If the IRS were to assert successfully that the stated interest on the debentures was OID regardless of whether NYCB exercised its right to defer interest payments, all securityholders would be required to include such stated interest in income on a daily economic accrual basis as described below.
OID Resulting from Allocation of Purchase Price
As noted above, the amount of the initial purchase price of a BONUSES unit will be allocated between the preferred security and the warrant. Because the amount so allocated to the preferred security, which, as noted above, will be treated for tax purposes as ownership of the underlying debentures, is less than 100% of the debenture redemption amount, the debentures will be treated as having been issued with OID in an amount equal to the difference between their stated redemption price at maturity (the sum of all payments made on the debentures other than stated interest (unless the stated interest is considered OID as stated above)) and their issue price. You should be aware that if you hold a preferred security, you must include OID in gross income in advance of the receipt of cash attributable to that income.”
Does anyone know if the IRS has taken a differing position which would result in reporting interest on the deferred security?
I am not a tax expert. Would appreciate others analysis and thoughts on this matter! TIA.
You are misunderstanding the language. it currently gets reported as interest when paid, if they deferred, it would still get reported, just not as interest, but as original issue discount, and would still be reported even if no interest was paid.
What they say about the IRS position is whether the IRS will think NYCB characterized it wrong and the IRS would say that it should have been reported as original issue discount the entire time, even if they DIDN’T defer.
Grid calls OID phantom income and it can be a trap for the unwary.
To summarize, if you hold these in a taxable account, the income will be
1. OID from the discounted issue price (it was issued in the mid-30’s and will be redeemed at 50, for an issue price of somewhere around 66
2. Interest income when it is paid unless they defer it, and in that case, it will switch to OID where the income is reported whether you get paid or not, and the catch-up interest payment (if they resume) would NOT be reported. I think the number of securities that deferred in the last 20 years could be counted on one hand. Last bank to do it was Old Colony or something or other bank.
Very close, Justin! It was Old Second Bank. And the only reason why it got deferred was TARP bailout (and this literally was a bailout) saved its ass from a complete wipeout bankruptcy. The govt got totally ripped off on that situation. And Old Second BankCorp is a prime example reason for why Feds changed the rules on cumulative and trust preferreds being used as Tier 1 capital.
As long as people willingly accept risk/reward anything is an appropriate investment based on ones goals. But largely “deferred feature” is a very thin layer of “protection” for people buying because its “safer than non cumulative” preferreds. Banks are just so inheriantly levered, many common investors dont grasp it. On any given bank it can be continously profitable and the next day they are technically insolvent. Old Second Bank was just one example of many over the years. As well as last years examples, too.
Justin. You are a rock star! Phantom income is my concern! With the amount of capital needed to raise I have a hard time believing NYCB board will pay common or preferred. I sure would not vote to do so unless raising thru preferred I always look for your posts!
speaking of NYCB, I just looked at the option chains. And I thought the frenzy around Powerball was bad…, but there are TONS of wildly out of the money open contracts (on both sides) hoping for either the FDIC to swoop in and wipe out the common, or for a White Knight to buy them lock, stock and barrel to get their hands on their Flagstar subsidiary, which is a money printing machine.
I’ve held MLP preferreds in an IRA; sell and ignore the K1
you need $1000 to trigger the additional tax filing , which I understand the Broker does on your behalf; i’m not sure “guaranteed payments” generate UBI ?
NMFCZ – does anyone know when NMFCZ New Mountain Finance 8.25% Notes due 2028 will go ex-dividend?
Sounds like it was supposed to be last week.
Ex date is supposed to be one day before record date.
Prospectus says:
Regular record dates for interest – February 1, May 1, August 1 and November 1 of each year, beginning February 1, 2024.
You may want to contact IR dept. https://www.newmountainfinance.com/stock-data/dividends-tax
Well I bought a small amount of NYCB-A. My order the other day went unfilled at $19, thankfully. I’m in at $17 today. It’s trading with a penny spread! I put in a market order! Huge volume today.
You can really taste the panic in the air right now. Like that metallic taste with an adrenaline rush. News orgs, bloggers, and X users are having a field day trying to out do each other with outlandish statements backed up by nothing.
In a way this current situation where news is released instantly and amplified by social media sure makes for interesting times. Damage joy is everywhere.
…and the next day it craters again. Of course. Let’s go even smaller. I got one round lot at $14.70. What will tomorrow bring?
Tuesday Clevlnd Fed Rate comment ….. slowly …..
Cleveland Fed President Mester (FOMC voter) has base case that assumes gradual reduction in rates this year.
While inflation may prove to be more persistent this year, my baseline forecast is that under appropriate monetary policy, inflation will continue to move down over time to our 2 percent goal.
It would be a mistake to move rates down too soon or too quickly without sufficient evidence that inflation was on a sustainable and timely path back to 2 percent. On the other hand, if year-ahead inflation expectations continue to decline, maintaining the current level of the nominal fed funds rate for too long would effectively be a tightening in our policy stance, which would pose an increasing risk to the maximum employment part of our mandate.
My baseline forecast is that output and employment will moderate this year and inflation will continue to move closer to our 2 percent goal over time. But there are a number of risks around this forecast.
Monetary policy is in a good place from which to assess and respond to these risks to the outlook. The current strength in labor market conditions and the strong spending data give us the opportunity to keep the nominal funds rate at its current level while we gather more evidence that inflation truly is on a sustainable and timely path back to 2 percent. This is better than finding ourselves in a situation where we begin easing too soon, undo some of the progress we have made on inflation, potentially destabilize inflation expectations, and then have to reverse course.
If the economy evolves as expected, I think we will gain that confidence later this year, and then we can begin moving rates down. My base case is that we will do so at a gradual pace so that we can continue to manage the risks to both sides of our mandate.
Thanks Jim–about what I would expect out of Meister who has been fairly hawkish all along.
Quack Quack..Don’t these people ever shut up.Drama Queens loving the attention and causing confusion.
Profiting off of confusion is my bet.
bring back the British Consol and bring back Gold Standard. fire the Fed for good. Tired of these clowns.
-steps off soapbox
CRE Contagion – Which Banks Are At Risk?
https://realinvestmentadvice.com/cre-contagion-which-banks-are-at-risk/
And to go along with that….
https://finance.yahoo.com/news/nycb-tense-talks-watchdog-led-215915423.html
Azure,
How is that chart of CRE reserve ratio even useful unless you know a bank’s LTV metric? Should I assume based on that single chart that OZK is in the worst shape?
Yet on page 12 of this OZK document: https://ir.ozk.com/static-files/57a17382-8f14-489b-a9b8-ccad512a89ae
“The loan-to-value (“LTV”) metrics on individual loans within the RESG portfolio as of December 31, 2023, are illustrated in Figure 13. The significant protection provided by RESG’s conservative loan-to-cost (“LTC”) and LTV metrics is always important, and especially so in the current macroeconomic environment. Assuming full funding of every RESG loan, the weighted average LTC for the RESG portfolio was 52%, and the weighted average LTV was 43%, as of December 31, 2023. RESG collateral valuations are supported by the fact that the majority of RESG loans are for new construction featuring current design and amenity packages, which provides a distinct competitive advantage compared to older, less desirable properties.
