So Many Opportunities, So Little Time

It has been another amazing month for income investors (or flippers or dividend capture folks). We spend so much time working on this website that we can’t participate like we would like–oh well, I have fun just the same.

Preferreds and baby bonds just kind of keep creeping up–not always 25 cent jumps, but a few cents a day and then it is real money after a month.

The lousy European economy (and accompanying low interest rates) and what appears to be a softening U.S. economy have folks looking for a better yield with a decent amount of safety–partially explaining why all these new issues coming out mostly trade strongly–even though the coupons in many instances are pretty damned meager.

We had started the month of March off with 6 positions that we planned to hold only until today, but 5 of the 6 were sold prior to today and we locked down 1-2% gains on each of those issues. We don’t advocate or concentrate on ‘trading’ but the markets have brought all of us an opportunity to knock down some quick gains so why not take advantage of a situation that presents itself on a platter. It is likely that this ‘easy money’ will go away soon.

For some newer investors we want to outline-quickly and briefly, one method that we use to lock down some short term gains, while also fulfilling our ‘sock drawer’ (Gridbirds term I believe for a long term safe hold) needs.

NextEra Energy–the largest utility in the world recently sold a $25/share subordinated debenture issue with a coupon of 5.65%–maturity date in 2079 (data on the issue is here). Given that the company had other similar issues with much lower coupons (i.e. 5.25%) trading in the $25.40 area before the announced new issue the new issue seemed like a bargain. Given our best guess it seemed like the issue would have upside during the 1st month–thus we bought 200% of our normal position at $25.15. Today we sold 1/2 half the position for $25.50 and committed the balance to the ‘sock drawer’. This is how we ‘trade around’ a base position. Given the Goldilocks market we have been in this was an easy one–sometimes they don’t work so well–but this was a low risk move.

On another note over 100 issues (preferreds and baby bonds) went ex-dividend yesterday and today—maybe there is opportunity for those that have time to peruse these issues to see if some fell too much and are ‘on sale’.

Our ex-dividend calendar has been a God send in the regard–it allows some quick research on these things all in one place–we update it daily (or multiple times a day) so data is pretty fresh.

The ex-dividend calendar page is here.

The link on the above page will open a spreadsheet which you can have right in your own google account if you desire. If one wants their own copy that is fine–but we have to manually update this data so if you take a copy you will be responsible for your own updates.

34 thoughts on “So Many Opportunities, So Little Time”

  1. Tim, I learned and gained much from your insights and the commentators. Finding your site mid last year was a blessing for it helped me stay the course and smartly navigate the turbulences we experienced at end of year. Much thanks and gratitude for all your efforts.

  2. Tim-

    As I said before, I don’t comment a lot, but I have used your various websites probably for 15 years. So valuable and I am glad too that you have been compensated because I too would subscribe.

    One comment that I would love you to weigh in on. Have you found that the amount of activity in chatter on your sites has been a bull or bear indicator? It seems like I check these websites and comments a lot more when things are going well than when they are doing poorly, and I definitely see a rise in chatter during times like these. Not saying that is a bear indicator, although I fankly think it is harder now to find good stuff than the title of your post suggests. Yes, everything that hits seems to go up 1-2%, but that doesn’t seem to be worth the potential downside risk with brexit or the us government unpredictability. Thoughts? Steve (changing my name to ‘SKG’ since you have a surplus of Steve’s)

  3. Just a few thoughts on shorter baby bonds…
    I have an account at Vanguard; as they have one of the largest in-house inventories or access to the vast majority of taxable bonds. I did an analysis of publically traded baby bonds on III (thanks Tim) verses what I can buy from Vanguard’s inventory. I only found one shorter term bond that I would invest in (in Vgaurd’s inventorythat I bought) that I thought was a good value verses just buying an open market baby bond with more liquidity. I was surprised at the good “deals” the baby’s are verses the straight bonds in Vanguard’s inventory. Any thoughts would be welcome.
    Not all those who wander are lost, Nomad

    1. Nomad, I would “guess” this could be due to recent demand-side institutional level buyers, both foreign and domestic, crowding into longer term bonds. Movements of capital into longer bonds by these institutions, especially recently, may be outpacing what probably tends to be slower moving and smaller capital flow-rates into baby bonds by primarily domestic investors.

      Have not looked at it closely though have thought there might be some interesting arbitrage opportunities between between baby bonds and their underlying issues due to the at-times inefficient correlation.

      1. Thank you for your reply Alpha 8, anyone that has been long decent bonds/preferreds (and most equities for that matter), has had an incredible increase in their portfolio value this calendar year (flippers too) and we are only 3 months in. I have spent a considerable amount of time cross referencing a maturing calendar of baby bonds verses straight corporate bonds on Vanguard and III. I even called Vanguards fixed income area directly to ask them why the publically traded baby bonds seemed like a much better deal in terms of income, liquidity and maturity. Their brokers response was that the institutional accounts are holding their individual corporate bonds/buying and not selling much, so the spreads are wider and the amount of bids are smaller because of lack of inventory. I have been investing in many different baby bonds with various maturities this year, but only 1 straight corporate bond with a 3 1/2 year maturity I found at Vanguard.
        Smile, Nomad

        1. Nomad, And no way to know which way rates are headed. 90 days ago it was all about the term-prefereds so that we could ride the indexes up on resets. Now, it appears we could be exposed to an income cliff down the road, especially if the fed tries to normalize the yield curve by selling a boatload of shorter term paper. This could drive 3mo Libor (or replacement)/5 year treasury rates into the basement and crush the resets. The spreads could end up being at or near the actual yield if we go down the same road as EUR. I mean who hasn’t taken a nanosecond to glance at the 30 yr Tr in the last few weeks. Of course, with the deficits being what they are, this could whipsaw the other direction in a year or two. Interesting times.

