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Sandbox Page

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.

1,906 thoughts on “Sandbox Page”

  1. CYs on the safe, fixed, perpetual preferreds at year-end.
    WFC-L 6.28%
    PSA preferreds 5.8-6.0%
    AGM preferreds ~6.4%
    illiquid utes 6.12% average

    I own some of all of these. In a fit of rationalization and revisionism, I decided to treat them as MMF replacements. That way, I can feel good about the yield. When I include substantial positions in WTFCP and WTFCM to the group, the total is 63% of my preferred/babies portfolio with a YOC of 6.4%, handily beating MMFs, treasuries, CDs and agencies. The YOC for the other 37% is 7.2%. My cash allocation is mostly in SGOV.

    1. The Entergy BBs can be added to the list as they are safe, fixed and long-dated.
      CYs Entergy BBs 5.5-6%

  2. Lots of imbalances at the close:
    T prA is bid up after the close following a gap up on a buy imbalance.
    There are people like me who will try to offset any of the preferred imbalances, but I was further away than the print . I shorted a little after the close at a 5.9 yield.
    My trade of the day :
    NEXA had a 500,000+ share sell imbalance and gapped from 9.40 to 8.80 on the final print. I was bid 8.90 and bought many 1000’s of shares, flipping them 3 seconds later at 9.40 for a 60 cent profit.
    A nice end to the year!!

    1. Interesting, The company I work for is owned by a P.E. Corp called Imperial Zinc. A lot of demand for this metal makes it worth recovering from recycling metals. If we see tariffs I wonder how it will affect this metal?

  3. 2024 In Review

    At least we beat CD’s!

    Total returns from 12/29/23 through 12/31/24

    Nasdaq 100 ETF (QQQ)= +25.6%
    S&P 500 ETF (SPY)= +24.9%
    JBPP(Justin Bank Preferred Portfolio) = +13.1%
    All preferreds= +8.9%
    All babys/terms= +8.0%
    Largest preferred ETF (PFF)= +7.2%
    1 Year CD bought on 12/29/23= ~ 5.5%
    Short term Tbill ETF (BIL)= +5.2%
    Canary preferreds (low coupons, high quality) = +2.7%
    Long term US Treasury ETF (TLT)= -8.0%

    Everything was going great in III land until ~September when we ran off into the ditch. That is when long term interest rates aka the US Treasury started its dramatic increase. That hurt what was setting up to be a banner year. JBPP is down -5.0% from its peak on October 16th. PFF is down -4.6% from its peak on October 18th. 10.1% of all preferreds lost money for the year, highlighted by our RILY* friends. 25.3% returned less than 5.0%, so you would have come out ahead buying a 1-year CD.

    Any guess what by far, the best performing preferred was?

    MSEXP by 1,000 miles, up over 500%, which is insane for a non-bankrupt, non-penny issue

    Going forward if your personal forecast calls for flat to down long UST rates, everything should be rosy. If you forecast rising rates, the downtrend that started September/October will likely continue. If that is your forecast, shorter term babys/terms that do NOT default would be a good alternative.

    Good luck going forward. To infinity and beyond . . .

    1. thanks for the 2024 recap.
      I am wondering what is the justin bank preferred portfolio
      I put the ticker JBPP into several websites but didn’t come up with anything

      1. Depoli,
        JBPP is just a tracking portfolio that Tex the 2nd created when the bank rout was happening. It’s nothing you can purchase. I’m sure he will probably chime in later.

        1. Mark, this is an example of one of the changes I am hoping Tim makes. If we can look at just Tex’s comments on a search, Depoli would be able to find the several posts where Tex listed the stocks.
          Problem is Depoli, the list is past history. It was made after the bank scare when the market thought more banks had a higher risk for failure. When this didn’t happen at least to the ones on the list they recovered and netted the holders unrealized capital gains. Who knows going forward if they will keep the gains, go higher or lose value.
          When a whole sector falls out of favor you find babies get thrown out with the bath water and opportunities occur.

          1. Yes, the search is nearly worthless in trying to find past posts. The other issue is when Tim scrapes the pages of comments, I don’t know if they go into an archive, or if they just disappear.

            If archived, then we need some AI to help make any sense of it since the JBPP has been discussed multiple times in different places on the site. We might need to up our donations. 🙂

            If not archived, then……

            I wonder how many comments have been made on this site since Tim started it. It’s got to be in the 100’s of thousands.

            1. Mark, some people I think have saved posts on the Way back site for things they thought were important.
              I never worried or realized how much storage space I was using for free with my Android phone until Google started nagging me I was getting to my free storage limit. I think another reason is they are looking for coins in the furniture cushions.
              Hardware and server space isn’t free. How much of the information posted on here would just sit on the servers in the attic gathering dust?
              As an example, say people post on illiquids in the sandbox or Reader alerts. Is it worth saving everything on the Sandbox to keep those posts?
              But then again I really appreciate Tex’s posts with lists and the work he has done. Yet recently he said he had to post on reader alerts because the post wouldn’t take on the sandbox page.