.”
So their whole portfolio could lose 30% of their value, owners hand over the keys, and they could probably sell it all and at least break even?
Is this the risk we are discussing without even having enough information for each bank to see if there is actually a risk? Why did the author of that website not provide the most recent LTV?
That website mentions a few banks: ” However, we offer caution for smaller banks with 30% or more exposure and low loan loss reserves. This includes banks like ZION, CADE, VLY, and CBSH.”
They could not bother grab the LTV metric for 4 banks to at least prove their point that their reserve ratio was too low?
I am not a banker. I am not an accountant. I have a basic understanding of things but can be wrong. But if someone owns a 100 million dollar property that appraised for 70 million last week and they only borrowed 55 million from me… I suppose they could give me the keys and I would sell it for 60 million to unload it quickly. Not the worst possible outcome I imagine.
FC, I am not a banker either but agree 100%. Ozark states its LTV on construction is so great that if default the bank can still profit. IDK. But I DO know this: every regional bank has a differing portfolio and most importantly a differing geographical market. For example, the WSJ did an article on NYCB and others and mentioned my hometown of Knoxville, TN. Knoxville has a low office vacancy which continues to drop (fastest in country); home appreciation near two digits; MFH occupancy rates are high. Another words my banks which haven’t left this market are doing well! I am taking advantage of this “throwing the baby out with the bathwater” and buying. If one is investing in real estate or the financing of real estate, one better understand this is a local market.
http://tinyurl.com/25uzn93h
Sounds like we could be neighbors TNTowanda. We have the same hometown at least.
Cool. There are a few of us Tennesseans on III. I am in Sequoyah, you nearby?
Azure,
That was interesting and helpful. Thanks for posting it.
Mark
So, Ab we are all waiting with bated breath on your visit to NYCB head office in NY and if you had anything else to share.
BTW, I have been following the rout down all day. My last bid for 24.56 didn’t seem to fill. Was hoping for more end of day panic.
As to picking up good deals on pfds/BBs, I’m of a mind to be patient. So far none that I bought in the last 1.5 months are trading below my cost, which is almost always par or under.
Reasons I’ll be patient:
– ZB, 30-year bond futures down sharply two days in a row, and the 30-year yield correspondingly up. Why and is this the start of a trend? If a trend, preferreds will fall more. Possible reason #1: The bond market priced in a rate cut path that is too aggressive and is now adjusting. Possible reason #2: There are hints that inflation may return. Possible reason #3: If the economy continues to heat up (nominal GDP), long yields may be too low. I can’t predict Treasury yields, but I can wait to see if rising yields make preferreds cheaper. We saw that happen today.
– The stock market is heading into a seasonally weak period Feb-March-ish. Also, for technical reasons it might be time for a market correction. If SPX corrects, I would expect downward pressure on preferred prices.
Most issues purchased in the past 1.5 months are likely to be above cost. Go back two years and the converse was true, probably darn close to 100% of them. Don’t confuse brains with a bull market :->)
AFAIK, don’t try to predict what will happen, especially based on daily fluctuations. A long time ago I learned that understanding it will confuse you. If you a buy and holder and the yield/price today meets your criteria, buy. If you’re a trader/swapper, react rather than predict.
Down day in the market (and quiet on this board). I had some issues come to maturity and am looking to deploy the cash. Any reasonable bargains starting to shape up? TIA
Only ones I’m looking at are those issues that float soon or somewhat pinned to par. Unless some of the others pull back more.
Bot 200 NYCBpU today at 33.10 for my “high risk Sock” ; this about as low as it gets going back to 2020; it’s an oldie IPO in 2002 with 4.8 mill sh; current yield over 9%; like it a lot better than NYCBpA of equal risk due to the yield advantage and few people understand it’s offbeat 50 par . Trading 9 points higher a week ago; i really love this one and the chart says i’m buying
at long established support; we shall see;
also got back into VLYPO
If one buys this outside of tax deferred or tax free accounts one needs to be aware that the OID from the deeply discounted subordinate note at IPO will create an amortized “phantom tax” drag. To what degree I dont remember off hand. This issue is now only about $150 million now due to accepted tenders during the GFC at a discounted price.
“in for a Penny , in for a Pound” or tell me your favorite Gordon Getty one liner ;bot another 100 NYCBpU at 26.12 ; there is no more news to prompt this ; just general panic with regional banks and NYCB in particular imho
BML-G . . . BML-H …. two old Bk Amer Floaters …. Seems interesting.
Any holders, comments ?? Thanks
Maybe. No good if interest rates fall too much.
Hi Jim I have USB-H and 3 other of these 3 & 4 % minimum floaters. Bot some time ago and quite happy with them. If they get called away I’ll have a real nice cap gain. Mean time quite happy with my yield on cost.
I own both BML-G and BML-H. I bought them a few weeks ago because of the decent upcoming dividend, because they’re less volatile than the other issues I trade, and because I swapped out of some of issues have appreciated much more. But don’t assume that I know what I’m doing :->)
For 2/5/2024. SOFR 5.32%
BML-G floating rate 6.33%, current yield 7.46%
BML-H floating rate 6.23%, current yield 7.43%
If FFR is cut 100bps by year-end and SOFR falls the same, where would price go? One possibility is price would fall to maintain CY at current levels, which would take BML-H from 20.96 today to 17.6. I’m too new at this to know if that’s how things work.
It’s interesting that the CY on these two floaters is well above the sub-6% CY on the BofA fixed preferreds. Extra yield for extra risk? Clue me in.
The risk like you mentioned is in time the Funds rate drops significantly over next couple years and thus you’re stuck with a lower yield possibly below the fixed. Its all about your assumptions and strategy. The fact the live floater is presently higher is no surprise. A sub 6% bank fixed is not anything I would sprint to the counter to buy though.
Yes, if SOFR is cut 100bpps by year-end, BML issues will likely be lower. OTOH, they might even rise if the entire preferred market recovers (these four issues were $24 to $26 two plus years ago).
In the meantime, it’s an attractive yield so I’m not going to worry about what might happen down the road. It’s likely that I’ll be long out of these issues by then.
I’m increasingly concerned about a potential conflict between China and Taiwan in the next couple years. I don’t think it’s anywhere near a sure thing, but if it does happen, it will have gigantic effects. Multiplying the odds times the impact, I think it might be the biggest investing risk factor to consider right now. This SA article is a good summary: https://seekingalpha.com/article/4667107-investors-should-brace-for-impact-if-rising-china-taiwan-tensions-escalate.
Has anyone here worked through how the income oriented investments discussed here are likely to be affected? Obviously anything with direct Chinese or Taiwanese exposure will be hit hard, but beyond that I don’t have a good sense of what will move where. How would the MLP’s and BDC’s fare? Would the credit risk for preferred issues be different for different sectors? Are US based REIT’s likely to be badly affected? Is there anything the than gold that looks like a safe haven? Do US treasuries benefit? I’m lost when it comes to the second and third order effects.
