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.
Q4 credit commentary from Cumberland Advisors.
“Corporate credit spreads remained tight in the quarter – a signal that market participants expect few credit problems.”
https://www.cumber.com/market-commentary/q4-credit-commentary-more-same
Do baby bonds fall under the 5% filing requirement on ownership for sec filing? The AI machine tells me yes but I don’t really trust them.
The AI is dumb and not to be trusted for any legal or tax type questions.
The 5% filing rule is based on voting, so unless the bonds are convertible into (voting) stock, you dont have to file for owning 5%. Feel free to buy 50% if you want! (although at Fidelity, you might have to buy them 10 shares a day…)
Thanks xerty, you answered my question also about the rule. I will have to see if a preferred I own has voting rights.
SCE.PRM/VCLT pair has recaptured prior low set in september… low trade was 22.61 …currently 24.30
BDC Bond FYI – Nuveen Churchill Direct Lending Corp. Prices Public Offering of $300 Million 6.650% Notes Due 2030
https://www.bdcinvestor.com/ncdl/202501/nuveen-churchill-direct-lending-corp-prices-public-offering-of-300-million-6-650-notes-due-2030/
https://www.sec.gov/Archives/edgar/data/1737924/000162828025001499/ncdl-fwp1142025.htm
https://www.sec.gov/Archives/edgar/data/1737924/000162828025001444/ncdl-20250114.htm
Price on the common is down ( not sure why tho), but has had a lot of buy recommendations on SA.
Div is .45 and they have paid several .10 specials – one spec going ex in Feb-
so 11 to 13.46% – pretty nice.
I presume you are referring to FTAI…stock is down 25% on Muddy Waters short report
Gary is referring to NCDL, which debuted in Jan 2024 and is trading near its lows.
tks for clarifying
2 unrated munis of interest. These are backing the infrastructure of Summerlin district 816 in Las Vegas.
6/29: 2.5 coupon 51779aah2 at 89.798 , YTM> 5.132
6/30 : 2.625 coupon 51779aa58 at 87.905 YTM 5.235
Notes:
Obviously there’s a good portion taxable as ordinary income at maturity as these are market discount bonds.
I took a look at the annual statement and it appears as of the latest report in 2023 all of the land has been sold to merchant builders. I’m not sure if any homes have been built, but the LTV is over 6-1, there are about 6.5 mill in bonds due through2029, and a reserve of 2.3 million, so assuming the builders (major companies) don’t decide to forgo their investment in the next 4 years (highly improbable as the RE taxes are being paid), these will be money good.
As a reminder, infrastructure debt “runs with the land” so a tax sale does not wipe out the debt.
As of 2023 report there were over 800 parcels platted, so debt will (and perhaps has) been assigned by parcel.
Even without 2024 data this is worth an investment, except I am not buying munis until the tax bill is clear, so feel free to take these , my friends.
These look like a dealer is holding hem but I did no investigate it. If it’s a dealer it’s likely Stifel.
Lt, just out of general interest, I recently supplied materials for a hospital tower in Henderson NV. These projects usually issue bonds backed by county or state. Have you checked on availability for these type of bonds?
Charles M,
I have not seen any and am often reticent ot buy rated healthcare bonds.
That said, I haven’t looked. If I pull up all the bonds in the secondary market in NV and look at top 50 highest yields I don’t see any.
Like retirement housing. There’s for profit and none profit. I know non profit retirement housing has had less issues with profitability compared to the for profit retirement housing. I haven’t checked but I wouldn’t be surprised if it was the same way with hospitals. Most of what we have been hearing about in the news is for profit medical groups getting in financial difficulties.
I’m not at my computer or I would run a FINRA search for let’s say Dignity Health bonds.
I didn’t find any but may not be searching accurately. Let me know if you do.
I bought a bunch of low coupon munis 15 months ago at 5.5 ytw and boy was it hard to sell them. I like the liquidity in the Cefs better
Just an FYI… SA has a new podcast episode of Tom Majewski of Eagle Point Credit that I found useful. It’s nothing new if you’ve heard him before, but he talked about their preferred/baby bonds. It reaffirms my belief that the EIC preferreds are excellent investments (IMO, not advice).
Best place to get true status and updates on California Wildfires is the actual CA Dept of Forestry and Fire Protection website. Check out this link for the real deal:
https://www.fire.ca.gov/incidents
Bank of America Motto:
What would you like the power to do?”
At Bank of America, we ask this question every day of all those we serve. It is at the core of how we live our values, deliver our purpose and achieve responsible growth. By asking this question, we continue to learn what matters most to our clients, our employees and our shareholders. It helps us start a conversation centered on our commitment to use our capabilities to help those we serve be successful. Because we recognize that we can only be successful when the individuals, companies, communities and employees we serve are able to reach their vision of success.
https://www.barrons.com/articles/bank-of-america-bond-losses-d531ae53
https://archive.ph/95jsO
Why is nobody talking about this industry-wide issue, yet it was a big deal in early 2023?
I’m just guessing but I’d think the banks have an asset/liability committee that matches maturities?
It WAS sort of a stupid way to look at bank solvency by looking only at unrealized losses.
Aren’t HTM securities not marked?
Lew Ranieri used to exclaim he never lost money on an MBS trade when he ran United Savings of Texas…that’s because he had the losers moved to HTM
lt
Former banker comment…..
When QE dumped tons of money into the system for COVID, it was put into banks.
They had huge imbalance between available funds and interest-earning loans.
So they bought Treasuries.
Long dated paid higher yields and they could place the in Hold To Maturity accounts where they did not have to mark-to-market.
In retrospect, not smart.
When interest rates rose, the bonds they bought were worth far less.
Didn’t show up on P&L but was an issue if the bank needed liquidity and had to sell them.
Most loan agreements and backup liquidity commitments fm banks require that their customers keep their deposits at that bank. No one anticipated that the depositors of those funds might come to ask for a market yield. That was something that hadn’t happened before.
If bank needed funds, the Regulators allowed them to borrow at face value against those Bonds. That program may have been discontinued but count on it being reborn if needed. No credit risk for Treasury – only time to maturity.