  4. CKNQP – No surprise I suppose on this one, but no payment has been made yet on yesterday’s call date… Fido this time, not Schwab, so I assume others have had the same problem.

    1. 2WR not counting my lambs until after they drop and been standing on their own for 5 or 6 days. So not worried about payment. What has been bothering me is what I replace it with in the Roth. This is an account we don’t plan on touching and want to leave to the kids, so something solid I don’t have to worry about for years. No bonds in it (yet). That was why I have been musing lately about
      to them and thinking about a longer term utility holding.

      1. Charles, likewise. I have a rather large amount to contend with this call. January will be spent shopping I guess. In the meantime it will go straight to SGOV.

        1. Piglet, Christopher Robin is the one who is confused right now.
          Several purchases done in the past month have been turned around and sold.
          Flips for dividend capture haven’t turned out. My own warnings about experiences on flipping that it works until it doesn’t.
          Buying dividend stocks to add to my stable thinking I’m catching the low only to see lower lows.
          That sweet spot of 6% Tim was mentioning doesn’t look so good for perpetuals and long term dated holdings like say MGR
          Lower coupons that have a face yield of 2.5 to 4% now showing 6% yield on cost that are solid like CNLHO are feeling like they can still go lower.
          I’m still holding my core dividend stocks but I have changed my mind about buying anything right now and looking at what I could sell to raise cash.
          CTA-A & CTA-B are looking good right now but I have seen them lower. The A I have seen between 52 & 54 this past year so at 55.00 cost and 6.3% yield is it a low or is the market setting up for a bear trap?
          Another thing I normally do of adding tranches when I feel confident on a stock to lower my average cost I don’t feel like doing right now.

          1. good comment ….CTA/PRA and PRB vs PFF pairs are trading near bottom of range in place since october 2023.. am looking for modest weakness to acquire

      1. Thanks, Irish.

        QOL shows Dec 30. I don’t know their source, but the company’s announcement said Jan 1.

        Here you go, 2WR.

        https://www.cobank.com/corporate/news/2024/cobank-issues-300-million-of-preferred-stock-nov

        The proceeds from this issuance will be used to redeem all of its issued and outstanding shares of Fixed-to-Floating Rate Series H Non-Cumulative Perpetual Preferred Stock, Par Value $100 Per Share (“Series H Preferred Stock”) on January 1, 2025.

        “The Series H Preferred Stock will be redeemed at a redemption price of $100 per share together with accrued and unpaid dividends to but not including the redemption date (less any applicable tax withholding as required by law). “

        1. You’re right… QOL has it wrong… See? Always go to the source and I have the prospectus in my notes and didn’t go there… I hang my head in shame…. lol

          1. FIDO is already showing it posted to our account for Jan. 2nd. Guess the lambs are out of danger.

    2. 2wr,

      I got the CKNQP redemption proceeds, and the div.
      Dated Jan 2, but I don’t know if Fido posted this morning, or yesterday.

  5. Does anyone including Tim what happens with Gridbird. I have not seen him on this website or SiliconIncome Investor.com either. I sure hope that he is well. Happy New Year Everyone,

    John K Cal

    1. I don’t think Grid will mind if I share. I message him once in a while over at SA. He has played a lot of golf until it got colder out, took a nice long vacation, and has decided to invest/rotate in a small realm of what he knows and likes. I get the impression if he figures out something new and interesting to discuss he would pop back around but for now most everyone here kind of knows his general thoughts on a lot of subjects. He seems to be doing well, healthy (no complaints to me directly), and enjoying life.

      1. FC thanks for the update. I have his contact info but didn’t want to bother him since he seems to not want to be bothered but I was beginning to get worried.
        Grid’s specialty was diving in and researching. His favorite fishing hole was illiquids. I got the impression that talking about them was throwing his game off. You start telling everyone on Facebook or Reddit about your favorite vacation spot or fishing hole then the crowds start showing up.
        The other thing it was suggested a couple times he and me were doing a Pump and Dump like that HDO group. I understand you can get that impression when you’re talking about preferreds that rarely trade or maybe just a small amount at a time. Who needs that when you’re just trying to help out.
        That’s one of the reasons I sometimes don’t post the stock symbol or Cusip when I talk about something.
        But the other thing he talked about was flipping regular stock like say TFIN.
        Wish he would come back and talk about that. Although we have some good traders who also post here.

        1. Appreciate yours & FC’s comment on Grid.
          Glad the read out is good health, and scratch golf.
          That said, get the man back to be a lead dog.
          Great 2024 ….. better 2025 for all.