Staying away from the political question as much as possible and just taking it as something that might or might not happen, does anyone have suggestions for how to invest to reduce this risk?
Nathan, I don’t know how you would stay safe or defensive in the market except to buy defensive stocks. HII, RTX, NOC, GE etc. In one way the market has already priced that in and these stocks have already been moving higher.
One of those is old school and seeing the war in Ukraine I think Modern military tech is now at the point where tanks, machine guns and submarines were invented 150 yrs ago. Companies working on drones and military robotics come to mind. One step down is be the company selling the picks and shovels to the manufacturers
Nathan, I do not know your situation , some ideas for ballast and alternative investing w dividends I have put Agnico Eagle (AEM) and Newmont Mining (NEM) in my Roth (Newmont is the largest by far gold co in the world w extensive copper, mostly in safe countries, US based and an S&P component; AgNiCo mostly Canadian and Aussie mines, low cost, a CA co., in Roth your divs not taxed at 15%.) According to Taylor Dart on SA the preeminent analyst in the space/ articles are available/ solid holdings. AEM has a strong div records, NEM a variable one. If you want a little more risk you can add B2Gold (BTO in CA, BTG on NYSE) to your mix, strong mgmt, approx 6% well covered yield no debt big cash position to the mix. Pays .04/qUS$ divs. Building a monster mine in Nunavut CA near the AEM complexes, some risk in Africa to be aware of. Taylor is long as am I. Say you put 5-8% in these. Good hedge imo.
I have Whitecap SPGYF (WCP in Canada) which can pay divs at WTI $50 and Woodside (WDS in US ADR and same on the ASX) also in my Roth. Again solid well run companies w o/ng/ (LNG w WDS) and am looking hard at Exxon which I think is discounted by arb on the merger w Pioneer (Permian oil) – so say 5-7% in those. You get US/CA/AUS o/ng/LNG here w well run co’s and div /shareholder focus.
Those in total would give you 10-15% hedge in mostly safe country production, divs and what I view as attractive values now. Just some Bea ideas, DYODD. Bea
Nathan, little help with the research.
My concern is catching a falling knife and the world economy and the saber rattling. Even though the Suez canal caused an uptick in oil futures the prices don’t seem to be holding, even with the conflict unresolved. Even though this might not affect WDS directly, it’s a world mkt. Investors here like quarterly dividends and they have a tendency to sell if there is bad news. WDS dividend is semi-annual and has been variable even looking backwards for several years. Here is a chart.
http://www.dividendchannel.com/...
Holding the distribution steady doesn’t seem as important to WDS as keeping cash reserves and financing projects. Don’t know how much WDS hedges NG, but looking forward for 3 months to the Northern Hemisphere spring when prices could drop doesn’t look good.
https://finance.yahoo.com/quote/QG=F?p=QG=F&.tsrc=fin-srch
You’re probably about 3 weeks from the next dividend announcement. I would be in no hurry to place a buy.
Nathan, Two sides to your question and a hard core response. We can worry about things beyond our control but it doesn’t do much good except cause stress. You want the yield or growth in your holdings you take more risk. Giving up yield and growth for safety is the other end of the spectrum. I asked myself the same questions years ago as I was looking for investments.
When I got down to the basics I asked myself what are the basics and how do I invest in them. When I walk into a room I expect to have light, heat to warm me or cold to cool me. I expect to turn the faucet and have fresh water to drink. I hope there is food to put on the table. This is what everyone wants. This is why investments in these sectors offer safety and lower yield because everyone wants the same thing.
You see certain people on here in some of the different forums talking about trying to buy these at a lower cost and a higher yield. The rest is just trying to increase your yield and profits and limit risk.
Ok, done with my Sunday sermon.
Charles,
What you’re saying makes sense during peacetime. I’m not certain that utilities would be a safe place if Taiwan is invaded. Politico speculates that our utility grids would be subject to cyber attacks from the Chinese or their proxies.
https://www.politico.com/news/2023/04/16/chinese-hackers-military-taiwan-invasion-00092189
I have to go with Charles here. I mitigate risk to my acceptable levels, and for now its basically 50% CDs, Tbills, TIPs, IBonds of various durations out to 2028. About 10% in a few overloaded bonds, and around 40% in various perpetuals with probably 90% of that in various OTC IG utes. If China ever successfully sabotages our utilities (which is presently well below my worry of where I can find my next bag of sweet potato chips), I sincerely doubt the market in general including all other sectors of preferreds will just whistle past the graveyard unaffected by it all either.
Grid, did you quit drinking milk after the Chernobyl disaster or eating seafood after the Fukushima disaster and get your mail order potassium Iodine tablets? I just can’t go down wrabbit holes and worry about things I have no control over. But I will continue to sell to contractors 6# and 8# rolls of lead to line movie stars bomb shelters with.
A friend gave me a year’s worth of expired MRE’s that the disaster relief agency was disposing of. The salt intake will probably kill me first.
Charles, the problem with being correct investing on an end of the world scenario is you can only be right once…And that is likely a pyrrhic victory anyways.
Never bet on the end of the world. Because there is no tangible reward for being correct.
Nathan
I recently spent five weeks on Taiwan and can provide a bit of local color for you about the election.
l.First the DDP won the presidential election but they did not get a majority in the legislature. In fact the new president has already nominated someone from the KMT ( one of the opposition parties) to be the head of the legislature. So there is going to be a split government.
3.The mainland was most concerned about the DDP because they have talked much more about independence. But with a split government, the possibility
of serious changes seems much reduced. The DDP does not have the votes.
4.More generally, people in Taiwan are very aware of how closely linked their economy is to the mainland and almost all the people I spoke with said that they did not expect a change because the mainland needed the economic support which Taiwan provides by way of technology and capital.
5.I might also add that on Taiwan there is considerably more question as to does the mainland military actually have the ability to invade Taiwan. People point to the recent shake-ups in senior leadership of the military.
Bottom line is that they view things from an economic approach. The mainland government is politically motivated ,however, and it is possible that they could invade for political reasons and discount the economic impact. That is a real possibility but not one people on Taiwan take as seriously as many in the U.S. do.
It is a very complex issue but I hope this provides a bit of local color.
SC
Just to add a little flavor to your excellent post sc –
-There are over a million Taiwanese working in the PRC. Huge source of managerial and technical talent. They run companies employing many millions of PRC citizens.
-Many of the “Chinese” companies (esp. in tech) that the world sees as part of the PRC are actually owned or at least operated by Taiwanese. Taiwan provides the technology and management skill, PRC supplies the workers.
