Strong Markets Make for a Nice Day

Well we have carried over some strength from yesterday into today–accounts look nice.

On the other hand the bid/ask spreads on some of the stuff I wanted to buy are pretty wide–many at $1 to $2. I have been adding to many positions, but not chasing too hard–if I have to pay 25 cents more than I want that is fine–but a buck or two per share–not.

I did add a perpetual back in with VEREIT 6.70% preferred (VER-F) down in the $19.xx area

I bought a little more of mREIT Chimera 8% FF (CIM-B). I had started a position earlier in the week–nice gains here as CIM has NOT suspended dividends as far as I have found.

I did sell my Hersha Hospitality 6.50% preferred (HT-E) for a few steak dinners. I want to build some sort of lodging REIT position, but thinking I am too early–so much pain coming in this sector.

So I have redeployed 5-10% of my cash, but continue to hold really ample amounts of dry powder.

Relative to the strong movements in the markets I am certain we will see lower prices ahead–we really know nothing on the Covid 19 and real economic damage is being done. My intention is to keep watching and buy when it seems opportunistic. With my conservative positioning now I don’t see selling much of anything.

55 thoughts on “Strong Markets Make for a Nice Day”

  1. Tim, End of day comment on Lodging reits. My son is a engineer for a Sheraton. He said they have about 23 full time and current residents out of 187 rooms. Some people prefer this to renting a apartment or retirement residence. Laid off a lot of the staff. Said losing money, but can’t see closing down maybe the temporary law of staying evictions applies to permanent residents of a hotel ? I think there will be more pain in this sector and this first round of government bailout might not be enough. I would wait as I think people will think twice for quite a while about spending money on leisure spending hours on a plane, or boat trip

    1. Charles, knowing the virus can remain viable for a while, most reasonable people are not going to pay to be the “next person in the room”. Im taking all reasonable precautions, but Im going out golfing today with the guys. I dont fear over this virus is what I am saying….But there is zero chance I am going into a hotel room for maybe the entire year. And I frequently use hotels. They are dead man walking for quite a while.

  2. Tim,
    I don’t know where else to post this.
    Is it possible to start a list of all the preferred stocks that suspend their dividends?

  3. At the open I bought another 100 of CMSC to keep, total of 500 shares now. I also bought 200 of BC-C and WFC-X to trade and sold them near the close to make a few dollars. Saw a lot of other familiar issues going up, but mostly spent the day looking like a deer in the headlights. Hopefully will get better at day trading as that may be the best way to go for awhile ?

  4. Has anyone else had this problem with SCHWAB??? I called their bond dept. today and was on eternal hold. After about 20 minutes the robo came in and said this: “Please try your call again later”. That happened to me “twice” and is very dissapointing as they are a very large company but obviously very under staffed. Iam even with their Pinnacle Team but that doesn’t seem to matter to them. They had 2 nice issues today but I was unable to get thru to find out the coupons or maturities of either one. Most likely though they were “Low Yielders”. Also the bargains we were all getting a couple of days ago are very quickly disappearing. Many of my preferreds were up bigtime today.

  5. What a fun day. Close your eyes throw a dart and everyone is a winner…I sold a slew of SR-A well over $25 and regretted letting them go. Didnt have to cry very long though as I got them all back at market close at 23.30.

    1. The past few days it has been pretty easy to buy issues sitting well below par and just ride the elevator up — then move down to the next lower quality issue and ride it up. I did well enough, but I am overly cautious sometimes.

      The remaining stuff that is cheap is pretty dicey. You have the MLPs like ET-C, NSS etc… and you have the mortgage REITS like CIM-A, NVR, NLY, IVR etc…

      Anyone care to speculate on which of those has potential?

      1. Scott the trash heap has been picked over pretty clean. The level that remains unpicked, I just wont go there. I have done precisely what you stated. But today was more about pruning than buying. I did pick up a few of the Dime bag bank preferred at $18 that we were all moaning about when it came out as 5.5% a few months ago. Bought INBKZ at $14.25 yesterday and doubled back down today at $15.30. Got a few hundred JBK at $24 and they ripped me off going above and below me and all my order didnt fill. Oh well great day.. Will have to look at what I actually own to see if I need to adjust or sell more.
        Anything term dated I own I will keep nailed to the floor other than INBKZ.