        2. Ah, yes, Charles the Pump and Dumper. Losingtrader admits only to the latter handle due to excessive fiber intake.
          Have a good New years. It’s time to head for my 4:30 PT 90 minute massage, followed by a quiet evening in……Vegas. I live 9 miles from the Strip but the Wynn sign and Sphere can be easily seen and read without binoculars. I have to use blackout shades or the Sphere is so bright it would distract from the wall-mounted TV and keep me awake.
          In any case, I’ve seen and done V the Strip so many times it’s become annoying

          Hoping for no fireworks in the hood . One of the dogs freaks out.

          1. Hey LT, you buy any of that LTSH today? a whole 421 shares changed hands yesterday then 2,793 traded today. I was pumping and my new partner was dumping. It even has your initials on it.
            I was thinking I need a new partner for my comedy act. Think you could join me and get us a booking off the strip?
            Actually have never been there. Couple of my customers told me if I showed up they would show me the town.
            My wife dragged me to an Indian casino here for dinner for New Years eve, Funny thing is I didn’t even drop a dime in the slots. The Wall Street Casino is only one I like to play.

  6. I bot NSA/PRA 6% perpetual preferred at 21.43 (21.37 stripped 7.02 cy) as the nsa.pra/pff pair is at bottom of multiyear range ..using 3yr horizonit has gone from over 2 sigma rich in december 2023 to 2 sigma cheap now

  7. Reviewed the annual reports for Janus Henderson’s JAAA & JBBB– (CLOs)
    JAAA Net Assets: — —
    Beginning of Year 4,472,073,366 2023: 1,662,369,525
    End of Year $ 13,965,630,533 2023 $ 4,472,073,366

    Impressive- but less so than the 8.46X increase for JBBB
    Net Assets: — —
    Beginning of Year 133,266,676 2023: 78,609,882
    End of Year $ 1,125,617,946 2023: $ 133,266,676

    Over $15 between the two.
    I’ve been parking some cash there- happy so far- they trade fairly evenly, especially JAAA, of course. Also using USFR, CLIP & SGOV.

    1. I also have cash parked at JAAA. Another one I’m using is FLTR, which has a similar chart to JAAA.

      1. Coaster-
        Very similar- this yr, FLTR has outpaced JAAA a little, but since IPO of JAAA in ’20, JAAA has done a bit better. JBBB has been around a couple yrs, and beat both- but more volatility- it too is nearly all in the bottom rungs of IG, but not 99% like JAAA.

  8. I bot AHL/PRE at 19.13(19.07 stripped 7.37 cy) as the ahl.pre/pff pair is bottom of 1yr range..it has gone from near 3 sigma rich in mid november to 2 sigma cheap today …on a longer (3yr horizon) pair is trading near fair

    1. Always interested in hearing from you AB.
      I especially like viewpoints that differ materially from my own (for example BTC).
      Happy new year!

  9. MBINN/PFF pair has gone from near 3 sigma cheap in june 2023 to 2 sigma rich and 3yr high in october (3yr horizon) and rolled over.. its currently near fair value.. would expect continued underperformance of this 6% perpetual

  10. TECTP – @ 10.47 [$10 liquidation preference] – Seems to follow a very predictable pattern of price appreciation heading up to x-div date, but at 10.47, that’s the equivalent of 26.175 were it a $25 issue. With the issue being currently callable on any dividend payment date, with the range high seemingly around 10.55 (26.375 equivalent for a $25 preferred), the historical range seems on the high side given the call risk, yes? It’s been callable since 5/15/24 and now has its next coupon payment at 11.50% approx, but what’s keeping them from calling this one? The common is not public and management owns something like 47% of the outstanding according to the last 10k but it does appear to pay a dividend on the common although I don’t know how much. Payment of common dividends cannot be made if payments on TECTP are suspended, so there’s insider interest in making sure TECTP pays dividends, but still there’s only 1,725,000 TECTP outstanding…. What’s keeping Tectonic from calling TECTP? I’m guessing there’s non-economic reasons why they keep this one outstanding

    1. Thought this item was lost in haystack !! Had entered in spring arnd $25.25 and did add in August at $10.12.
      Crazy low vol , premium to the now current call, yet on any dips below the $10.20 area I am an adder.
      Appreciate to posting. Great 2025 …..

    2. 2white – my take is that like the common, insiders own a bunch of the preferred and they like the juicy yield. If this wasn’t the case, it would be at odds with “self-interest” not to call it since Tectonic’s regulatory ratios are good and can easily handle a call of this small issue.

  11. Anyone notice odd div postings at Fido today?
    JAAA- split the div into two parts (correct total), as well as the cap gains into two parts.
    TRINZ was posted twice (expecting a clawback)
    Getting weird there.

