We are in the typical goldilocks period when interest rates have already spiked higher and now are drifting back waiting for the next ‘event’ before potentially moving higher.
Long time investors in preferreds and baby bonds know this is the time to re-evaluate you portfolio and make sure you are ready for the next month or two.
If we assume that interest rates are going to move higher from here one may want to peruse their low coupon issues to see if that is where they want to be in a rising interest rate cycle since these issues will normally fall faster than others.
As rates rise mid level quality (or even junky quality) and coupon issues will normally trade the firmest–typically falling slower than the quality issues. Additionally those baby bonds and term preferreds with ‘date certain‘ maturities in the next few years typically react less to interest rate moves since investors know they are going to realize their $25/share price upon maturity (assuming the company remains solvent). This is where I like to invest–shorter maturities–you can find those issues here.
I will spend the weekend trying to find dividend/interest payers for the end of the month since I had so many September payers October is looking a bit skimpy (except my monthly payers which I have a boat load already).
This was a crazy week of hits and misses. Divvy’s and cgs were solid for September 21.
Let’s focus on the misses….
I have three of the LT’s (A,L,H). The values that are being traded are just garbage now. At one point LTSA was worth more than LTSL. That’s something they don’t teach you in college!
I guess I should thank the genius folks at the regulators for keeping the markets safe for me. Bottom line, hole in statement from all of these.
Action needed…none. I received all int/div payments and will continue to play Mexican standoff with the LT’s, the regs, and whomever for now. Emphasis on now. I did notice that LTSA paid a qualified dividend even though I don’t care either way.
I also love The Precious, metals that is. It has been MC Hammer running around in those CrAzY pants and dancing on my pm positions. Donkey Kong than came out and stomped on SPPP in particular. Apparently bullion sitting in a Canadian bank that is more precious than gold is so scary. Bottom line, add another hole Mildred. Action needed…none.
I am lousy at buying pms, so I go for the shotgun approach. The PM market in general reminds me of this quote, “The beatings will continue until moral improves”.
I have miners and bullion. All my miners are paying dividends and have clean balance sheets debt wise. The miners are in friendly countries primarily and have a mix of metals. Once the congress critters open up the spickets, we should get a nice bounce. I am seeing support on Friday, but it needs to hold before being meaningful.
Okay here is what I bought/sold last week;
Buys @ par or below on PF/BB
9.27.21 GMLPF, NRZPRD, PSECPRA
9.28.21 PAX, NUSI, KHYB, RISN, NBB
9.29.21 GECCM, IMBIL, KHYB, RISN
10.1.21 AAICPRB, RISN, NSS
Sells
9.30.21 OXLCL @ profit – stupid partial execution! AaAaAArrRrrHhHhggGgh
10.1.21 DLY – 1/2 position on bounce over cost
NW:
The miners have maneuvered (managed) them selves well during the lean years. With or without China and their trials at throwing their weight around, mined resource goods are in demand and the opening of new mines is very tough in relation to the capital needs for them to maintain improve toward and keep existing facilities green.
ALL green transition will base off of carbon and metals.
Nothing has settled from the result of selling puts there waiting for a downdraft to own more miners at a cheaper price, so I collect the prems. Selling covered calls has been useful and needs a constant management.
All that is Roth and IRA stuff.
My taxable which is what I dive in here at III for has done well with 15% in cash mostly from calls with no direction toward a new home. No open buys have been hit or even gotten close. Doing no flipping.
The Canadians at IBKR taxable are compounding divys with only two calls and good gains.
The TD taxable has stayed even with a grand in divys being slurped off each month and thrown in on top of the pension monthly.
Recent slivers of AAIN (to replace AIC) , the new VNO pref and a few commons at IBKR have been added, but smalls. I wait and watch, scratch and peck. Need real value.
This calendar year is a trial year of ” act like we are in full retirement”. ALL expenses are being yanked and so far it looks like a full go in Jan 2023 for us. Our plan is to let the IRAs become available by age 70 or so, and see if TIME can help defuse the RISKS. Toppy market in US are a real gremlin that chews on me!