        1. Yeah, I think now there will be money to be made on the price of various issues fluctuating a few dollars as trading ranges are established. You saw some of that with SR-A today Grid.

          We have gone from trip to Vegas money back to steak dinner money. Both of which beat the usual Drive-thru!

          1. Scott, well I may be going from Vegas money to steak dinner money too…But…This is AFTER Bonnie and Clyde conducted an armed robbery on my brokerage accounts. 🙂

  6. Tim . Thanks to your nibbling idea. 90% of my pref. and BB. under par. $25 and some greens.. showing up .. no B.K. yet.. in business 39+ years always had 2-3 months + reserves..

  7. USBpM – Exited with $2+ profit in 2 days – nice. Happier trading these well rated sub-$25s rather than risky single-digit ones that could double or go bankrupt.

    Sure, it is rated well and a bank v/s mREIT but wonder why people are willing to pay mid-$26s for something they threw away in $22-$23 few days ago…

  8. From what I heard today, in the stimulus bill being processed, any company who takes money (not sure if it only applies to ‘bail-outs’), will NOT be permitted to pay a dividend on their common shares for the period of time in which they are paying the money back AND for a period of one year afterwards. Also, they’re not allowed to do stock buybacks.

    Don’t run with this as gospel, but be aware that these details are being worked out and may push a bit of demand from the common side over into the fixed side (preferreds and baby bonds). Might be one of the reasons we are seeing such a strong day today on the fixed side.

    But please do your own sniffing around. I’ll post as I find out more info.

  9. A little good news for the day- on the horizon-
    There’s now a possibility of more dry powder/staying invested for those of us taking RMDs : Both houses appear to be including a suspension of RMDs for 2020- would be nice , if you don’t need to withdraw the money.
    Also, several borrowing features for 401Ks, etc.

  10. Lots of anomalies!

    Here’s one: TSCBP down 75 cents today to 15.75, while
    TSCAP is up $4.84 to 20.53.

  11. Tim, in the light of all this stress on MBS issues – what is your present opinion of IHIT ?

    I have a rather large holding, which is now down substantially. Was wondering if the 2023 target of $9.83 is a viable event, or could anything worse happen between now and then?

    Thanks!!

    1. inspbudget–I suspect they will be ok–BUT I glanced at it today to potentially add to my position, but I think I am going to wait until I can review the portfolio–it is pretty decent credit so if I were you I will leg in if you want it.

    2. inspbudget–I just glanced over it and at $7.60 I added shares. Great current yield–and at $7.60 it allows for around 20% bankruptcies.

      1. Thanks Tim, for the quick response on IHIT. I will probably not add, but hold onto what I have. Let’s hope it recovers back to the redemption target soon.

    1. SteveA–I believe the same, but my hope is the CEF and utility preferreds and baby bonds won’t take such a hit on the retest.

  12. The Utes are up big time today. 5.00 in 2 days on my SCE.PH
    I am concerned on the AGNCP and still hold. Does anyone know if they have suspended dividends? They have already declared them and payable april 15th

    1. I sold my AGNCP this morning and bought CIM-C with the winnings. Already up on the CIM-C big too lol….it’s still sooo cheap.

      1. DaddyDollars—I’d be careful and leg in–I added to mine today and will slowly add more shares as more safety (normalcy) arrives

    2. AGNC seems an ok to hold. I have some AGNCP and holding though not adding here.

      As per an article on yahoo finance a few days ago, 25+ hedge funds own it. If some of those are exiting their positions due to fund redemptions or to bottom-fish in more distressed stuff would explain why AGNC is trading poorly

      1. I googled and dividend still hasn’t been suspended. Unlike some other MREITs who declared then suspended theirs. Still have 6 days yet for ex- date then 15 days after for payment. In this warp speed market its a nail biter to see what happens. Maybe bald by then!