-The reliance on Taiwanese management even extends into things like shoes.. One factory PRC complex I am very familiar with has over 300,000 workers on its campus (!) but is owned/managed by Taiwanese (and it has “sister” plants in China – so a lot of bodies making shoes). They make shoes for almost every brand you know, and they are incredibly vertically integrated. In addition to shoe assembly, they have a leather tannery, sole molding plant, shoe lace factory, even a printing plant to make the tags and a box plant to make the cartons and shoe boxes. Absolutely staggering to see because they also have dorms for almost all of their employees, a bank, hospitals, chicken farms, (on and on) to support their workers.
IMHO, in an open conflict between PRC and TW, a lot of those PRC operations would be disrupted, which would really hurt the Chinese economy. I am not saying that the PRC government won’t do anything stupid (I remember the cultural revolution), but it would have some terrible “secondary” effects inside the PRC economy.
Just my humble opinion. I could be completely off base.
Nathan,
In my experience, during any crises a flight to quality occurs and short term treasury notes are the beneficiaries. You could also look at defense issues like Raytheon … . Also, since the overwhelming majority of advanced semiconductors are manufactured in Taiwan, existing chips would become very valuable- not sure how to play it. But it would be worth investigating.
Hope this helps.
Mark
Trying to pick potential winning stocks if the market gets whacked is difficult. And sometimes, what you expect to appreciate does not do so. If that occurs, you’ve only increased your risk by adding more exposure.
In the 2008 GFC, when 8 of the sector SPDRS were down over 50%, the best performing sectors were Utilities -43%, Health -37%, Staples -31%. There was nowhere to hide. Even gold did poorly during a large portion of that drop.
Very few stocks do well in a severe bear market. Those that do tend to have special stories (new innovative products, successful clinical trials, discovery of new oil or gold fields, etc.). Your chance of finding them is minimal. Cash is king and for the most part, only negative delta positions will hedge a portfolio well in a bear market (shorting, inverse ETFs, puts, etc.). These strategies are more complicated and require more than the typical skills of retail investors.
Nathan, I recently saw Bill Ackman speak on this subject. While I don’t recall the statistics, I do know they were alarming. I believe almost 75% of US required chips rely on Taiwan. That would mean the DOD would not have enough to replace the requirements for the sophisticated defense equipment, utilities, cars our entire economy would be jeopardized.
Recently I read Taiwan stated the plant under construction in Arizona is problematic. They cannot find qualified workers.
While there are structural changes the Govt could make to encourage more STEM studies, these will not happen.
Not sure there is an investment strategy for this other than stockpile food, etc. I think we would be at war fighting for “democracy” once again (not that I think war is always avoidable, I just think stating sovereign preservation is adequate as every sovereign has that right.
> I’m increasingly concerned about a potential conflict between China and Taiwan in the next couple years.
Hypothetically, if you knew this was going to happen, I think the best strategies is also one of the simplest: buy long-dated Treasurys in as much size as you could handle.
Thanks for all the thoughts so far! To clarify a bit, I don’t see a US-China conflict as a given. My personal guess would be there is about a 20-30% chance that China moves to reclaim Taiwan in the next 3 years. If China was to move, rather than an actual invasion I think it would more likely to start a blockade (described legally as a quarantine) as in this paper: https://www.atlanticcouncil.org/wp-content/uploads/2023/12/strategy-paper_naval-blockade-of-Taiwan.pdf.
By contrast, I think it’s a little more likely (call it 40-50%) that the US experiences a recession in that same time frame. The Taiwan scenario is less likely, but impact might be larger. One way of rephrasing my question might be: is guarding against a recession any different than preparing for a major disruption of Taiwan? Given two investments of roughly equal baseline risk, I’d prefer the one that would hold up against both scenarios over its counterpart that only helps against one.
I’m looking less for actual hedges that would go up, and more trying to understand what the impacts would be on different sectors or types of investments. If I can move to things that would drop only 20%, that would sure beat something that drops 50%. One view is that everything of equal yield is equally risky under all scenarios, but I suspect that some things are more susceptible to different types of events. I just don’t really know which are which!
The real investment question: Does one feel comfortable investing in Taiwan Semiconductor??? Berkshire sold last year on political vulnerability. The stock is on a tear. I am conflicted This is my investment concern on Taiwan.
If Berkshire held it, I would let it ride. Warren likes the Chinese business folks as he invested in BYD years ago based on his admiration. (Yeah!)
Too many unknowns. There are several ways this could play out.
SUN …. Sunoco … re SUN proposed buyout of NuStar …. any comments re SUN.
Jim ; its trading like it’s a done deal ; ; get .4 sun for every NU , and the 4 preferred series are all trading pinned to par for being called ; I’m hanging on to the common and Pfrds and accept the conversion/ calls
I had an index step-up annuity for 6 years that matured this week. It yielded 13.2% last year but because of some down market years, the average annual yield for the past 6 years was somewhere around 6-7 pct.
I no longer want as much market risk in these scenarios so I’m contemplating a fixed annuity, of which I know very little about. Can anyone offer any information or sources for information regarding this? TIA
Well, stantheannuityman.com and blueprintincome.com are two great sites. Look for “MYGAs” and fixed annuities. The sites have good explanations for how they work.
For you folks out there who bought the Pitney Bowles 6.75% Notes (PBI-B) it has gained about $3 per share over the last couple of days. There is a complete shake-up of the company’s management going on, New CEO, multiple changes on the board, etc. Whether this shake-up can turn this old company around remains to be seen, but the Q4 report showed signs of new life and lit the fuse under the appreciation of PBI-B. For the sake of my shares I hope so. One of my few barking dogs.
dj For what it’s worth, I was perusing looking for end of the month movements on preferred and baby bonds that we sometimes see and tribute to the ETFs month end re balancing. I actually came across Pitney Bowes b as I was looking. Now I noticed the common stock was actually down slightly, while the preferred B was up unusually as you indicated, with big volume that started right in the last 10 minutes of the end of month. so while I thought that movement was because of end of month balancing, I also see that it continued on for 2 days. so I’m beginning to think that maybe it was because of both events. But I would suggest you take a look at chart and volume , It seems very coincidental that it started in the last 10 minutes of the day with large volume. Thanks
dj, JG:
PFF added 172,993 PBI-B shares on January 31, 2024 (where the stock took a 9.22% gain for the day) and added another 16,800 shares on February 1, 2024 (9.05% gain for the day). PHGY (the Bloomberg ticker for the index that PFF follows) increased its % weighting for the PBI notes from 0.19095 on January 1, 2024 to 0.21922 on February 1, 2024. No PBI-B shares were traded by PFF earlier in the week, so (aside from the one-day heads-up on the index rebalance that PFF always gets) they weren’t frontrunning the change.
DJ, I took a quick look at third qtr as I am evaluating bonds. Forward guidance is flat; no new CEO but a search committee, new board members. Below is a Q&A from earnings. It seems CAPEX is to be lowered to meet current debt and “my opinion” telegraphed to all that a dividend cut is in the works.
Matthew Swope
That’s helpful. Jason. Just one last one. Sorry, as I wrap up, you mentioned more disciplined capital allocation. Would you guys consider cutting a dividend?