  12. Just a year-end note if you’re running a ponzi scheme or facing other criminal charges, Lufthansa has a lot of space available in first class using frequent flyer miles from every US origination point to Frankfurt, Munich and beyond today through the 1st. I suggest booking to Beyond. nobody will find you there.
    This could also be useful if you’re a floor trader and would like to YOLO your clearing firm by shorting millions of options.

    Glad I could help you flee in style. Just another Losingtrader service.
    I decided to post this after watching the Prime video “Chiefsaholic” about the Chiefs superfan who turned out to be a serial bank robber. It’s a great video if you’ve ever bet on sports . What could be better than sitting in a hotel room , wearing an ankle monitor, and watching the superbowl with $155,000 in bets riding on the outcome. I won’t spoil the rest.

  13. What about PFFA, CY 9.2% based on the 2024 dividend? The monthly dividend for PFFA has been reset annually every January since March 2020.
    2020 $0.15 (starting in March)
    2021 $0.16
    2022 $0.163
    2023 $0.165
    2024 $0.168
    I don’t think the 2025 dividend has been announced, meaning CY calculations going forward are uncertain.

    Between the Oct 2023 low and the Oct 2024 high, PFFA appreciated 29.4%. Over the same period PFFR appreciated 25.5%. Since the high PFFA is down 6.1% and PFFR 8.2%. Clearly, these are two different beasts.

    I’m going to wait for the 2025 dividend announcement and the market’s reaction before spending more time on PFFA. Also, if there is a stock index correction in Jan, I’d like to see the impact on PFFA.

  14. Moody’s seasoned Baa corporate bond yield, ticker DBAA, is calculated based on bonds of 20+ years maturity. Baa is the bottom tier of IG with some speculative characteristics.

    It seems to me that the correlation between DBAA and preferred stock yields should be strongest for fixed perpetuals.

  15. PFFR has been paying 12 cents/mo since July 2019 when it changed from quarterly to monthly payments. From Oct 2017 to June 2019 the annual dividend varied but was roughly equivalent to 12 cents/mo. The stability of the dividend is appealing.

    The yield on PFFR is 144/price, currently 144/18.52 = 7.78%. Entering this formula in a charting program produces a chart history of PFFR’s yield that is valid from Oct 2017, almost its entire history. Here’s the chart:
    https://www.tradingview.com/x/IaZCWU19/

    1. Thanks to Rocky for drawing my attention to PFFR. Here’s what I think.

      REIT preferreds etf PFFR has had a stable dividend of 12 cents/mo. for 14 years through thick and thin, a remarkable record that speaks to good management. The CY is a tasty 7.8% with low credit risk. I’d be happy to add it to my holdings at this yield, even knowing the yield is likely to go higher. It would be buy and hold for me.

      I plan to buy some now (small) and add if the price drops. Downside target guesses include 17.71 (8.13%) and 16.95 (8.5%).

      1. Why the rather dodgy REIT sector over PFFA? Cap gain?
        -Oops- forgot about your comment way below- wanting diversity, had not owned REITs, etc.
        Still, PFFA looks pretty good (own a little myself).

        1. PFFR appears to be the opposite of dodgy with its solid dividend history. Don’t need to know what’s in the sausage.

  16. Looking at Brighthouse Financials now. Was considering moving from BHFAL to BHFAP but in the past month BHFAL, BHFAN and BHFAP have had price drops. BHFAL -4.68%, BHFAN -4.68% (only because nice gain in the fast few days) and BHFAP -9.45%.
    Don’t know why BHFAL’s chart looks much better. BHFAL is BB while BHFAN and BHFAP are preferred. Coupon rates: BHFAN 5.375%, BHFAL 6.25%, BHFAP 6.6%

    1. Dan, I wonder if you have the right idea looking at BHF Baby Bond instead of adding to the ABLLL
      You have a opportunity to get a Capital grain and collect a decent dividend. Both are in the insurance industry.

    2. good comment.. bhfal/vclt pair has seen bhfal outperform for the last 3 years with signficant swings.. its currently trading near fair value ..was two sigma cheap in 12/2023 .. using same bhfan/pff pair also trading near fair ..was 2sigma rich was in october,..I recently bot bhfan as using a short term (1yr horizon) its near 2 sigma cheap

  17. Year end review is tedious.
    One BB Tim mentioned has been doing very well although I don’t think he owns it now. ABLLL, Abacus Life up about 20% this year and still paying 8.48%. It describes itself as “asset manager focused on lifespan-based financial products”. It buys life insurance policies. Recently got (or getting) $150M in debt financing.
    If price drops enough I may buy more. NOT a recommendation. I don’t fully understand the risk. 5.74% price jump Friday for unknown reason. Price dropping afterhours.