          1. oops…need to re-read before posting…normalize by buying a boatload of shorter term and selling longer term Ts, through which they could remain Treasury holding neutral.

        2. My comment would be that institutional bond holdings do not move much as most are buy and hold. For example, large insurance company general accounts hold long maturity bonds and trade around it based on spread/credit perspectives. Very little trading of the core resulting in large parts of bond portfolios being fairly stable and large bid/ask spreads. Retail corporate bond buying is not a very good opportunity, ever.

  4. Thanks, Tim for all you do. So far this year, my options writing has been going ok. Had some missteps that cost me some money. If I can keep it up… I will have about a 13.2% return for the year. Of course with markets that’s a big IF!

  5. Tim, your time spent on this website is SO APPRECIATED! Many of us would welcome at least a PayPal address for voluntary donations.

      1. “mikeo–I have a blast doing this.”

        Tim, I think we need to take your temperature….

        In all seriousness, I do understand that these types of hobbies can be very fun and rewarding (I have spent thousands of hours using my website to help cat owners for free….) but just know that there are many of us here willing to contribute $$ to your labor of love.

        1. Hi Amy–someday I may do just that -but now I just have a blast. I have spent $10s of thousands–but I also sold the old site to Salem Media–and in fact still work on their sites (for money). That old site ‘paid’ me literally a few $100’s of thousands over the years so I’m still quite a bit ahead.

          Also I have had a number of the ‘teams’ on Seeking Alpha ask me to work with them for $100-$200 per article–no thanks–not selling my soul for that silliness.

  6. My GTC sell order for NSS hit at $25.55 yesterday. Ex-dividend today. Now trading at $25.05. So, I’m back in. Wash, rinse, repeat.

    1. Steve, your losing money that way selling at $25.55 and buying at $25.05. The quarterly interest payment was over 59 cents this past cycle.

        1. I really was just making sure you knew what the actual interest payment was because different sites have way off and lower yields posted on NSS. Not criticizing in anyway. Just making sure you knew the math behind the sell and repurchase price with foregoing the lost interest payment.

          1. Agree with Gridbird, unless you are avoiding the dividend for whatever reason, you were Bette riff just holding. Or at least not buying back just yet.

              1. Ken, your fingers cooperate as good as mine do on a pad screen. I can spell a lot better than it appears I do. Its just I fat finger an iPad screen. My weakness is proofreading before I send, lol..

            1. Hey Tim, Lol…No that wasnt what I meant at all. I would never disparage your site. In fact I wasnt even referring to your numbers at all (I didnt even know you posted them as I just read the articles)… I meant all the different sites such as Marketwatch, CNBC, Yahoo, etc concerning NSS specifically.. Marketwatch has 48 cents, CNBC has payment current but yield wrong, and Yahoo was playing the middle and putting N.A. under dividend. TD is incorrect also….The live adjustables play havoc on all the various websites. I certainly needed to clarify what I meant, as I originally didnt understand what you meant. 🙂

              1. HaHa–I thought that was the case, but it did bring up the need to find a way to get the correct numbers out there.

                I was just getting your goat a bit before the nice spring weekend.

                1. Tim, the live floaters play havoc on me too (specifically NSS). My memory is bad but I still remember last spring someone guiding me to correct my bad math on the payment. I wont mention any names (Tim), but he (Tim) had to teach me how to use the calculator correctly as I was off 4 or 5 cents myself. 🙂

        1. NSS is a “live floater”. You can’t look at past dividends, you have to figure what the next divi is going to be. If you look at prospectus it will tell you how it’s calculated. Or you can wait until the company announces the amount.

          1. Exactly. I actually sold late today since I captured the div and am a little afraid of Libor continuing to decline. Still should pay a nice rate but at over par I’ll go elsewhere for now.

        2. Hi BP–thanks for the heads up–I took the dividend out of the ‘security’ page just now. I believe there are just 3-4 live floaters now so will remove the others also.

          1. Tim, no problem, I appreciate your help so I hope I didn’t stir things up too much. Except for getting Grid’s goat.
            Have a great weekend!

            1. BP, I got tired of being wrong all the time too. Thankfully someone showed me the NS site where they post the actual data a while back and it has greatly minimized my computational errors. 🙂
              …unrelated side note…Funny how greed works on ones brain…I was crying like a baby feeling like I got fleeced buying 800 shares of that Merchants Bank preferred at 25.50 a couple days ago. Now, I am regretting I didnt buy more.

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