Everyone happy – Fed flooded the market with cash and the banks soaked it up into Treasuries at a positive spread (10 yr yield vs overnight borrowing)
Who’s the dope?
BofA is the biggest misbehaver – I think they have a gap of $111 billion (don’t hold me to a number)
Hi Westie,
Speaking of bank woes…
We have been working with clients on this for a while, but it is hitting the western press, so I can talk about it publicly.
You may have seen that the Chinese gov. has paused all bond purchases. May seem odd, but returns on bonds have dropped into the 1% range and just keep falling.
Problem is a little complicated:
-China’s main bond market is closed to foreigners. Its officially about $17T
-Most Chinese companies are restricted from investing overseas, so they can put their money in the Chinese stock market, the bank, or buy bonds in the restricted market.
-Companies are trying to hold cash because of economic turmoil, but stock market has been wild, so companies have been primarily buying bonds but also putting money in banks (gov was requiring that, but has backed off more recently).
-Gov wants people to spend and stimulate the economy, but with so much of the economy crashing (like housing), people are saving and putting money in banks. The banks can’t find solid borrowers, so they are buying bonds with the huge deposits they are getting. The good news is that older bonds they purchased were at higher rates, but new ones are paying very little. Kind of the opposite of the US problem.
So, the demand for bonds is driving up prices like mad. The gov had been buying lots of bonds too, but has now stopped because they risk further crashing the market.
The gov is facing a lot of problems, many of their own making.
-shrinking population, which is a huge problem, but is magnified by the gov. having lied about population stats for years.
-Unemployment is skyrocketing, especially amount young people. estimates run as high as 50%, with many college grads being forced to take jobs as delivery drivers, etc.
-housing bubble, largely caused by gov. overstating population and housing demand, so it is crashing down.
-failing investments, like the more than $1T they put into overseas projects (belt and road, etc.) that are not paying back (and may never).
-struggling companies, in part because they relied on data from the gov that was just plain lies, and in part because the gov. forces many companies to take actions that don’t make economic sense. Many companies are being required to retain employees even when they should be downsizing – and companies are hollowing out from the strain. At the same time, growth is slowing and falling inbound investment and companies leaving China is straining Chinese companies.
-Foreign companies are trying to manage supply chains to be less reliant on China and to prepare for whatever nonsense will bubble up between the new US administration and China.
Wild and crazy times.
Holy smokes, Private! Yeah, crazy but informative. Good thing we don’t have bureaucrats and politicians running things here.
Private, You posted last year a link to an article about China and how it might affect other countries in a domino affect. This reads like it’s getting worse there.
There was a recent reprint of a business article on MSN of businesses from Europe and other countries that do business in China. Instead of streamlining for efficiency with one company supply chain inside China the article said foreign companies were being told they had to have a local supply chains in every city they did business in.
Does anyone have an opinion about Enstar’s (ESGR) two preferreds: ESGRO and ESGRP. Thanks.
I liquidated 1/2 of my esgro as relative to pff it has outperformed from its post merger announcement lows to where it was in august.. the threat of delisting I feel is material
Thanks for replying. I’ve done some digging but haven’t come across any information or statement as to whether or not they intend to continue to list or to delist the preferreds. Have you read anything specific on the subject?
“As a result of the Transactions, Parent will directly own all Enstar Ordinary Shares and the Enstar Ordinary Shares and the depositary shares representing interests in the Enstar Preferred Shares will be delisted from NASDAQ and deregistered under the Exchange Act, in each case, in accordance with applicable laws, rules and regulations, and the Company will no longer file periodic reports with the SEC on account of the Enstar Ordinary Shares or such depositary shares.”
https://www.sec.gov/Archives/edgar/data/1363829/000110465924108117/tm2420342-22_sc13e3a.htm (2024-10-11)
+++++
“If the Merger is consummated, the Ordinary Shares, the Series D Preferred Shares and the Series E Preferred Shares will be delisted from The NASDAQ Stock Market LLC (“NASDAQ”) and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as promptly as practicable after the Third Effective Time.”
https://www.sec.gov/ix?doc=/Archives/edgar/data/1363829/000110465924083286/tm2420342d1_8k.htm (2024-07-29)
+++++
No position in anything Enstar-related, but I took notes due to my interest in delisting generally and the potential effects of SEC Rule 15c2-11 specifically.
Personally, I wouldn’t own anything from Enstar.
they bought a big stake in AmTrust as it went private. the cabal that ran AmTrust/Maiden Holdings had MHLD do what appeared to be “sweetheart” deals with Enstar (selling Enstar lines of business and portfolios at bargain prices) – crippling maiden for the benefit of Enstar. The cabal went on to screw preferred shareholders at both companies.
I would think that if there is a chance for Enstar to delist/screw preferred owners, they will take it. They have the playbook the cabal used before.
So, investing in Enstar may be a way to get in bed with the Zyskind/ Karfunkel cabal, but that seems pretty risk to me. IMHO those guys are not trustworthy, but YMMV.
GEO Group and Core Civic are at or near recent highs. These are the 2 private prison stocks.
I’ve no idea if they end up substantially profiting from the imprisonment of illegal aliens, but they likely profit from imprisonment of illegal immigrants (That’s an outer space joke, eh?).
GEO runs with deep junk rated credit…
High risk..I’m not at all sure it’s high reward
i bot CXW a while back; i’de expect business will be very good with more paid beds
EIX 281020aw7 6.95% coupon 11/29 98.8071 for a 7.253 YTM
ONLY $5 million offered so HURRY!
baa2/bbb-
Y buy a preferred?
I do not own this
Aren’t SCE preferred actually in front of the line to get paid over EIX bonds? I swore someone mentioned that. I did not do my own research though.
SCE preferrreds have structural seniority so theoretically, yes, they’re ahead in line. Rating agencies, however, don’t give the preferreds credit for that structural seniority as they rate them below the EIX bonds and pretty much in line with the EIX preferreds.
ORLY. Thank you for that.
Landlord, what’s the basis for that seniority.