    1. Dan, just a quick look. I passed on this when it came out. Main reasons is two areas of insurance. Years past, agents and financial planners were recommending you buy policies to cover nursing home care in last few decades. There were also companies buying peoples life insurance policies for a lump sum or offering annuity like payments.
      Companies failed and couldn’t honor their commitments in a ZIRP environment as they couldn’t invest money to get enough income to pay out and they miscalculated costs of nursing home care or how long people would live.
      My understanding is Abacus life came back in the market saying they have solved the issues that caused other insurers problems. Of course you can get a better return on invested money now.
      While the baby bond has increased in value the common has lost 50% of its value this year and 25% of its value since inception. The last offering of common stock included stock of original investors who were cashing in on their investment.
      This is really really me doing a fly by and general observation. You’re good with the investment and probably know more details than I do.

      1. Yes Charles, ABL stock is risky. It might do very well in the next year or two but I’m not taking a chance on that. I’m expecting ABLLL to be OK for the at least a year but of course I don’t know.

    2. I sold my ABLLL at $27.59 last week. Yes, it’s currently paying ~8.5%, but because of the premium the YTC (2/27) is less than 2%. YTM (11/28) is just over 5%. Who knows what will happen for short term trading, but I don’t think there is any logical case to buy this and hold. I’d only consider getting back in if it was much closer to par so that the YTM was over 8%.

      I don’t know what’s going to happen next with the price of the preferred, but decided it was best to get out with a gain. There was a really big transaction just after close on Friday: 43000 shares at $27.97 when it usually only trades a couple thousand a day. Short squeeze? Maybe the company itself needs to buy these back because of some covenant? Anyone have a better guess at why a risky preferred would go crazy like this?

      1. Nathan, don’t know why ABLLL is acting the way it is. Price up over $30. I was planning on holding for awhile since call date is not until 2/27 but sold this morning at 29.91 for a 17% gain.
        It will be interesting to see what happens going forward.

        1. ABLLL is up over 50% in 6 trading days, was up 2.59 earlier today– something is going on, but can’t think of anything making this climb like this.
          With 24% profit ( or more), I think it’s time to cash out.
          Now up to 32.98 ask 33.96 up almost 13$

          1. Sold half so far- asked 33.50, sold at 33.90 !! A gift from the mkt maker?

            Ask now 34.50, was 34.96 – buck higher- crazy ….

            1. Wow – one of my best profits for quite some time.
              Sold more ABLLL at 35 and finally at 37.
              10 min before the close, someone raised the Ask to 42 –no takers-surprise.
              Well, unless this magically turns into a 50 or $100 BB overnight, I’ll be happy at a 42% profit.
              Can’t wait to see what drove it to a high of 37.20 Rose about 39% in 6 days!

  18. Bloomberg headline today:
    “S&P 500’s 2024 Rally Shocked Forecasters Expecting It to Fizzle”

    This is a good example of why I ignore most popular press articles (except to use the headlines as a gauge of sentiment). If you had followed Ed Yardeni or Michael Howell, you wouldn’t have been the least surprised by the SPX rally. Also helpful were charts that showed the historical behavior of SPX in election years.

  19. I just bought some PFFR on Friday (1/2 position) as I am just looking for some diversity and I did not own any REITs or debt thereof. Thoughts? Here are the top 10 holdings:

    Name % Holdings Sector
    DigitalBridge Group Inc – 7.15% PRF PERPETUAL USD 25 – Ser I 2.78 % Finance
    DigitalBridge Group Inc – 7.125% PRF PERPETUAL USD 25 – Ser J 2.48 % Finance
    Digital Realty Trust Inc – 5.20% PRF PERPETUAL USD 25 – Ser L 2.42 % Finance
    Hudson Pacific Properties Inc – 4.75% PRF PERPETUAL USD 25 – Ser C 2.20 % Finance
    Diversified Healthcare Trust – 5.625% NT REDEEM 01/08/2042 USD 25 2.14 % Finance
    UMH Properties Inc – 6.375% PRF PERPETUAL USD 25 – Ser D 2.04 % Finance
    AGNC Investment Corp – FXDFR PRF PERPETUAL USD 25 – 1/1,000th Ser F 2.03 % Finance
    Vornado Realty Trust – 5.25% PRF PERPETUAL USD 25 – Ser M 1.88 % Finance
    SL Green Realty Corp. – 6.50% PRF PERPETUAL USD 25 – Ser I 1.88 % Finance
    Kimco Realty Corporation – 5.25% PRF PERPETUAL USD 25 – Rep Dep 1/1000 Cl M 1.86 % Finance
    Percent of Portfolio in Top 10 Holdings 21.71 %

    1. Rock, you asked for comments happy to oblige. Most are perps, a mix of mid and high coupon. I only own KIM-B which has been falling. Good chance the prices will continue to fall affecting the ETF price. Nothing wrong with your decision. Maybe you should have started with a 1/4 position? Timing is hard to say. Short week for the market and the same for next week.
      I’m debating some buys and sells. I am asking myself if I should do the buys now before the herd comes back and wait to set the GTC sells until after the holidays so I can judge the mood of the market as to where to place the price.