Ana Maria Chadwick
So let me take a step back in terms of capital allocation, and I’ll bring it into kind of four buckets, as you know. First and foremost, I mean the generation of capital. And as we’ve talked about a restructuring program and different things to increase our profitability, increase our cash flow generation.
Second priority is investing in our business. And we’ve talked about CapEx. And we have focused to more optimize the CapEx instead of new build and construction. So that is also providing some additional sources of capital vis-à-vis prior periods. Debt reduction, pay down, we have upcoming maturities all the way up to ’26 at the moment, but we’re focused and our intent is not to let that go current.
And lastly, on return to shareholders, that is really a conversation we continue to have with the Board. At the end, it is a Board decision. But I would say those — the order in which I just mentioned those four, that’s the order and how we think about it.
CHTR and LBRDA getting whacked today on news that CHTR lost 61K broadband subscribers during 4Q as well as its usual 250K+ video subscribers. Rival Comcast also lost 34K broadband subscribers during 4Q.
So who is picking up these internet customers? ATT and Verizon?
Both CHTR and LBRDA down 12% each and near 3 and 5 year lows. This may have some ramifications on the pricing of 7% LBRDP, as LBRDA owns 47M shares of CHTR. We all know how the algos and bots tend to target everything in the capital structure, whether justified or not.
DYODD.
Well, we were not part of the ones dropping Spectrum (Charter) internet service. To get high speed broadband in our development outside of town we had to sign a long term contract through our HOA in exchange for them extending service to our area. The service has been great and the price very competitive. We have no alternative out here to Charter. Personally hoping they do OK as I like the 550 Mbps reliable service from them.
Im doing my best, dj. I have spectrum internet and their cell phone service. Its actually a very good deal, $29.95 unlimited talk and text, and plenty of internet use also. Charter actually grew that segment nicely last quarter.
Well, personally, I’m VERY excited to finally get Spectrum around here…. They’ve just completed building out the system in our community and a rep is coming on Saturday to explain it all and begin the hookup procedures.. Even though Spectrum has been only 4 miles away for as long as we’ve been here, we’ve not had a viable alternative to satellite for 17 years ago…. I’m a total dinosaur having never had cable option anywhere I’ve ever lived, never had unlimited bandwidth possible and therefore no idea about Netflix. Roku, whatever so there’s going to have to be some serious ‘splaning going on for me to understand it all, but I sure am looking forward to having Spectrum. I don’t even know how they’re going to get their fiber up the quarter mile long driveway and into this stone house and if it needs to be in a particular location of their choosing inside to maximize its potential… The guy better have some serious patience with me… ha
BTW, the news from CHTR says a major reason for loss of internet subscribers is strong competition coming from fixed wireless…. I tried US Cellular fixed internet which promised 300 mbs download speeds and then they told me I qualified for 600 mbs at my location… Once installed, their speed (25 mbs range) didn’t even measure equivalent to satellite and their response was essentially “Oh well.” Not even an offer of tech support to try to figure out why. So the fixed internet idea didn’t work for me…. Also tried AT&T fixed internet prior but they required a fixed dish type thing be drilled to the external wall of the house at a location of their choosing… No thanks.
I have had fiber to my home for a few years now. I might throw a fit if i ever go back. Streaming video calls, netflix, movies, gaming, … i have the basic package of ~ 600Mbs. When the fam shows up, or we host and dozens of people interacting with phone, streaming, … no issues. Couple that with Netgear’s Orbi wifi mesh network covering thousands of sq feet… its pure goodness and especially with gadgets and home automation… If i forget to turn on the boathouse lights on a evening boat ride, “Hey google, can you turn on the boat house lights?” or dock lights 🙂
Totally agree.
Fixed fiber to the house is the way to go
Been using Verizon Fios for ages now. They have periodically upgraded the speed over the years at no cost to me. Given that there are just 2 of us, I likely have more bandwidth than I need
I got a chuckle reading the discussion on “Fiber Internet”. It seems the U.S. has either developed or has access to modern technology but chooses to stick with older technology for residential customers. In the past the U.S. utilized ADSL with its range and speed limitations while Thailand implemented next generation HDSL with repeaters to deliver high speed internet miles from the CO (Central Office). Several years ago Thailand implemented fiber internet to rural residences.
Mentioned in this discussion are various installations where the fiber is converted to coax or UTP (unshielded twisted pair i.e. CAT 6) prior to connecting to the modem. Each conversion is a possible fault location requiring a service call to repair. In Thailand the fiber is connected directly to the modem/router, no intermediate ISP owned equipment to troubleshoot. No underground installation issues as the fiber is strung along traditional public utilities lines, no EMI issues since it is fiber not copper.
My house is in a small village many kilometers from the CO but has a direct fiber connection to the modem/router. Unlimited 1 GBPS down and 500 MBPS up costs less than $20 a month. Included in the package is an additional mesh network box and an ethernet/ HDMI TV box with multiple free movie channels. In comparison my house in rural Florida only had dial-up access, yes dial-up, till last year despite being far closer to the CO. The new Florida connection is an unreliable/slow 5g wireless system for $50 a month.
ha, Bob in T – interesting read.. We moved to rural Tennessee in ’07 having lived for 12 years on the tiny Caribbean island of Montserrat, an overseas territory of the United Kingdom. It’s 39 sq miles, had about a total population of about 11k, and during our years there, its dormant Soufriere Hills volcano decided to wake up and destroy 2/3 of the island forcing the population to dwindle to 4.5k population. It never even occurred to me that we could move back to anywhere in the United States and not experience better internet than we had on our tiny little island, uninterrupted even by the exceptionally rude Madame V. Montserrat – “Still Home Still Nice” https://www.youtube.com/watch?v=lUM-R33fqXY&ab_channel=2whiteroses
2WR – they will bury the fiber in your grass / dirt. They don’t bury it deep. maybe 4 inches then all it takes is drilling a small hole in the stone to feed it through
While I have Verizon FIOS and thus not familiar with Spectrum. I suspect they are set up similar. There will be some type of box (Verizon calls it an ONT – Optical Network Terminal) the fiber runs into. Does not matter where it is located. Mine is in a far corner of the basement next to my electrical panel
The fiber inside the house is then distributed by wires run to your output point. This is where it can get tricky in exiting construction. But I have mine run through the basement ceiling to a garage utility room, briefly up a heating duct that leads to my study and then connected there to my router
The router is what you want to locate in the best spot for your coverage
Mav – When you say “output point,” you’re referring to the router, right? So if my current satellite setup covers the whole house adequately with coaxial wire from satellite to the Hughesnet modem in my garage and then the modem connected by a long ethernet cable fed behind walls to my router in the upstairs master bedroom (a 10 year old Netgear unit I might add with probably Ethernet wire of the same vintage) is there any reason why duplicating that setup for Spectrum fiber to their modem shouldn’t work just as well only with much faster speeds and unlimited data?