I’ve obviously not done the homework
EIX has no profits of its own to pay the bonds. They depend on dividends from SCE For their income. SCE can’t pay EIX dividends without first paying the SCE preferred.
makes sense. the sub has the income. Now that I look closer SCE debt is a2/a- and trading about 100 bps better than eix
Now I’m wearing it.
been loading up on SCEpM since jan.8th ; i mentioned it here ; as they kept dropping ,added more ; you can also try PCG pfrds- they are in the “same tank”
but of course ; PG+E doesnt have any operations in So Calif; and no fires ;
Thanks, Ted
Boy, that didn’t take long: Southern California Edison sued over role of equipment in LA wildfires
https://www.msn.com/en-us/money/companies/southern-california-edison-sued-over-role-of-equipment-in-la-wildfires/ar-BB1ro2Y4?ocid=TobArticle
Bill, I told you the ambulance chasers (lawyers ) would jump in. Reading reports, the ATF said on the Palisade fire could be a re-ignited New Years eve bonfire from the Santa Ana winds. No reports yet on what started the Eaton fire. Two things, EIX said they shut power down.
https://abc7news.com/post/possible-links-between-utility-companies-la-wildfires-investigation/15797450/
They admit they had readings about the time the 800 acre Hurst fire started.
LADWP is denying their equipment could be possible, really?
I expect lawyers to go after the deep pockets. I would also not be surprised if shorts start rumors to take advantage of the news. Yes I know that borders on conspiracy theory but I have seen false claims fly around the internet before when people are shorting a company.
So far fire officials and the ATF have not reported on the Eaton fire.
It’s a frivolous lawsuit. They have no evidence other than some residents saying they saw a fire at a transmission tower. There were fires across thousands of acres. SCE has actual evidence and data showing there were no issues with their equipment before the fire started.
Regardless, SCE’s liability is capped at $1B if they have a safety certification (which they do) and $3.9B if they don’t.
Isn’t EIX subject to unlimited liability if the approx $15 bill fund is breached by claims?
I thought this at first, but now I don’t think this is correct. There are claims that the same bill that established the fund also put a cap on the total liability that can be assigned to a power company. I tried to post some links to such articles earlier but they weren’t allowed, probably because the system thought they were spam. So here’s an extended quote:
“Jefferies analyst Paul Zimbardo says shares of Edison International (EIX) dropped 10% on Wednesday with the market effectively assuming full responsibility for the catastrophic Los Angeles fires at the damage liability cap, subject to fund availability. The firm, however, believes the market is overestimating Edison’s exposure due to the Assembly Bill 1054 legislative protections. The bill established a liability cap at 20% of the electric equity rate base and a $21B claim paying fund for wildfires with reimbursement based on prudency, the analyst tells investors in a research note. Jefferies says Edison disclosed a $3.9B 2024 liability cap and it estimates $4.5B for 2025. On an after-tax basis this implies $3.2B liability, the firm points out. It believes the risk for shares is if liabilities for these and other fires breach the fund size, requiring incremental funding. “From an investor perspective, the most unfortunate part is that EIX and California broadly had a relatively quiet period without catastrophic wildfires that came to an end,” Jefferies contends. Edison did not file an incident report to date which is a favorable data point, the firm adds.”
I haven’t been able to read Zimbardo’s actual report, and I worry that there might be a misinterpretation somewhere. It establishes that some people believe there is a cap, but I don’t know that it’s entirely clear what happens when the fund is exhausted. Here’s what Morgan Stanley has to say as of Jan 15:
“What happens if liabilities related to the Eaton Fire exceed the wildfire fund? This is a tough question on our minds. Currently the level of potential damages does not look likely to reach these levels, but estimates continue to rise. The latest estimates we’ve seen call for $25-40b in total insured damages split between both the Palisades and Eaton fires, with Palisades potentially the bigger proportion. But, the total claims may initially exceed these wildfire fund levels (before considering settlement percentages) when adding on uninsured claims and legal fees which could also be very large. Damages that exceed the level of the wildfire fund would potentially go back to EIX to finance (if they’re found to have caused the fire) and could represent a financial pressure on the company. We would watch for state legislative initiatives to bolster the level of the wildfire fund if this scenario were to become more probable.”
I bought in to SCE-J on Monday hoping that either there is a cap, or at least enough uncertainty that I can get out close to par sometime before the courts make a final determination. Up a dollar so far, and hoping things keep moving in that direction.
I think you’re saying the same thing I am seeing, which is the cap can come off if liabilities exceed the fund and they are liable. But, if liable there are tens of billions in insurance losses that would be subrogated by insurers.
Id agree if you wait, you won’t get good prices though.
i bot MITP 9.5 5.15.29 at 25.23 (stripped 24.75) the stripped price is near lowest price for the since inception on 5/20.. relative to sjnk its trading near 2 sigma cheap on 8/9 MITP closed at 24.76 vs sjnk ..on 8/9 sjnk closed at 25.08 vs 25.23 today
I know we’ve been here before and I know you’re not going to change but other people need to know that if you are calculating YTC or YTM based on an amount of accrued figured from the x-div date not from the payment, your yield calculation will not take into account the 15 days after the x-dividend when you earn no accrued. In other words, when accrued is calculated from x-div date, if you are a buy and hold kind of buyer, you’re calculating on 105 days of accrued by the time you receive it when you are only going to receive 90 days’ worth. Granted, if you’re flipping to capture a dividend you can move on after the x-div date and reinvest in something else that is immediately accruing accrued (yes I said that), but your calculator will figure your yield based on 105 days……. Your calculator with be wrong unless you adjust by adding BACK to the price, the amount of accrued you DON’T receive between x-div date and payment date… This is particularly important when trying to accurately calculate YTC on a short term call date. So I’ll soften my stance a little bit, but other readers should very much keep this in mind when calculating YTC based on the amount of accrued you always use…..
Thanks for the alert.
Just eyeballing his “stripped price” it seemed to low. Now I know why.
Strange that he uses a convention that is not only inaccurate but also not used by any financial pros.