    2. PFFR CY 7.8% with a stable 12 cents/mo. dividend. If price were to fall to 17.09, the CY would be 8.4%. The extreme would be 16.22 (CY 8.9%) near the Oct 2023 low. I suspect PFFR is going lower, but I don’t know if it will be a little or a lot. It depends mostly on where long-end yields go. My guesses.

      1. Thanks Charles and R2S. Yes, obviously I might be catching a falling knife here, with rates potentially breaking to the upside. But as I’ve said, at this point, I’d rather buy the ETF as opposed to the individual securities. I saw the office vacancy post by R2S so there’s that, but it does seem that there is a trend for back to office, but I guess we’ll see. For me, if I have to go back to an office, that will be my official retirement date.

  20. “How Tariffs Can Help America
    Economists Have Drawn the Wrong Lessons From the Failures of the 1930s”
    by Michael Pettis

    “Done under current circumstances, in other words, tariffs could increase employment and wages in the United States, raising living standards and growing the economy.”

    https://www.foreignaffairs.com/united-states/how-tariffs-can-help-america?utm_medium=social#

    Pettis is a serious economist and not a stalking horse for Trump.

    1. r2s there are two sides in a game, Someone always loses. According to this scholarly article it boils down to excess production and consumption. If you break it down by market segment the US does have excess production in certain segments of our economy. I remember in the early 60’s my parents going to the bakery outlet for Rainbo breads and buying 7 loaves for a dollar when my dad was making around 40.00 take home pay. By the mid 70’s America’s wheat farmers found demand overseas made them more money exporting than selling domestically. American consumers started to complain as the cost of baked goods continued to rise ( pun warning)
      The same could be said now for the oil business as we export more than we consume.
      Excess production will have to be sold at reduced prices or cut. Similar to what we are accusing China of doing now as they try to sell excess production at lower prices. This feedback loop will cause producers to lower costs domestically as they try to make up for lost sales in higher margin markets that impose tariffs.
      Eventually producers, even if they have government subsidies will find they can’t keep selling below what it costs them to produce the product and they have to cut production or go out of business or both.
      I see cheaper bread and gas prices in the future but at what cost to jobs and businesses.
      The economy is like squeezing a balloon. You make it smaller in one place and it bulges in another. Keep doing this until it weakens and the balloon pops.

    2. How do tariffs change your investment decisions in real ife? That would steer the discussion onto our track rather than debate the politics of it.

      1. Martin, I didn’t think I was bringing politics to the discussion. It started as a reference to history. I have no Idea what the future brings, I can only go off what I read or have lived. History repeats but not always in the same way.
        Because of what I have lived through with the oil embargo in the 70’s and the inflation in the late 70’s and early 80’s when I started to save and invest.
        If the oil export ban here in America hadn’t been lifted how would history and investments have changed? This is history and how politics affected it.
        I use this knowledge to ask myself how safe is it to invest in things related to oil and energy and investments related to farming like ADM, MOS, DE and yes CHS
        I ask myself what is the risk. The market is forward looking and logo programs and the herd anticipate or jump first than ask questions later. I ask what opportunities are there as there are certainly risks at least to capital.
        If you look at all the companies I mentioned they all had a lower quarter in 24 compared to 23 so it’s perfectly reasonable to be cold blooded and dispassionate and ask if tariffs happen how will it affect stock prices.
        I am not talking or taking political sides. Let’s grab the popcorn sit back and watch the show and see what happens. I have an open mind.

    3. R2S, thanks for the tariffs article. I’ll need to read it more then once to fully comprehend the authors points. It does seem logical on the first read. If believable next comes applying it to investments.

    4. I appreciate Pettis’ contrarian take on tariffs. I’m not going to try to guess how this plays out for investments. There are just too many unknown factors. Even Pettis says tariffs would have to be done right to realize a benefit. All very theoretical at this point. It does no good to be dogmatic.

      1. Rocks just grab a chair and some popcorn and lets watch the show. The show hasn’t even started and people like that lady I met at the cell phone store who want to run out and spend their money because she thinks the cost will go up. She doesn’t really know if the cost will even go up and if it does go up by how much it would.
        I’m a salesman and if I was an unscrupulous salesperson and I heard the customer talking like this I’d say buy it now (x price) before it costs you double and I would make a killer sale.

    1. You’re comment I find extremely interesting. Yet over on S. A. there are plenty of article pushing and touting their beloved reits. I don’t own any & have no desire to dive into this potential time bomb. I see stats all over the place of still tons of people working from home and they plan on continuing to do so.