2WR
I used output point because some people have multiple. But if you are just talking internet, yes I mean the router
If you are getting TV service, in a lot of cases that is wired directly to the TV locations (unless you are just doing streaming and relying on the internet access which would go through the router). Just depends on the situation
Yes if you have good coverage with where your router is now, you should likely have good coverage putting the new router in that spot. That said you mentioned wired by coax – and a 10 year old ethernet cable. With the latest fiber (at least with Verizon) they may need to update those cables to the latest Cat 6 or Cat 7 ethernet to take advantage on the higher bandwidth / speed
You should specifically ask them about the 10 year old ethernet run upstairs. I mean it should work, but not at the speed capacity you are paying for unless they pull new ethernet
Also make sure your ethernet adaptor on your computer is also set up and capable of the higher Gigs you are paying for. If it isn’t, that is something you yourself would have to upgrade
Thnx, Mav. At least I’m now feeling armed and ready………
Are you sure the Charter install will be fiber? I thought they were coax only.
David, When Spectrum wired us up they installed a hybrid system. They extended underground fiber to a fiber to coax node at the entrance to our development. From they node they ran a large underground coax cable to pedestals located along our road. From the pedestals they ran a smaller coax to our house into a small panel on the side of the house. From that panel they ran a coax cable into my basement to their cable modem and router next to my head panels for my coax and CAT6 networks. The coax was split before the cable modem to supply their media package to the selected TVs that received their TV boxes and DVRs. The other split went to the cable modem which picked off the Internet signal and sent it via CAT6 cable to the router. I plugged the router ports into my CAT6 to supply my house network with Internet. The Spectrum technician
who installed it did a great job and was good to work with as I am a little particular with networks and wiring my house. My basement and part of the main level is supplied with wireless from their router while the upper level and main level is supplied from wireless access points that are on the CAT6 network. We have very stable internet as the Spectrum nodes are only servicing 30 or 40 houses. They can serve up to 500 or so, which can lead to problems. There us not going to he more development in this area due to very strict zoning due to being in the watershed for the town. We should be safe from overloads due to tookany folks all wanting bandwidth at one time. I am guilty at times of that myself as I have an indoor cycling center. The cycling app i subscribe to requires that I download files up to 20GB to ride a virtual ride. I try to do that at off times and download several when I do to last a week.
Thanks, everyone – Great input to arm me with all the relevant questions…… Right now I’m particularly worried about the digging to do given they already dug up our landline telephone wires once…. This house also has a 12 zone sprinkler system installed so I’m concerned about them hitting not only the sprinkler water lines but the low voltage 12 strand wire that controls the zones… … then making sure everything is maximized for optimal performance inside… all this helps …. I appreciate it.
2WR. Before they run the trunk line along the road (the line is normally run within the public road right of way). they are required to call 811 and have all the utilities located. Any hard surfaced driveways they will use boring machines to go under.
Before they run the line to your house they are also required to have all utilities located where they plan to run underground. Normally they will run it down your driveway if it is gravel or along side it if it is hard surfaced The line to your house is buried using a very small piece of wheeled equipment that the spool of cable is mounted on and fed down through a slitter that slits the ground and placed the cable. It is barely noticeable where it has ran the cable. The construction manager for the crew installing the underground should meet with and work out the routing to your house where you can explain about the yard sprinkler system. I recall when I installed fiber and electrical underground on my projects we could always locate the sprinkler system because they had tracers with the piping and wires. Remember the construction contractor is responsible for anything damaged while installing the system, Good luck! FYI I was the development liaison with the Spectrum Construction Manager during our installation due to my engineering and construction background.
we have Verizon FIOS its great, as noted they gave us free upgrades after installed- ‘forced’ when copper was eliminated, prior I had VZ internet too and land line. Anyway it works well.
LBRDP is my largest pfd position, tied w STT-D which prob redeemed soon, w my basis around 8% yield. Very happy w that one and its Charter share coverage. I thot pfds held up pretty well today a few even slightly green. Utes not so great w 10yr pop in rates. Nibbled on a few and added to one. Should stay in mmkt, can’t help myself these over 5% yields in solid utes. Bea
Thanks, DJ – I’ve been told they are very thorough and patient with customers. There was already a guy here to map out a planned route but there’s been some conflicting info received. They’ve confirmed they’re doing the flag thing with the utilities but again that won’t help with what’s there for the irrigation system. I also want to make sure they don’t cut any of the satellite cables (Hughesnet and Directv) as I plan to have both for at least the first month just to be sure. And I do know they’re they take responsibility for lines they break, but still who needs the aggravation..
I’m sure it will all work out but am hoping whomever comes is extra good dealing with no nothing but opinionated dinosaurs.
When AT&T installed fiber in my neighborhood, they had the location of off property utilities. On my property, they located they used underground detection equipment to locate sub structure installed by my builder (sprinkler system, sewerage, elctrical wires, etc.). They art deco-ed the properties by spray painting the grass wherever they located something. Hopefully, your utility does the same.
After my house was built, I installed some new sprinkler pipes for better coverage. Pre sodding, the cable installer was lazy and rather than trim the extra underground line, he just left it there. Unfortunately, it was the neighbor’s feed line. It looped into my yard and back before going into their house and yep, I cut it. It’s a fun time asking your neighbor to check if their utilities are all working.
They just completed the installation now. It’s pure fiber right to the house…. Supposed to be getting 300mbs but only measuring about half that right now, but the suspected cause is I opted out of using their router and stayed with my existing but 10 year old Netgear R6300v.2 router. I was told to expect dead zones if I used their router and what I have actually covers all areas of the whole house except one where I’m using an extender of some sort. They told me I would probably benefit from an updated router or an Orbi MESH system due to the size of the house…. Immediate reaction is I’m thrilled overall… Can’t wait to say goodbye to Hughesnet but we’ll keep both for now for a trial period…. Spectrum guys told me they’ll be back within 10 days to dig in the fiber after the Utilities do their flagging thing.. They’ve noted what I said about the underground sprinklers installed so they should arrive with the proper underground detection system as well to ID what’s there other than utility lines…. fingers crossed.
Thanks all for the hand holding/sharing your experience… It helped! And thanks to everyone else for tolerating the non investment oriented thread.
Now maybe you can wheel and deal as fast as Grid does, 2WR!
Seriously, you are gonna love Youtube now if you had satellite before.
Congrats on the new upgrade. Hopefully it means you will post more often.
What and where out my welcome???
2WR. Yes, you will definitely benefit from a new router for more reasons than just speed. Combine with a modern mesh type wireless access point to cover your big house and enjoy! One other thing, if you have older computers or notebooks they may not have the capability to use the faster wireless. My old windows notebook can only run at leas than half my wireless because of it’s old hardware.
thanks, Dj- I’ve already discovered how true what you say is re: new router… My primary usage is on a 2017 vintage MSI GE72 Apache Pro Windows 10 laptop…. I have no interest in Windows 11 and even less interest in getting sucked into the Apple vortex, so hopefully this laptop is modern enough at least until Windows 12 or whatever….. Right now I’m only getting about half the advertised speed but it’s a such a vast improvement from what I’m used to plus coupled with unlimited data for the first time in my life, I’ll be like a kid in a candy store for a long long time discovering all I can now do.