STRONGLY DISAGREE… as my response to white roses indicates the stripped price IS 24.75 but the YTM calculation does not take into account that there are 15 days of accrued which must be added to it in order to get accurate YTM…this is of material importance on short dated (under 1yr) securities but not on one due 5/15/2029
Like I said, I know you’re not going to change… If an overstatement of the accurate YTM on MITP in the amount of 11.1 basis points is immaterial to you then have at it.. In addition, it looks as if you are counting the number of calendar days in between when, as per the prospectus (https://www.sec.gov/Archives/edgar/data/1514281/000110465924059394/tm2413013d4_424b5.htm) p S9,
“Interest on the notes will be computed on the basis of a 360 day year consisting of twelve 30 day months.”
EXCUSE ME!. so assuming 30 day month the number of days between 11/1 and 1/13 would be 30+30+13 for 73 days which is I what I based my calculation on and fwiw I get the yield differential based on a 15 day maturity extension to be 8 bps.. on to the next thing
Both https://quantwolf.com/calculators/bondyieldcalc.html and https://digital.fidelity.com/prgw/digital/priceyieldcalc/ provide what the amount of accrued is they used in conventional bondmath for figuring YTM. In your specifics, Fidelity goes to the third decimal and shows .383. Quantwolf only shows 2 decimals, .38. But you’ve convinced me… It’s time to give up the conventions used by the entire bond industry universally and start using trollmath.
We do agree on one thing – “on to the next thing.”
good comment ..I checked the fidelity calculator and you accurately pointed out it said 38 cents of accrued.. I also noted that it ADDED it to purchase price of 25.23 to calculate the ytm.. would welcome your thoughts on that
Right. It’s included in their price (not added) because unlike https://quantwolf.com/calculators/bondyieldcalc.html it does not automatically give you the option to automatically calculate a “dirty” yield… It’s included in both (meaning quantwolf’s “clean” yield) because bonds/preferreds like our quoted $25 par bonds are the exception, not the rule, to be trading without the accrued included. Practically all bonds trade with accrued interest included in the price you pay. So, theoretically, the majority of people using these calculators are using them to figure yield, and total price paid, on those bonds that trade “clean.” We who focus on baby bonds/preferreds need to understand the nuances involved and how to adjust for the world of exceptions that we deal in.to figure yield accurately. The accrued is included in what they show for information purposes which allows us to adjust it accurately. And also, one must remember that the calculators know nothing about x-div dates since the majority of bonds don’t have them, so we have to take that into account as well when they show the accrued… For example, if you buy a bond the day after the x-div date, the calculators will show the accrued anyway even though you won’t be entitled to any accrued until the next payment date passes.
ok..tks for your patience.. going forward I will use one of the two calculators provided to determine the acrrued interest/dividend when calcuating the stripped price.. thank you
You’ve mentioned this before, and I didn’t really understand it. Unfortunately, even after this explanation I’m still not understanding it well. Would you be willing to keep trying? Maybe with a worked example one of the FTF issues that is converting soon, say MFA-C?
I think the base of your argument is the “lumpiness” of the dividend payments. In the extreme, if you were to buy just after an ex-div, and sell before the next ex-div, you would receive zero in dividends. But typically the price would have increased between these times at approximately the dividend rate, so I’m not seeing why this matters unless looking at second order effects on why the price increase not constant.
One time I can see it would definitely matter is if the issue is called at par on the FTF date. In this situation, you wouldn’t be getting any premium on the price when you sell. I guess planned maturity would be the same: if you are purchasing close to maturity, to get an exact return you would need to consider the actual number and timing of the remaining dividend payments, and not just the average annual rate.
Are these the cases you are considering, or is there some other situation where there is also a difference in the expected return? Or am I missing the point and you are saying something else?
Ok, I’ll give it one more shot….. It has to do with how to calculate yield to maturity/yield to call taking into account the amount of accrued you are entitled to on issues such as baby bonds that trade “flat.” By default, a bond calculator knows nothing about x-dividend dates. They all, be it XIRR or the calculators such as https://digital.fidelity.com/prgw/digital/priceyieldcalc/ assume the bond/preferred they are calculating yield for receive an identical amount of accrued every single day. Technically its an amount based on 360 days in a year not 365, but we’ll simplify. That would mean that every quarter (assuming quarterly pay) you are paid 90 days of accrued on the payment date. But what happens if you are calculating the amount of accrued due you are entitled to if you use the x-div date? If x-div date is 15 days prior to payment date and you calculate your stripped price based on the amount from this date, then your calculator will be assuming you are getting accrued for 105 days, not 90 days, because there are 105 days in between the x-date and the next payment date. So if you use that amount, you will be fooling the calculator into assuming a year is equivalent to 360+15+15+15+15= 420 days long. as far as the amount of accrued it is using. To compensate you have to either calculate your accrued based on the amount from payment date to payment date or compensate for those 15 days after x-div date where you will be entitled to no accrued for the specific payment period (not in reality). How would you do that? You’d have to add back into the price you are paying the amount of accrued after the x-div that the calculator assumes you’ll be getting on payment date. NOT coincidentally, that amount is identical to the amount of accrued you’ve assumed when calculating the total of accrued from the x-div date instead of the last payment date. That make sense?
I don’t know if this is any clearer than before but I hope it helps… Summarizing, if you use the amount of accrued due from the x-div date to calculate your yield in a calculator it will assume there are 15 more days of accrued to be paid upon payment date than you will receive…..To be accurate in your calculation you have to compensate for that. That’s why accrued should be calculated from payment date to payment date when using a calculator to give you an accurate YTM of YTC on a bond/preferred that trades “flat.” Now who can tell me if EIX will be tagged with blame for the fires?
“Now who can tell me if EIX will be tagged with blame for the fires?”
I can tell you. They are likely responsible for the Hurst fire which is not significant. They are likely clear on the Eaton fire. The Palisades fire isn’t even in their service area.
Regardless, their liability is capped and the costs are ultimately recoverable from customers.
Landlord I’m reading it the same way.
my bottom line – not enough to effect their ability to fund the SCE pfd dividends ; all things considered
Just so everyone knows, these fires are fluid changing from one moment to the next. I mention this in case you have bought some to flip. I already owned and bought for long term hold and income. They recovered a little today. I did add a little to lower my cost and average down. Maybe I will hold or maybe I will sell my higher cost shares later.
