So Much for a Quiet Week

I had anticipated equity markets being a little bit quiet this holiday week and instead we get action that is starting to look a bit more like the 1000 point down day we have been looking for in the DJIA.  Watching price movement in the Dow it looks like there is little traction being gained YET.  With each little bounce sellers come in–probably still need the big ‘flush’.

Of course thus far the fall in stock prices has not affected our holdings to any great degree–maybe we are off .1 or .2%–a fair share of it from the hated Spark Energy Preferred (SPKEP) which tumbled after clawing back to higher prices recently.

We have noticed the Dynagas LNG preferreds getting totally hammered, in particular the DLNG-A 9% issue.  Here is the chart–off $5 in the last week or so.



The 10 year treasury is now at 3.03% as it continues to mirror the equity market tumble.  The bigger news is that crude oil is off $3,  I think this tumble will end soon, but if the economy softens ahead $55 crude may become the norm–we are just too darned good at shale drilling and production in the U.S.

For now we are sitting tight (which is what we do 95% of the time)  nothing really to do.

18 thoughts on “So Much for a Quiet Week”

  1. Tim – agree that sitting tight and taking no action like today is prudent. I have a few preferreds that are trading down, but this is on very light volume with some of the issues – several hundred shares traded.

    For those newer to preferreds, many of the shares are held by individual investors. Sometimes the spreads can be quite wide on some of the thinly traded issues (.50 cents is not uncommon between the bid and ask) and on a few occasions it appears the small shareholders will sell off their holdings on weak market conditions. I try to ignore days like this, as most of my focus is on companies that have solid balance sheets and earnings.

  2. The 6 month postponement of the Iranian oil sanctions for the likes of China and India have really spooked the oil market. If we don’t get any kudos from China on the trade issue, we should clamp down on the sanctions.

    1. Hi Marc–that is an issue I haven’t had time to follow too close–I have to leaved this to readers like you that probably have a better handle on the issue than I do.

  3. Some good buying opportunities out there but of course they can get better. I bought KIM-M today and added to my CHSCL, and thinking about some others. Also bought ECA (Encana) and CHY today also.

    1. Hi Leonard–yes they are popping up here and there, but thus far no ‘tossing the baby out with the bath water’ moment.

  4. I like regional banks – always have. I found some opportunity with NYCB-A. It is a fairly hated large NY regional bank (about 52B in asset sizes). It’s coupon is 6.375%, floats in 2027 at Libor + 3.82%. With today’s LIBOR rates that’s 6.46%. Thea common stock is really disliked by the market and 15% of it’s shares were short in October 2018 (using Morningstar to get this number).

    Never understood, why the preferred traded up to $30.44 cents. It is BA1 rated (just below investment grade) by Moody’s. A year ago, it was $29.29. I brought it under $25. Will it continue to drop? Who knows. But I have room for 6.375% in my portfolio long term. I doubt, I will ever get the float since most people never do. I have a whopping 2% of my portfolio in this issue.

    Clearly not an investment for very many. I am good with it. Maybe because in my Information Technology career, I worked for a 6B NYC regional thrift

    1. NYCB is quite leveraged. Take a look at their balance sheet and financials. There are better options out there with the same coupon.

      1. David, are you comparing NYCB balance to other specific banks or just companies in general?

          1. I only track it from a distance and never have dug deep. The common has caused pain…And just recently they issued debt to buy back common… That seems odd for a bank. Yet the yield of the debt is lower than the yield they are paying for the common. Seems like an odd way to protect the dividend. I dont really have an opinion on stock as I never got serious enough to pull trigger and dig into financials prior to ever buying.

  5. Its hard to believe that Nustar Logistics 7.625% Fixed to Floating Subordinate Notes (NSS) are currently trading only 7-8 cents above par. This one goes ex-div 12/28 and has built-in protection for the (likely) event the Fed raises rates.

    There’s really no downside here unless the interest payments get deferred…a very unlikely scenario. Why aren’t these shares trading higher?

    1. Citadel–I have that one on my watch list as well and may have to get some for the dividend capture–I suspect it will see action soon–energy mlp related stuff is just so out of favor is the only reason I can think of on this one–maybe Gridbird will chime in–he watches this one closely I think.

    2. Citidel, this is just my take (an over simplified laymans explanation as that is all I know anyways, lol)…If you look at present yield of NSS (basically it will be 9.17% off par as that is what the interest payment in January will reflect). The actual preferreds are a few basis points higher (plus well under par) so basically they are within earshout of each other… Yes there is probably a slight anchor towards par from being past call, but largely because NSS for all the intents and purposes, is a preferred anyways. Yes, it says debt, but its the nasty word in front that matters (deferrable subordinated debt). Worst case the payment gets differed and during those years, they stack senior secured and bank asset secured loans on top and the thing goes belly up then, and your recovery will be very minimal. If they reinstate they more than likely reinstate preferreds too as they are cumulative also (yes they could stay suspended but after 5 years NSS could actually tip them into bankruptcy and force nothing in return for all, also.).
      I personally in most instances do not think this type of debt is of much protection (this is why they get lumped into preferreds anyways) with these types of companies. But the market likes that security blanket of the word debt and generally treats them more kindly during stress events, even if it is a general false sense of security. Personally even if they did have call protection the way things are trading now I wouldnt be betting on the price would have been much higher.
      Heck NuStar, was granted waivers from creditors to allow them to count NSS as preferred capital instead of debt so they would stay in compliance with the debt covenants of the real bonds. That really is all you need to know about ones real safety in terms of holding this issue as debt thinking it is safer. And yes, I own a slightly oversized position here…But this one needs its hand held. I dont let this thing run around my backyard unsupervised.

  6. Tim, I’d like to wish you and your family a very happy and healthy Thanksgiving. We all have so much to be thankful for and I want to let you know that I truly appreciate all your hard work and efforts on this communities behalf. All the very best, Nomad

  7. I decided today to see if I knew what the heck I was doing. I looked at PFF which is how I used to invest in preferred stocks and was never happy with it. Well since it’s peak in September until today, the market price (not NAV) is down 6.54%. Then I took a look at PGF – it’s down 4.4%.

    Then I took a look at my dividend yields versus their dividend yield.

    I am smiling. I may be a novice but I sure am doing better than the ETF approach that I had used in the past.

    Have a Happy Thanksgiving to all

    1. Steve, I am glad you joined the club with me…What club is that? Using PFF as a personal investing benchmark club. Its the Washingon Generals versus the Harlem Globtrotters of investing. It makes a dummy like me feel like an investing genius…I whip it every year.

Comments are closed.