I have NO, NO , NO motivating factors to do anything like a job, consulting or NOTHIN’ ( …or watch any news.)
Please send any contributions to address below.
Good weekend!
“pref and a few commons….but smalls”
“I wait and watch, scratch and peck. Need real value.”
Yeah, I am basically doing the same thing without the options. In the last 12 months, I have had a handful of miners double. I have been following PMs for at least ten years or so. Many good miners in the Great White North. I have gotten used to the volatility so no surprise here. I already have made several steak dinners on SPPP and PHYS earlier this year when they rallied.
I bought the HECLA convertible at $47.50 and still holding. Sitting on a nice u/r cg and collecting the 7%. I would have never bought it without III (hat tip to Tim).
I would like to question why you want to assume (in bold in your post!) that interest rates are headed higher.
Lots of wall street pundits and bond managers have been calling for this since a while and especially in 2021 and a whole lot of them saying 2% yield on a ^TNX have been wrong at least for the past year or two.
I think the sheer size of foreign govt debt trading at way lower yields and even -ve means that the US rates can only go up so much until the others rise too…
So maybe we can play just-in-case, ‘what-if higher’ but think likely that rates stay here or go back lower – say ^TNX towards the 1.3 where it was just before the Fed meeting Sep 22nd.
At a minimum, wait till they head back higher and above the 1.52s set last week…
Msquare, If one looks at the 40 year 10 year bond chart, we are still climbing down the mountain. Getting to 2% still wouldnt disturb the trend. Need to get above 2.5% to say the declining interest rate era is over.
However, even if one believes interest rates arent rising much, fear and perception can provide opportunities. In 2013, the 10 year raced quickly above 3% all while Fed Funds was at 0%. That was the peak as when Funds rate started finally being raised 10 year was already back in its secular decline in yield.
Of course with credit spreads so tight, this compounds the risk factor. One could get a scenario down the road where govt yields dont do much but the other credit qualities spread backs up against it. There are always things to be aware of. Even an increase of 10 year to just 2% ( with no credit spread movement) could cause some of these very recent 4% perpetuals to drop 10-20%.
Core inflation report (PCE) just hit 30 year highs this week at 0.4% and 4.3% past 12 months. Of course CPI has been even higher in percent. Yet 30 year bond is mired at 2%, while the IBond if bought this month is going to generate over 5% blend for a year. No wonder govt limits these purchases of IBonds. Can one imagine the flood of money going into these if limit was raised to $100,000?
Today is I-bond purchase day for us (wife, self, a few kids).
Yeah, I sure wish the limit was a lot higher.
Happy New Year!
They can’t raise rates past 2%…it would cause another great depression…and even 2% will cause a 20% drop just like last time. Also, if you put rates back up to where they were in 2005-2007 where you could get a guaranteed 5yr bank CD at 5%+…why would you risk much money in the market?
AXS-E 5.5% investment grade is selling at $25.12 after ex-dividend today. First call is 11/7/21, but no notice has currently be noticed. Opportunity maybe?
No upside other then the coupon offers strength against 25. Not bad idea. Just probably have trouble pushing up
Like the dual IG, QDI, and the parent rated A+ by S&P. Bit of an interesting one for some due-diligence. Thanks, Golfer!
Well I’d say I’m 80% in $25 perpetuals because they are 1. QDI and 2. Seem to trade better.
Today I’m looking at energy transfer. Not QDI but clearly high rush heh??
Oh it’s a k1, rats
Hard to say which are my low coupon issues. I have a few around 5% which looked high a few months back, but I guess they are low now ? I am thinking anything under 6% either needs to go or be solid enough to keep forever just for the income. At 72 forever has a different meaning than it does to younger investors 🙂
Bill,
I’m just hoping Powell doesn’t trip-up again and cause another tantrum, although in all honesty, I don’t think there is any way the taper can start and the market not throw a tantrum. It’s so addicted to low-cost/free money in that punchbowl that even walking up to it is going to send things spiraling. For us, most anything below 5% has been sent packing, especially something like WFC-Z, where it was trading.