What I can tell you is I have been talking to customers all over the Western US today and a lot are not as forward looking as investors here.
They have customers bidding jobs out 6 to 9 months from now and I am giving the sales people advice not to back themselves into a corner and be honest with the construction firms prices may look a lot different for materials later this year.
with respect to my purchase of MITP 9.5 5/15/2029 at 25.23 ex date 11/1 .59 quarterly dividend .. number of days between 11/1 and 1/13 is 73 days. 59/90 = .655 x 73 is 48 cents so stripped price IS 24.75 ..I believe the issue you raise is that because the payment date is 15 days after the ex date that the ytm calculator does not take this into consideration in its calculation which would have meaningful impact on short dated (under 1year) securities. of course this is NOT the case with MITP
bhfan/pff pair new yearly low ..5.375 perpetual current yield 7.76
I sold 1/4 of ESGRO at 20.47 as the esgro/pff pair has rallied back to its 8/14 high.. the risk of delisting I felt is not worth holding the security
I’m actually hoping for a delisting. If it goes to zero in my account I will move it over to my Roth.
No, delisting of a stock does not automatically imply a 0 market value. Here’s why:
Delisting Reasons: Companies can be delisted for various reasons, including:
Financial Performance: Failing to meet financial thresholds (e.g., low stock price, low revenue)
Regulatory Violations: Not complying with SEC regulations
Mergers & Acquisitions: Company being acquired or merging with another
Voluntary Delisting: Company choosing to go private
Post-Delisting Trading:
Over-the-Counter (OTC) Markets: Many delisted stocks continue trading on OTC markets, although liquidity (ease of buying/selling) may be significantly lower.
Potential Value: Even with lower liquidity, delisted stocks can still retain some value, especially if the company remains operational and potentially profitable.
Important Considerations:
Liquidity Risk: Delisting significantly reduces liquidity, making it much harder to buy or sell shares.
Reduced Transparency: Trading on OTC markets often has less regulatory oversight, potentially increasing risks for investors.
Company Performance: The ultimate value of a delisted stock depends heavily on the company’s continued performance and prospects.
I bot LANDO 6% perpetual at 19.91 (7.5 cy) as the LANDO/PFF pair has gone from over 2 sigma rich in august to 2 sigma cheap today (1yr horizon)
I’m not sure if that’s a good reason to buy unless you are making a bet on future interest rates. Isn’t saying it’s “2 sigma cheap” the same as saying that prices for fixed rate perpetuals have dropped a lot because long term interest rates are going up? I’d think it would make more sense to compare LANDO against other perpetuals rather than a blend of term and perpetual. This doesn’t mean LANDO isn’t a good buy, I’m just not sure about the reasoning.
Apart from this quibble, I’d be interested to learn more about your “pair trading” approach to preferred stocks. I was baffled by most of your comments for a while, but after some Googling I think I mostly understand what you are saying. But I’m sure I’m still missing a lot. Have you done a write-up before?
good comment..the duration of PFF is near 6 years whereas a perpetual preferred is 18-20 years.. having said my proprietary model indicates the frequency of mean reversion over the last 3years has been high indicating a tradeable range.. clearly though a trend of higher rates would adversely impact low coupon perpetuals
lando/vclt pair has seen lando outperform for the last 3 years.. it currently testing the uptrend line and 200 dma
I bought more too. Better rate than fixed income so no regrets unless they go bust. Trading between O and P boosts my return making it worth the risk for my trading strategy.
Citigroup Captl Trst Active Fltr …. CpN …. Due for a reset …Late Jan Pay Date
Any holders see a Qtrly Reset . Thanks
New US sanctions on Russia’s shadow oil fleet appear to be the cause of the crude oil rally, now 78.9. If it sticks or goes higher, it won’t be good for inflation.
Daily news blurbs strike again.
Ok, this is from my background and experience That I want to share.
First, I want to say that the growth of private investment companies buying up other companies has led to monopolies and this shouldn’t have been allowed. In the case of these horrific natural disasters with hurricanes, tornadoes, earthquakes, floods and fires there is too great a chance these companies can charge whatever they want or even price fix needed materials.
Building materials.
USG gypsum / drywall has one of the largest mines in Paris Ca. owned by Knauf of Germany biggest manufacturer in the US. You can look up their other plants located in states that have had large scale destruction
Georgia Pacific, owned by Koch industries gypsum mine in Nevada 2-1/2 hour drive from LA. plus other plants all over the US
Pabco Pacific Coast Building Supply, Look them up. Drywall, Roofing, Concrete blocks, clay bricks etc.
So what is left that is needed in re-building that we can still invest in?
Lumber, waferboard, plywood, roofing, insulation, plumbing, electrical, concrete (maybe) Steel rebar, etc. Also the distributors of these products, but you may be surprised how many of these are privately owned.
I have to go do honey do’s so I need to come back to this subject. I have a few in mind and need to research more.
Here is a list of some to consider
HCMLF ( intends to spin off it’s North American operations this year)
CODGF ( CertainTeed roofing, Glass manufacturer )
SXYAY ( Construction adhesives, Better than 3M in my opinion. go to any roofing distributor and ask if they carry it.)
OC ( Owens Corning, Roofing and insulation)
Johns Manville ( Head fake, Privately owned by Berkshire Hathaway. Just thought I would see if you had read my rant)
WLK ( bought Boral Tile roofing largest tile roofing manufacturer in US, also a PVC pipe manufacturer)
BCC
BECN
WY
PCH
WFG
GMS
I’m probably missing a few, Let me know.
DOJ is looking into pvc pricing fixing. WLK and OTTR named among others.
The state of CA is going to deflect blame to EIX and hammer them to collect every penny.
marketwatch.com/articles/la-fire-edison-stock-bc297e34?mod=mw_latestnews
Between my SCE and ALL issues … I may have some tax loss harvesting to do for next year.