For all those looking at new networking gear, the best site I ever found is https://dongknows.com. He seems to be unbiased. I donated after he helped me (via articles and Q&A) pick the best router for my home setup, and its perfect. He also discusses real world results versus specs. FWIW!!
In my area, it’s 5G wireless, CenturyLink fiber, and various small ISPs using a city sponsored fiber network taking customers away from Charter. I have my fiber order in and I am really looking forward to cancelling my Charter service. I guess that’s a little schizoid since I also own LBRDP, but they just have to survive until 2039 🙂
State of California utility commission is holding hearings about ATT wanting to do away with copper landlines.
They are really scrounging for copper pennies. Think how much money they can add to the bottom line scrapping all that copper!
Just kidding. Rural users are very upset as fiber isn’t available everywhere. Especially the coastal hill areas. Cell service is done with repeaters in some areas that connect to those copper landlines.
Covid after effect. Work from home boom turned to bust as everyone is back in the office again.
AUB-A has had quite the run over the last month. I’m going to lock in some profits and dump a good portion of my shares here. I’m not too concerned with the stock, but I still seem to own a lot of banks from the crash and I don’t want to have to follow as many of them. Also for some reason Ally just can’t get the ticker symbol right in my account for them.
Last 2 days I sold out of the GJH decided there is a lot to choose from with a 7% yield to move into. With the interest in US cellular thought it was a good time to move on. Bought some MFICL to replace part of it with.
I may have bought your shares. 😬
A fair swap, I hope.
Maine, You look at the volume last 2 days my shares amounted to about one third of the volume. I have more if you are interested 🙂
Bought another fu$%&*g CD. TDA had a 7yr, 5.05% from First Federal Bank Quarterly pay available for another day. I have more CDs than AOL handed out in their peak. It’s callable though, so thats a bummer. Higher for longer peeps.
Can you walk us through your logic for this callable buy? Heads they win, tails? What do you think the future holds for this buy to be a win?
Maybe I’m wrong, PP, but I just bought another illiquid ute pfd yielding over 100 basis points higher than your CD and the pfd is significantly below its call price.
Am I missing an elephant thundering toward me?
JMO
Just portfolio allocation move, nothing more sinister at play
PP, I hear you. The available CDs look ridiculous with their short calls. Some of them are just substitutes for t-bills. I always look at new issue agencies. I figure if it’s going to get called in 6 months, I might as well get some yield (and pray it isn’t called). Big bank new issues often have longer calls and better yields than CDs. The fixed market is skittish right now.
Yes, normally I like to jump on monthly payers, but those that are on offer now are a joke in terms of yield. Agree on skittishness of the fixed playground. I like to peruse the corporate bond new offerings on TDA, a few days ago all of them disappeared at once. They don’t know what to do either.
As I say that, I see TDA has a new 4 month, 5.05% monthly payer CD from Central Valley Community Bank.
rocks2stocks;
I do the same. I bought a FHLB 6.2% 2033, callable in 1 year awhile back. Figure it is just a 1year cd @ 6+%, not a bad deal. Pretty sure they will call it in October, but who knows ? Two years ago we bought some pretty dicey stuff to get 6%, what a difference to now. Don’t know where rates are going, the present ones are “normal” to me, pretty close to what they were before ZIRP.
I remember refinancing my home back in 1992, I was paying the “normal” 8%, but Countrywide Credit ( you remember those guys ?) offered a 30 year fixed at 6.5%, the lady who worked there said I was so lucky to get in, we will never see rates this low again 🙂
WAFDP up today on merger approval. At today’s price still paying over 7%. Sold half for a nice weekly gain.
The common shares don’t seem to reflect the appreciation of the merger. Down 3.5%.
I am now a NYCB-A shareholder..
Regarding the NYCB-A pref LIBOR language…It looks like there is no language which allows it to revert to SOFR, i.e. no language stating that it will goto the industry standard.
If I am reading it correctly, it will goto the LIBOR rate when it was discontinued, I believe June 2023. Are folks interpreting it the same way? If yes, this is a positive and means it will be called if the bank doesn’t go bust by then!
This is from the prospectus:
“If fewer than three banks selected by us and identified to the calculation agent to provide quotations are quoting as described above, Three-month LIBOR with respect to that floating rate period will be the Three-month LIBOR in effect for the prior floating rate period or, in the case of the first floating rate period, the most recent rate that could have been determined had the floating rate period been applicable prior to first floating rate period. The calculation agent’s determination of Three-month LIBOR for each floating rate period and the calculation of the amount of dividends for each dividend period will be final and binding in the absence of manifest error.”
Prospectus: https://www.sec.gov/Archives/edgar/data/910073/000119312517082030/d221314d424b5.htm
I guess all of NYCB’s income securities are on sale today..
though the NYCB-PU is still more expensive than its lows in the last year.
A reminder, when evaluating these you can’t just look to the prospectus… you absolutely must look at it in the context of the LIBOR Act provisions.
The Act basically says a LIBOR contract will fall into one of three buckets, and once you’ve figured out the right bucket the Act will tell you what happens next.
If you rely *solely* on the prospectus you may come to the wrong answer.
I agree that issuers can have different interpretations. With that said, the prospectus can provide major clues. Regardless, I like the name no matter what. I was hoping someone has already figured out their intent. I would email IR but i have the feeling they are a little busy today.
Best case: The coupon gets fixed at the June 2023 LIBOR rate + 3.82%, which is close to 9%
Medium Case: It floats at the SOFR rate as of the call date, March 2027, 3.82% +0.26%
Worst Case: It stays fixed at 6.375%. I frankly don’t see this happening unless I am missing a term in the prospectus.
I doubt they are thinking that far ahead, but Best case is the most likely, since they contemplated using an old rate with this sentence.
If fewer than three banks selected by us and identified to the calculation agent to provide quotations are quoting as described above, Three-month LIBOR with respect to that floating rate period will be the Three-month LIBOR in effect for the prior floating rate period or, in the case of the first floating rate period, the most recent rate that could have been determined had the floating rate period been applicable prior to first floating rate period.
Additional option – they could call the preferred stock at the date at which a decision could be made about what to do about the loss of a LIBOR quote. Given that the coupon rate is relatively high, I think that might be the most likely outcome.
I have written a query to the investor relations dept at NYCB about their plans for this issue, and will share it here if they do reply.
Maine ; i seem to recall Congress passed a Law that all financial firms can change from LIBOR to SOFR ; regardless of the language in their prospectus
They can if there is ambiguity, but there doesn’t appear to be ambiguity in the prospectus. I have read about 50 of these things, each varies.
The law is here: https://www.ecfr.gov/current/title-12/chapter-II/subchapter-A/part-253
Nice Data Pt. for Fed …..