  21. Do TIPS protect against inflation? Westie, Rocks, Losing Trader (LT) and I have a discussion below about forecasting future inflation and asset class returns. LT suggested that Treasury Inflation Protected Securities (TIPS) might perform well IF inflation rises. I decided to take a look at how they did during the most recent bout of US “transitory” inflation, from 12/31/2019 (pre-Covid) through today 12/27/24.

    Here is the benchmark CPI, although it is only through November 2024

    CPI total= 22.7% or 4.19% per annum

    If you went and bought the largest TIPS ETF aka TIP on 12/31/19

    Price only= -8.75% or -1.82% per annum, yes that is a NEGATIVE number aka lost money

    Total return= +8.25% or +1.60% per annum

    NET total real return, after inflation terms= lost -2.59% per annum

    NOT a good option.

    Then I decided to look at how a specific TIPS did and chose a 10-year CUSIP 9128287D6 which was issued on 7/15/2019 and matures on 7/15/2029. It has a coupon of 0.25%

    By definition if you hold it until maturity, it will pay off at par times the overall increase in CPI. So, on a principal basis alone, you will have a real return of zero. The interest payments are indexed to inflation, so they will correspondingly increase. For example, if the overall inflation increase is 50%, the interest paid would go up to 0.375%

    Today, it is trading at ~ 92.3, so if you bought it for 100 in 2019 you would lose -7.7% if you sold it today.

    Note that if you buy an ETF, it typically does NOT have a fixed maturity date, so you might get a capital gain or a capital loss. As opposed to buying an individual TIPS when you are guaranteed of receiving par plus CPI at maturity.

    Obviously, you are not going to get rich with TIPS, but is a reasonable way to preserve purchasing power ONLY if you buy individual securities.

    This analysis does NOT include taxes which are UGLY also if held in a taxable account. Even if you do not sell an individual TIPS bond, the increase in principal is taxed each year. I.e, you pay taxes so will have to come up with the funds from another source.

    I am NOT advocating one way or the other on TIPS, only showing the results for the last ~ 5 years.

    1. > Today, it is trading at ~ 92.3, so if you bought it for 100 in 2019 you would lose -7.7% if you sold it today.

      I don’t think you are calculating this correctly. While multiplying the price times the original par value would be the obvious thing to do, unfortunately for TIPS it’s much more complex even to figure out how much they are worth. The price is based on $100 of par value, but the amount you are considered to be holding actually increases with inflation. Unlike an I-Bond, the coupon rate stays the same and the accrued value increases.

      Thus if you want to find the current market value, you need to also multiply by the “index ratio”, which is the sum total of the daily inflation rate since the bond was issued. For your bond, that’s here: https://www.treasurydirect.gov/auctions/announcements-data-results/tips-cpi-data/tips-cpi-detail/?cusip=9128287D6

      For Dec 27 2024, it turns out to be 1.23383. This means that if you started with $1000 of principal, you now have $1233.83 of principal. Multiplied by the price per 100, this means the current value if you were to sell is $1138.83 (plus the tiny accrued interest). Your total return would also include the compounded value of the (admittedly small) .25% interest payments you’ve been receiving.

      At least, I think this is how it works. Despite holding some TIPS (in an IRA) I’m still not sure I’ve got it right. David Enna has a description here that I read periodically: https://tipswatch.com/tips-in-depth/ (start at the section “Inflation Accruals”).

      In any case, I don’t think individual TIPS bonds are nearly as bad a deal as your example concluded. While they haven’t offered a high rate of return over the last decade, at least nominally I don’t think they’ve lost money. Quite by definition, the market value at all times should keep up with CPI, plus a little.

      1. Nathan, you are correct! My numbers for the individual TIPS were wrong, but the ones for the ETF were. The corrected numbers for CUSIP 9128287D6

        Price only return= 13.9% or 2.6% per annum, while positive it still lags the CPI giving a real return ~ -1.55% per annum. The principal value is only guaranteed to match inflation at maturity. So it is not defined to match CPI at every time up until then. For a given CUSIP, it would have to trade at par aka 100 at all times to match inflation.

        In a taxable account, I still think this is UGLY. Less so in a deferred account. And in both cases, the key is holding until maturity or close to it. This will trade like all other bonds that converge to par at maturity. This is why high coupon issues trade above par and low coupon issues trade below par.

        1. Just a small clarification on how the increase in principal value is taxed.
          The dates when it is calculated (or re-calculated)
          The buying transaction
          January 1
          The interest payment dates
          December 31
          Any sale
          so even in a year when the investor does nothing the value will be calculated 3 times.
          between 1/1 and the first payment
          between payment 1 and 2
          and between payment 2 and the end of the year.
          and you can have times where the income is negative because there was deflation in a particular period.

        2. > So it is not defined to match CPI at every time up until then. For a given CUSIP, it would have to trade at par aka 100 at all times to match inflation.