That fire is 800 acres 95% contained and no structures reported lost so far.
https://www.fire.ca.gov/incidents/2025/1/7/hurst-fire/updates/ded9cc25-f98d-4c9e-8f4e-75799d1b0a41
Living in Cali and knowing how this stuff usually goes I sold all my SCE-N shares on Jan 8th for $25.10. about a dime a share loss but was happy to get out. Didn’t want to wait around to see if they were at fault or not.
EIX FTF 1000 structure 8.125 due 6-15-2054 w call/ float in ’28 5yr tsy plus 386.4 trading sub 95 (low print today 92) … jr sub debt cusip 281020ax5 not a rec but fwiw.
Common stock chart is busted as sp down (~30% or about 10 bil MC) on large volume over last 4 trading days. Probably trades lower before higher but who knows..????
Careful out there 😉
https://apnews.com/article/california-wildfires-eaton-cause-utility-fireworks-eb0f4f71e437f1ba692f929e9633c856#:~:text=LOS%20ANGELES%20(AP)%20%E2%80%94%20A,broke%20out%20the%20same%20day
https://www.reddit.com/r/videos/comments/1hz6mzv/cause_of_the_eaton_fire_caught_on_video_and/
Right now there is video floating around claiming the Eaton fire was started right below transmission lines owned by EIX. Naturally you cannot tell if embers were blown over to it from the other side of the hill/mountain or anything else of that nature.
There are a few large trees which are in the photos near those transmission wires but the perspective is really hard to tell how close. I cannot imagine they would allow any tree to grow close enough where wind would allow them to physically touch such transmission lines. EIX has stated they saw no disruptions or oddities on those transmission lines before or after the fire for approx 12 hours before and 1 hour after. I assume they can detect arcing or faults on transmission lines.
People are already starting up the lawsuits over the Eaton fire which is fully expected. So I am not sure what to think at this stage. People say embers can be blown quite a long distance in high winds thus a fire 1500 feet away down in the valley can be tossed around easily. Fire is more visible when it is on the side of a hill. Once again not surprising people first see it on the hill side.
Could it be EIX’s transmission lines? Sure I guess. Anything is possible. But if you examine the pictures those lines are really high up in the air and it would be super odd for a “stick” to get blown into them, arc, and the burning stick falls to the ground. When the wires touch they would not make contact at the tower. It would be in the middle where the slack is if they arced. Could they have arced in the middle between towers and then something got super hot on the tower itself? Once again I do not know. I am not a lineman.
281020ay3 EIX due 1/28 $2 mill offered at 6.41 YTM.
Perhaps there’s no stock rally right now. I’d rather have this debt than any preferred. BBB-
I sent an email to Fido stating my dissatisfaction with their new restrictive trading rules (as well as old)– received this from ‘Amy’ in Brokerage Services:
” I have entered individual feedback on your behalf today, pertaining to your expressed statements revolving around the different trading scenarios and limitation. It has been submitted to our back office under reference number CF-140000.”
I’m sure all will be changed within a week or so. I’d like to see everyone here with an account with them to do something similar- couldn’t hurt.
I moved 1/2 of my account from Fido to Etrade. About a week later I got a call and email from my assigned wealth advisor or whatever they call themselves. Not going to be returning their call.
Why not? You’d think they’ve got some incentive in mind to offer you to get you back….. got nothing to lose to listen……….. Similarly, I chose to take house proceeds to ETrade instead of Schwab and got word from Schwab they’d match the monetary incentive I got from ET….. not going to do it for now, but at least I know I can if ET doesn’t work out….
2wr-
Do you think e-Trade will avoid the trade limit problems. etc, of Fido?
Did you ask or get any reassurances?
thanks
Personally I think that’s an unanswerable question for a firm to answer…Either Fido’s far overstepping their Nanny state thru their actions, which is what we all believe, or they end up being a trendsetter for the industry…. For another fIrm to issue reassurances that this won’t happen would be no more than pandering IMHO, backing them into a corner where they don’t need to be..
Thanks, I just thought it might have come up in any back & forth on transferring.
Etrade has no such nanny trade size limits.
If you want to post something (ticker + share size), I can test it for you.
I’ve called them 10x or more about this and obviously they’ve not done a darn thing about this issue. I’m done wasting my breath.
looking at MCY, the 10-k for 2023 showed total California exposure for Homeowners less than $1.1 bill. I am not at all certain on auto.
Reinsurance should cover the excess over the ceded amount of $150 mill.
I’m looking at the MCY 4.4 ‘s of 2027 at an offer of 93.3891 YTM 7.839 Baa2
cusip 589400ab6
Not sure where to find a better list, but if you want to play the insurance end here is some.
https://seekingalpha.com/news/4394168-moodys-assesses-californias-pc-commercial-property-insurers-amid-wildfire-disaster
Annotated chart of 10-year t-note yield
https://www.tradingview.com/x/z7c4oS4v/
Tim-
I see UMBF received, after hours on Fri, reg approval to buy Heartland Fin HTLF–
Maybe you announced it sometime?
Lyn Alden commissioned this report. It starts with an executive summary. Here’s the fist item:
“Structural fiscal deficits have surpassed private sector lending and monetary policy as the primary drivers of economic activity and inflation, marking a fundamental shift in the economy’s liquidity dynamics.”
Full Steam Ahead: All Aboard Fiscal Dominance
https://www.lynalden.com/full-steam-ahead-all-aboard-fiscal-dominance/
Rocks I will finish reading this in full later. But I want to point out the first part of the article and the panic in the pension system in England that is referred to was the basis for the law here that was passed allowing for the option of money market funds to break the buck and for managers of said funds to limit withdrawals in times of panic and stress. Wish I had bookmarked the article by the Heisenberg report from that time.
Not clear what law you are talking about. Back in 2008, there was a run on a big US MMF, Reserve Primary Fund, after it broke the buck during the Great Financial Crisis (or whatever they call it.) Investors withdrew 2/3 of Reserve’s assets in 24 hours. Reserve imposed a 7 day freeze on withdrawals, then liquidated. Treasury then instituted a backstop program for MMFs. (Reserve had about 1.5% of its assets in bankrupt Lehman commercial paper. ) Subsequently, the SEC wrote Rule 2a-7 imposing liquidity requirements, Investment restrictions and stress tests on MMFs. I think there were some amendments ~2023. Maybe that’s what Heisenberg wrote about.
