Saturday Ramble

Well the new 5% term preferred issue from Eagle Point Income (EIC) is off and running. Why is an issue with a meager coupon of 5% trading strongly at $25.35? It’s the ‘term’, the monthly dividend payment, and quality that is a step above the other CLO peer group.

The ‘term’ of this issue–a mandatory redemption in 2026 will keep the share price from getting hammered too badly if (when) rates rise unlike perpetual issues. The monthly dividend payment–a bird in hand is better than 2 in the bush. Lastly the company owns mostly collateralized loan obligation’s debt tranches (versus riskier equity tranches).

Disclosure–I bought about 2/3rds of a position around $25.05.

The new issue from Hennessy Advisors (HNNA) was ‘teed up’ at eTrade and Fidelity on Friday–but I haven’t seen any trades. I want a little of this 4.875% debt issue (HNNAZ). Again the coupon is meager but maturity is 2026 so the share price will be more stable than a perpetual and assuming they don’t go belly up in 5 years the issue is ‘money good’.

The newest issue from Priority Income Fund (not publicly traded) is the 7.00% perpetual (PRIF-K). Trading at $24.75 three weeks after issuance exemplifies that this is a dog–we want term preferred–not perpetual junk. I am sticking to the term preferreds until they are all gone (called).

The new 4.25% perpetual (GDV-K) from Gabelli Dividend and Income (GDC) is trading strong–at $26 three weeks after issuance. As Gridbird advises ‘names matter’ and we all love Gabelli, although I didn’t buy this one–I love the name, but the issue – not so much.

Of course this week the redemptions continue. US Bancorp, Prudential PLC and First Bancorp all announced redemptions and late Friday Ken posted the OFS 5.95% call notice. I’m sure there are others–keeping an eye on the Reader Alerts page is the surest way I know to be able to scan for new issues, redemptions and lots of other pertinent information.

25 thoughts on “Saturday Ramble”

  1. And when it turns out that inflation is persistent, all 400 of these brilliant phd’s will change their minds and provide 400 reasons why inflation continues. Everyone looks as the same date in the rear view mirror and unfortunately the future is actually unpredictable. We’re left on our own to survive as best we can. Actually, that’s really ok with me.

    1. I predict inflation will either go up, or it won’t. React accordingly. Listen to pundits and sales pitches at your own risk.

      1. Sounds like charting to me, Martin – where the charts tell you something will go up unless it doesn’t…. lol

  2. EIC preferreds trading somewhere? Anyone have temp / otc ticker?
    Looked on Schwab, Fidelity & TOS…

    Also search for EIC does not return anything.

    1. mSquare–trading pretty much everywhere under EICPP–I bought it at eTrade and Fido last week.

      1. Thanks Tim for the site and also for ticker EICPP. I get a lot of actionable info and especially on new issues here and it is much appreciated.

        I looked on various pages here for the temp symbol but did not see it and hence asked. Shouldn’t searching for parent ticker EIC have found me the new issue and /or pages here on it?

        Cannot search for preferreds at Schwab for these CEFs!

  3. Well sticking with the barons theme. And inflation
    Here’s what barrons wrote up…………Claudia Sahm obama economist 8.9.2021 No. They don’t have crystal balls sitting around, but they do have 400 Ph.D. economists, hundreds of whom work on the economic outlook. Jay has an immense amount of firepower to really understand the data. Anybody who gets paid to forecast agrees that this inflation is temporary. The people out there saying inflation is high and going higher don’t [forecast] for a living.

    So get that according to Sahm NONE of the feds 400 economists and NO OTHER economist in the biz thinks inflation is not transitory. These are the people guiding 8 trillion in QE and gosh knows how much more in pork. Say what you want but I’ve always thought it’s best to edge my rate expectations. Pretending you have 100% ability to forecast is crazy

    1. I don’t forecast for a living but I do invest for a living. I have to put money behind my opinions they can’t be politically motivated.
      I’m under the assumption that a lot depends on upcoming policy decisions by various entities. Do they all know what those moves will be? Or are they all saying it won’t increase inflation no matter what they do?

      1. Yeah, well my money’s on inflation. But whatever transpires, I put my money on hydrocarbons,. Inflation or not, we will need them. At least for as long as I’m alive. Then Greta and that bunch can have at it, hopefully without unintended consequences, such as poor people dying in the cold and dark. It’s easy being green when you have yachts & private jets. Everybody else can just suck it up.

        JMO

      2. “I’m under the assumption that a lot depends on upcoming policy decisions”

        It’s unlikely policy makes much of a difference under the likely scenario. Fed likely tapers as expected and raises rates in a year, so that doesn’t seem like much of a swing factor. On fiscal policy, tax-and-spend likely nudges down growth and thus inflation, as this policy has been doing for decades. Even if tax increases end up being less than expected, deficit-led spending is a drag on growth and inflation, as has been the case for decades.