The Q4 Employment Cost Index was up 0.9% (Briefing.com consensus 1.0%), seasonally adjusted, for the three-month period ending in December 2023. That was the smallest gain since the second quarter of 2021. Wages and salaries were up 0.9% and benefit costs increased 0.7%.
The key takeaway from the report, which Fed Chair Powell keeps a close eye on, is that it shows disinflation in employment costs, offering another signal after the core-PCE Price Index for December that inflation trends are moving in the right direction.
ET preferreds: https://ir.energytransfer.com/preferred-equity
The 7.125% series G Fixed-Reset cumulative preferred ($1000 par) is trading below par.
CUSIP: 29273VAM2
First call/reset: 5/15/2030
5-year reset to the 5-year yield + 5.306%
Semi-annual dividends
Total cost of buying will include accrued interest.
[restarting the thread about call options with a new post]
[and thanks to all the posts on the previous thread; they helped clarify and confirm my understanding.]
Azure, my specific question about covered calls is “what do you do when the underlying rises past the strike price?”
Do you for example allow the underlying shares to be called away, then evaluate whether to re-enter?
Bur, thank you for your question and I hope my answer will help in some way. Of course every equity and each investor’s situation is unique. If I want to hold the equity I have written a covered call on and the stock has risen above my strike price; the choice is either roll the strike price higher and time to expiration longer or just let the underlying equity get called away. I have equities that I have written covered calls on for DECADES, bringing in enormous amounts of premium (I still am writing covered calls each month on many of my portfolio’s positions). When I was managing institutional funds on Wall Street the vast majority of our accounts wrote calls on many of the positions and sold puts to take in premiums/initiate positions in equities at lower prices. Of course, in later years we had sophisticated programs that calculated the odds and my teams would make decisions based on these factors. Lastly, the decision to use options as a hedge, income strategy, speculation, to mitigate risk etc should be considered by each investor because they alone are the most important decision maker. I am traveling in Russia (in magnificent Saint Petersburg currently) and through Europe and may not be able to reply immediately to any questions here. I truly wish you well my friend.
The world is a book and those who do not travel read only one page.
Be well, Azure
AB, avoid any military sites, and oil storage areas in St Petersburg.
Pajaltz
Why? Because they’re not pulchritudinous? hehehe… Hope ur having an enjoyable trip, AB…
2WR,Happy new year to you and yours.
Ukrainian Army has been targeting oil storage, military sites and warehouses in nearby Russia.
We need “I am Groot” to be 100% when he returns.
If you try to call him, remember the Call is “covered” by the KGB and Puts-in.
BTW, when I owned a laundromat in the 90’s, next door was a beauty parlor named Pulchritude.
I am Newman
hey Bur, not addressed to me, but I’ll share for what it’s worth.
Taking tax and dividend question out of the equation… Best to do this in a tax deferred account on non (low) dividend paying stocks.
With options writing strategies we are typically looking for what is called Theta decay – this is the decline in time premium of options over time. Time premium (as opposed to intrinsic value) is always $0 at expiration.
I find that Theta decay is optmized when you sell out of the money options at about 45 days to expiration (DTE). At 21 DTE you should revisit the postion to make sure you are getting appropriate ROI. If you decide to roll your short option leg forward, then do so no later than at 7 DTE. Between 7 and 0 DTE weird stuff starts happening particularly with at the money short options. Best to exit.
I like to look for monthly theta decay to be in 1% to 2% range in terms of an ROI target. Also you might want to focus on selling the 30 Delta out of the money call to initiate a new position. Rule of thumb is that the 30 Delta option has a 30% chance of expiring in the money. It also should be farily liquid. Always use limit orders!
When your options are in the money, as long as you can get a good ROI in terms of monthly Theta on the 45 DTE Call, you can just roll your calls up and out using 45 day window. There will always be a temptation to select options expirations longer than 45 DTE when you are rolling an in the money option. Resist this temptation as theta decay is slower the farther away from expiration you go.
I also do my options selling on Friday’s and buying on Mondays. Probably supersticious, but I just think option values decay over the weekend – I realize efficent market theory says this does not happen.
Covered calls sound grand until I remember I own one share of MSFT not 100.
Question for the pros…
– HMLP/A was delisted & deregistered and now trades on the expert market.
– AAIN (baby bond) was recently delisted & deregistered but does not seem to trade over the counter. Pulling up the CUSIP (041356809) on FINRA turns up nothing. What’s the difference between preferred equities that go dark and bonds?
– NM/H will soon be delisted and deregistered. How can one figure out if this issue will end up on the expert market (as HMLP/A did) or simply vanish?
– Separately, SBYNL is on the expert market and spiked to around $5. Took advantage and got rid of it with a basic sell order which executed on Schwab without any issues. If I had owned HMLP/A or NM/H, is it just as straightforward to sell even though the bid may not be favorable? Same situation if these issues were held with Fidelity?
Any insight would be appreciated. Thank you.
Not a pro, but…
1. There is no difference between preferreds and baby bonds, for example look at AFSIM vs. AFFS. What you are seeing with AIC and AAIN is just because of what Ellington did or didn’t do.
2. There’s no way of knowing what will happen to NM-H unless IR will tell you.
3. HMLPF (correct symbol) can be sold anywhere just as you did with SBYNL. At Fidelity, you can buy or sell.
One tip thanks to another poster here – if you open an IB account (even just an unfunded demo account) you can see bid and ask on expert market issues.
Thanks David.
In the case of AAIN, I suspect it boils down to some specific SEC rule which determines whether there will be continued trading of delisted bonds over the counter. I don’t know enough about the intricacies of securities laws. Perhaps Merger Sub, created by Ellington to effectuate the merger, may have something to do with this.
“In connection with EFC’s guarantee of the Notes and in accordance with Rule 3-10 of Regulation S-X and Rule 12h-5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Merger Sub is exempt from the requirements of Section 13(a) and Section 15(d) of the Exchange Act. This Form 15 is not intended as an admission that Merger Sub was previously subject to the reporting requirements under Exchange Act Section 15(d) or that Exchange Act Rule 12h-5 was not applicable.”
One example that now comes to mind is South Jersey Industries. The bond was delisted and yet still trades over the counter. Can anyone explain the difference between SJI and AAIN?
Expert market trading – If we have the ability to buy and sell common/prefs on the expert market (albeit at not so favorable bids and asks), there is at least continued liquidity vs. none at all. What am I missing other than a much wider spread?
Thanks
Ron, SJIJ does not trade over the counter. It trades on the bond desk. SJI also stated at merger they were not creating a trading market for it, so somehow it wound up trading on the bond desk.
There is a process, but I dont know what it is. But I remember a few years ago I was wanting to buy Fortis Series F (Fortis utility Canadian market preferred) but it wasnt available in US on OTC. This online friend of mine called her Schwab global desk dept, and within 3 days the ticker FORFF was created so I could buy it. So the company does not have to be involved. I own AIC but due to its short duration I have no expectations it will be tradeable. But since I am not selling I dont worry about it.