Investopedia has a short write up on the Primary Fund.
https://www.investopedia.com/articles/economics/09/money-market-reserve-fund-meltdown.asp
JMO. DYODD.
Bear, I think that is what I am remembering. The Gilt panic happened in Sept. so it would take awhile to get changes in place.
The question in my mind is how to prepare for structural inflation in the foreseeable. The Fed will need to keep short term bills and notes relatively low to allow for enormous Treasury financing. Does that mean long rates will go through the roof gradually? Maybe just stay with F2F issues? Maybe buy some rock-solid fixed-rate perpetuals with 7+% yields? Maybe just a little of everything for the time being. Who knows?
Whidbey, There is a lot to digest in this article. I’m down to P.E. & Doge in the article and the idea they will save the day. (not) We don’t need more concentration of wealth and influence of the operations of the government and the economy. The rise of stable coin, just a different asset for storage of wealth. Already noted in the article that the wealth is held for a short term for liquidity which means it can actually be more volatile and less stable.
I’ll continue to read, but back to the question of what to invest in is the big question as you note.
Whidbey-
While SOFR has been dropping along with the FFR, the 5-year yield has been rising. I hope this lasts long enough to help some of my reset preferreds.
I looked through a lot of preferred charts this weekend and many look like they are headed to 7%.
Here’s a little tidbit you may have forgotten about. It wasn’t that long ago that brokerages were charging commissions. Fidelity stopped charging $4.95 on 10/19/19. I figure this has saved me a total of $33,800. My port is thus $41,000 higher today considering my average return over the past 5 years. I liken this to a sweet tax cut. We should all thank Robinhood!
E*trade never charged that fee…..only on OTC
You must have had a different type of account at etrade than the one I had. I recall that fee being charged.
I remember buying in large amounts so commission was a smaller factor. When it disappeared 4 or 5 years ago I changed my whole strategy. Many small trades.
E*Trade absolutely charged commissions. Back when I first opened my account there, when dinosaurs roamed the earth, it was $19.95 per trade IIRC.
I remember those $20 trades, and then $10 ones after a while. And they were cheap back then too!
be careful with Schwab ; they charge full commissions on OCBB stock buys
Wells Fargo Advisors, for one, does not
Interesting ; PCG (PG&E) which has no operations in So California
its our Utility here for most of No. Calif ; took just as a big a hit to the price of
the Common as EIX ; go figure !
My current portfolio review: Had I not changed my investments almost exclusively to short-term maturities and high spread floaters I would be one very unhappy camper over these past few months. Because of this focus and the active trading I do my portfolio has gained 2.98% (8.93% annualized) over the past 4 months although the past month has been flat. I’ve taken some minor losses on ditching perpetuals I had such as GAM-B, GNT-A, MGRE and RIV-A. I really like MGRE but sold it at $24.96 last Monday. Now it’s $24.16!!! I’m tempted to start nibbling at MGRE again and other perps like RZC, HOVNP, JXN-A, BHFAN, CHSCN, ECC-D and FGN, but the current rate trajectory is so relentless I’ll force myself to wait until we see a little flattening. While I’ve profitably traded in and out of illiquid utes I have two “orphaned” issues I’m still holding at a loss: AILLO and CNTHP.
I’ve made a small “killing” trading 1,000 shares in and out of SPNT-A since its 11/15/24 ex-date. Trading spreads: 25.18 -25.61 / 25.36 – 25.57 / 25.43 – 25.67. Now I’m back in @ $25.45.
My EIX perpetual bond took a minor hit last week, but default is highly unlikely. SCE said their equipment did not cause any of the fires, but a photograph subsequently surfaced of an Eaton fire starting under one of their distribution towers. Regardless, EIX’s equity is over $18B and their liability is capped by law at $4.9B. The bond floats 3/15/26 to over 8% at today’s sofr rate. I have 1.3% of my port in PSEC bonds. The 2028 bond is holding up but the 2029 bond is off 8%. I’m somewhat nervous holding these, but PSEC shows assets of $7.6B and equity of $5.1B. Assets would have to be overstated by 70% to jeopardize these bonds! I can’t believe the actual market value of PSEC’s assets would be anywhere near 30% of the CPA “audited” value.
Here are issues I hold that have held up well during the current benchmark interest rate onslaught: ANG-A& B, ATCOL, BANFP, CCIA, CGBDL, CHSCL, CSWCZ, DDT, EICB, FITBI, FLBL, FTAIO, GECCZ, GLADZ, HTFC, HTLFP, JAAA, MBNKP, METCL, MFICL, MS-E&F, NEWT-G,H,I & Z, OXLCP, PMTU, PREFJ, RITM-A,B & C, SAJ, SAY, SAZ, TECTP, WHFCL, WSBCP, WTFCM, WTFCP and XFLT-A.
I am grateful to Tim and all contributors here. This is such a wonderful site. I have started quarterly contributions to Tim in order to express my deepfelt gratitude.
I loaded up big-time with ALL-B this past week and have an average cost of $25.38. The blended coupon for the current dividend cycle will approximate 7.55% based on the current 3 mo. sofr. While this is a far cry from the 8% plus coupons of last year, its still very attractive. ALL-B is rated BAA1/BBB and reduced its exposure in California’s fire prone areas over the past few years. I just read that AlL only has 5-7% market share in Southern CA. If this is somewhat accurate the maximum loss would be $1 billion – as Monty Python would say “a mere flesh wound.” I doubt ALL-B will peak above $26.50 this current dividend cycle as it did in the previous one due to its lower yield and higher 10 yr. treasury benchmark. However, I’m hoping it gets above $26 which would be a 9% plus annualized yield. I’m surprised ALL did not call this issue last year when the coupon was over 8.5%. The odds of a call now are greatly diminished due to the capital required for the wildfire claims and the higher refinancing cost. There may be an opportunity to buy All-B cheaper this week as the stated coupon on brokerage websites will change Wednesday from 8.08% to approximately 7.55%. Many retail investors may not realize this and sell when seeing the lower coupon. This is just a guess on my part.