        Let’s see what inflation looks like when we revert to trendline growth of under 2% and supply chain kinks get resolved.

      1. w Barron’s pumping the NRZ-PD, it may pop..has been hanging around 25-25.25 or so..I got some at 25.05 few weeks ago and had hoped to buy more. I like the reset feature w a high base rate.
        re the 4-5% issues, not for me w inflation raging, even w a 5yr redemption period.
        The yield on these pfd funds is dropping and of course they get stuck w losses on redemptions for the ones they own over par. Trapping Value had some good articles on various pfd and other yield etf’s on SA. Bea

        1. NRZ-D just had a 47 cent increase. 20 cent gain plus 27 cent ex-dividend. I still have half of my large holding expecting more gain.

          1. I dont like Mreits but I forced myself to buy some grey market sub $25. If it reset today its yield would be near 7.4% ish from recent 5 yr climb.

    1. Barrons has a history of posting these pfd articles at just the wrong times! Here’s the main listings
      Capital One Financial 4.25% COF Pr N
      JPMorgan Chase 4.20% JPM Pr M
      New Residental Investment 7.00% NRZ Pr D
      Vornado Realty Trust 4.45% VNO Pr O
      Wells Fargo 4.25%

      Also name WFC Z/AEL A/AL A
      …… It’s just enough info to be dangerous

      1. I feel some of those picks are quite decent. Most are safe, pay above 4%, and you don’t have to monitor them too closely. Would I drop hundreds of thousands into them tomorrow? No. Of course not. But 500 or a 1000 shares is not a terrible place to put some cash to work. Seeing them trade at 24 per share 12 months from now is not the end of the world as long as they keep paying. Finding anything above 5% qdi with a similar risk profile is HARD right now. What they offer is the going rates if we like it or not I suppose.

        I just can’t see the same names or similar quality names rushing to issue new preferred at 5.25% next year. Why would they? Most are redeeming the juicier preferred as we discuss it. What will be left is a lot of over priced 5ish issues from the past

    2. Key take away from that Barrons article…”New preferreds could fall 10% or more if rates rise a percentage point.”

      1. I would focus on the “or more” part. If long end rose 1%, it would likely be closer to 20-25% haircut in price for the low 4% perpetual issuances.

  4. Do investors not believe the doomsday prediction of inflation or do they not care? If it’s not transitory and real inflation is over 4% I don’t want a 4% issue.

  5. Eagle’s new term preferred is more evidence (imo) that they’re going to call ECCB at the end of the month.

  6. It appears to me, without researching the actual numbers, that there is a virtual deluge of issues being called in the last week or two. It’s as if the issuers have mostly come to the conclusion that the bottom in rates has happened, or currently is happening. I have a fair amount of cash, but I’m of the opinion that somewhat higher rates (not a lot higher) are coming before the end of the year. Maybe some slightly better buys.

    IMO, the Fed will take all necessary action to keep the economy from tanking. Even if inflation continues at the same rate or gets worse, the Fed will publicly consider it temporary and refrain from any tapering actions. Powell wants to be reappointed and the Fed traditionally refrains from taking strong action in an election year.

    Or maybe we go into a Japanese type sluggish economic environment that lasts for years. Who knows?

    1. randy—we look more and more like Japan, although with the pandemic the fundamentals have changed for a bit–but soon the lack of growth with an older population may well kick in. Of course we will be issuing lots of debt just like Japan has for years-we’ll see if there is an appetite for it when it goes on forever.

      But as always we (investors) have to adjust and go with the flow–there are few other reasonable options.

      1. If the demand in the economy for goods and services continues and it pushes up inflation without a slowdown then rates will go up. The Feds can’t control inflation if people are willing to pay for it.
        Gas prices are approaching 4.50 in my area and even with the rain the tourists were out in force spending money.
        One national freight company announced they would drop working with 3rd parties like freghtquote,com, more are sure to follow suit.
        The volume of freight is causing freight delays with freight left sitting in terminals for days. The mom and pop businesses using these freight discounters are going to see charges like $1,000.00 for over length so you ship something like a 10 ft window be prepared

        1. One datum on supply issues: my son ordered a custom chair from Lazy Boy around Labor Day and was told to expect shipping in 5-7 months–but he was notified it is in and will be delivered this week. So even with some padding on estimated delivery dates, some items appear to be moving. I was just glad it was not in one of those shipping containers seen floating off of Washington state.

Leave a Reply

Your email address will not be published.