          Yes, this is right, and I said it wrong above. The accrued principal value will change with CPI. The actual market value will depend on things like current interest rates and expectations for future inflation. While this particular bond has gone up, there is no general guarantee that this will be true at anything other than maturity.

          > Price only return= 13.9% or 2.6% per annum, while positive it still lags the CPI giving a real return ~ -1.55% per annum.

          The flip side of this is that if you buy it now at 92.3, it’s guaranteed to return the CPI inflation rate plus the 7.7% back to par in 5 years, plus .125% along the way. While the tax treatment is tricky outside of an IRA, this makes it a better investment than a 5 year fixed rate treasury if inflation exceeds current expectation.

          1. Jeez, why did they have to make these so difficult?
            The recent 5 year tips priced at 97.75, for an inflation rate of 2.12 , I believe.
            This seems attractive, except I then must figure out the time value effect of paying taxes on the principal adjustment each year, correct or no?

            I guess one could sell a portion of these each year and pay taxes but that seems to defeat the purpose.
            Alternatively, isn’t the I bond now 1.4 over CPI , with taxation deferred, so one must then figure the time value of NOT paying current taxes?

    2. Thanks, everyone, for convincing me my skull is very thick.

      In recent years when new CDs, bank notes and agencies were available at 6+%, I wanted to know how they compared to TIPS and which gave a better return. Since I was clueless on TIPS, I bought the stuff that was easy to understand.

      I think the proper comparison is between TIPS and treasuries at the same tenor. You don’t need TIPS to find better yields than treasuries.

      1. Munis subject to AMT are always–in my research–going to have the highest risk adjusted (going off credit rating) after-tax return, assuming you are not subject to AMT…or does one do better with the A+ rated CEF preferreds (maybe hard to say since you don’t know what part of the return is taxable till year end?)

  22. With long-end treasury yields making new closing highs today off the Sep lows, what are the CYs on the safe perpetual preferreds?
    WFC-L 6.4%
    PSA preferreds 5.9-6.09%
    AGM preferreds ~6.5%
    illiquid utes 6.11% average
    Some long-dated IG BBs in the same neighborhood: KKRS, ENO, SFB, SREA

    1. The last two times long-end yields climbed to current levels, the yield curve was inverted and short-end yields were near 5%. I watch the yields on CDs, new issue IG bank notes, and agencies, and they are dramatically different this time with the yield curve mostly uninverted and short-end yields around 4.3%.

      The only superior CYs I see are in the III playground. I haven’t spent any time looking at corporates.

    2. How safe is a “safe” preferred?
      Jokingly, Perhaps people decide to start “storing crap from home” v paying for off-site storage. A backyard shed is pretty cheap, and a lot more secure than a storage facility: Remember the guy who killed Madalyn Murray O’Hair and son?

      “The FBI at San Antonio shed new light on the case of missing atheist activist Madalyn Murray O’Hair and two adult children when it revealed that a gang of burglars found a suitcase packed with $420,000 in gold coins that disappeared with them four years ago. FBI agent-in-charge of the San Antonio office Roderick Beverly told reporters Tuesday three suspects admitted they stumbled onto the coins while burglarizing storage lockers in 1995.”

  23. Bonds going out on the low…meaning high yield
    2 yr 4.32
    3 yr4.37
    4 yr 4.42
    5yr 4.47
    10yr 4.63
    19yr 4.92
    20 yr 4.93
    30yr 4.82
    (19 yr is included as it is sometimes the high yield)

    Several of the A+ CEF preferreds now at 6.1%, though those are likely taxable largely as ordinary income. From a trading perspective, it appears these prfds are at the lows established in early -mid Summer.
    I’d rather own an A+ prfd taxable as ordinary income than a BBB- taxable as qualified income. I really don’t like the financial preferreds as they are both non-cum and subject to “jump to default” risk.
    I’m trying to hold cash but getting sucked in, hopefully not too early.

  24. TLT basically at its 52-week low after hours. Better hold the line or things may get even more interesting for the markets. RSI is around 30.

      1. R2S – Yah, I have no clue. Just trying to hang out, have cash and CDs as a base. Been going more with ETFs instead of individual securities since Fidelity has put the kibosh on placing real orders. Stay tuned. LOL.

  25. I need some advice on a low cost automated brokerage firm. I liked Fidelity but they recently instituted a new rule on low volume securities to restrict trading (even at the bid or ask price) especially preferred and especially floating or F/F preferred. To sell 1,000 shares might require trading 100 share blocks and maybe 50 at a time after the first 3-500. So I switched to Schwab only to find out that their ap doesn’t allow F/F’s to be traded on their ap, only on the phone and not many of the phone traders are qualified to take orders for such exotics. Does anyone know of another brokerage at low cost that allows automated trading of F/F’s? Thank You

    1. Potter-
      You’re talking about Schwab’s phone app being the problem? Not sure of the app, but no problem on the computer.

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