Wow are the insurance companies having a rough day with the California fires. The big loser is Mercury (MCY) down about 22% as I write this. Years ago I owned this for the dividend but sold it a long time ago when I started investing in preferreds, baby bonds, and notes. The larger companies are not suffering as bad, down maybe 5% – 10%. The California public utilities also getting slammed with PG&E off 10% and Edison off over 6%. Not a good day for anything Southern California and the fires are still raging. Almost impossible to put out a fire burning dry brush / woods with 70 or 80 MPH winds blowing.
So Cal Edison (EIX) does not provide electricity to the Pacific Palisades are where over 5,000 structures were destroyed. Edison cut off power in the Altadena area where it does provide power many hours before the fire started in an isolated area where people hike called Eaton Canyon. The State of California has also limited liability for public utilities like Edison. Thus, I am buying more of SCE-M at 7.50% preferred under par. The losses per Chase and Accuweather are estimated at 50 billion plus which is by far the largest financial loss from a fire in USA history. The real story in the Palisades where huge losses occurred due to the fact that homes are millions of dollars per home and condos is the empty Pacific Palisades reservoir named the Santa Ynez Reservoir, which has 117 million gallon capacity to fight fires and was empty due to the fact that the floating cover project over the water in the dam that was supposed to be completed on December 19, 2012 (twelve years ago) as listed on the LADWP website listing of Santa Ynez Reservoir Floating cover project. The fire fighters ran out of water with only three million gallons to fight the fire (thus less than three percent of the capacity that the fire fighters would have with the 117 million gallons of the Santa Ynez Reservoir. The failure of multiple Los Angeles mayors for the last twelve years has led to a massive loss in wealth to many of its citizens, a massive warning to insurance companies and their reinsurers, and an unknown future to the state of California finances with property taxes and consumer spending drying up in one of the wealthiest areas in the USA. The fifth largest economy in the world it appears was run into the ground and the entire USA and the world insurance market has never seen a loss like this in the USA, the largest economy in the world. A very sad result in a place that has some of the best weather, soil, natural resources in the world led by some of the worst leadership one can imagine with a one party supermajority of democrats running the State and major cities.
I just listened on the news on youtube, LiveNow from Fox, that the city does not even bother inform the LAFD Chief or fire dept that the reservoir was near empty. This is straight from the Chief saying this in an interview. They just expect there to be water when they need it. She is really not holding back with her comments. Not pointing out anyone specifically but the implication is severe to those who are responsible.
I consider the buying opp. on the SCE preferreds; series J K L M N to be Black Swan event ; similar to the situation with Regional Banks in May 2023
BBB rated securities with about a zero chance of having the dividend deferred
and they are cumulative ; and qualified; Jand K (floaters to be) presenting
significant Capital gain opportunities; EIX has been calling in all the SCE
securities at the first opportunity ; see Quantum
I have been loading up on SCEpM
Aren’t the SCE preferreds an “obligation” of a sub of EIX?
I was looking at EIX debt on Friday, which has widened .
Can anyone post the statute limiting Calif public util liability?
I may be late to the buying party, and I get the point,but these aren’t down anywhere close to what the regional banks dropped. I’d argue the regionals all had real risk.
> Can anyone post the statute limiting Calif public util liability?
Assembly Bill 1054 “Public utilities: wildfires and employee protection” is here: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB1054
And here’s a summary by SCE about the mechanics of the bill: https://download.edison.com/405/files/202210/20191205-ab1054-wildfire-fund-summary.pdf
Nathan,
Thanks
Isn’t the fund going to be exhausted by claims from these fires?
Is it one person who judges whether the utility has been prudent?
I don’t know enough to make any claim. I’m new to this and researching to try to figure out whether to buy the dip in the SCE preferred, but my knowledge doesn’t go very deep. That said, my very small amount of research suggests:
1) Yes, this fund would be overwhelmed by these fires if it is determined that SCE is substantially responsible.
2) There’s not much if any evidence yet that SCE is actually responsible. I think they’d already turned off power before many of the fires started.
3) The fund pays whether or not the utility was prudent. The difference is that they have to (at least partially) repay the fund if they weren’t.
4) Whether or not SCE goes bankrupt is going to be based on a long drawn out court case independent of any decision regarding this fund.
5) PGE has gone bankrupt twice and still managed to pay off their preferred stock. This is no guarantee, but it might be precedent.
PG&E total amount of preferred stock is quite small compared to the amounts outstanding on the SCE preferred.
I still think you need to add a 6th line for lawyers and related lawsuits even if they are not to be found at fault.
Isoin- SCE is now part of EIX ; EIX distribution territory is So California exclusively so that is the formerly named SCE for the most part.
my point in comparing this to Regional Bank failure is ; there was real risk
in a few West Coast Banks ;ie Silicon Valley Bank; but the regionals around
the Country took big hits as well, and most of these had almost no risk ;imho
On the major networks they are saying the total damage will be over $150 Billion. I wonder how much FEMA will pay towards this nightmare. Iam sure the folks in NC & Fla. are still looking for money too due to Helene.
This was trading in the 30’s pre market then opened around $50
Where does Accuweather get its damage estimates ?
“ statistics”— hmmm
“ independent methods “ — we pull it out of our butt
I honestly think they are like kids and just make stuff up for attention .
They can always say their numbers include all sorts of unverifiable things.
I couldn’t find any specifics so I’ll ignore the widely reported Accuweather figures . They would get no attention if they just said, “ folks it will be bad, in the many billions”
I was at a baby shower yesterday for my nephew & his wife. My brother-in-law was saying he is getting ready to start a remodel on his home and wondered how this disaster is going to affect building supply prices and labor here in Northern Calif.
There are other things to consider. The camp fire that destroyed Paradise in 2018 if you look now, only 8,000 people have come back out of 23,000 after 6yrs and the town has only been partially rebuilt.
https://en.wikipedia.org/wiki/Camp_Fire_(2018)
The availability of rental housing and the cost of rent went up. So many things are going to change because of this fire.