        1. Can they pay this common dividend (ex-date 30th) and day after that suspend common AND Preferreds (ex-divd 31st for AGNCP)?

          Or, do they have to wait till next common dividend comes around in 3 months and thus pay this preferred dividend which goes ex-div day after the common. Maybe I am splitting hairs but this may determine if I hold or sell on 30th!

  13. Looking for an opinion. If we are going to gamble a few dollars on the MREITS, is it a better bet to buy one that has already suspended, where the damage is priced in, or one who hasn’t suspended? Is CIM more likely than not to keep the dividend?

  14. To me I think this is not the bottom but a head fake , because of the FED pouring in liquidly. The Fed is buying up Muni, Treasury, and Corporate bonds through Blackrock. So are things really going up in price or are they being bought by the Feds?
    I am waiting for the next leg down, if I’m wrong its ok I still have Preferred’s. When the smoke clears next week and we see how bad we are economically then things will change. I hope to G-D I’m wrong.

  15. I am up 6-7% today, but still down loads more. Unfortunately, I got complacent…or should I say accommodating to mReits in my portfolio… and I will not be coming out of this rally with gains like I did with the Dec18 dip. I agree we do not know much about the economic impact of the shutdown, nor ultimate trajectory of the virus. Spent the last two days rebalancing the portfolio. Will try to go to more cash if I can hit dollar cost avgs, and I will once again focus soley on IG rated stonks and notes when I first came over to the fixed income side.

  16. I’ve already made a few bux on my adds to PSA & NNN pfds.

    Hopefully, with the passage of the stimulus pkg., this is the start of some Wall St. optimism.

    Thanks, Tim, for all your communication during this period of time. Most appreciated. Great site.

  17. I have sold things left and right that have jumped. This was crazy. Though still down from my highs, I have more money than I had starting Jan. 1. Taking a little time out here and catch my breath.

    1. Congrats Grid. I managed to overtake my highs for the year today.

      I’m hoping this is the year where I finally outperform the S&P after losing to it for so many years.

      1. Our best bet to outperform may be a full liquidation and sit it out, lol.
        For those that like nasties look at INBKL which trades at $21 now but you can get sister INBKZ in $15s with a current 10% before going float in 4 years. It matures a few years after INBKL also. I couldnt resist..

        1. Don’t we want to avoid most FtF like this Covid plague? At least for the most part…. You have MANY FtF securities that will reset to a next to 0 Libor rate plus some paltry amount of 3 or 4%, but the time the rest of the world finishes going to zero or negative rates.

          For many current securities, that takes something like a INBKZ from a stated 6.2 yield to a sub 5% yield, if you’re lucky. If it converted today, it would be ~5.2%, dropping a full 100 basis points, relatively speaking. With the 3 month libor considered to be zero most likely, you’re going to lose ~200 basis points.

          This is why I see a lot of FtF stuff performing poorly as compared to many other offerings in our space.

          Get my drift?

          1. A4I, You are thinking 2 dimensionally…The drift is INBKL is closer to floating than Z is by a couple years and yet it is 20% higher… You get 10% for four years with Z. We cant predict interest rates daily.. At 2024 take zero to the 4% plus adjustment to $15 and you get and way over 6.5% until 2029…Price point is zero concern here provided INBK is solvent until maturity.

        2. I bought 400 FITBO today around 18.50… not sure about INBKZ because I have no idea what rating it would have.

          BB
          B
          CCC?

          If I could buy FTF issues I would have bought some USB-H yesterday.

          1. Kroll rates subordinate debt BBB-. Genesis of Kroll came about from big rating agencies screwing up ratings in crisis. A niche player but respected from what I have read. Still I position this purchase as a higher risk bucket purchase and bought with that intent.

  18. Tim, Do you think that these big moves in the mREIT preferreds is because they are dealing with the margin call issue well or is it a case of a rising market lifts all boats?

  19. Two Harbors Board of Directors announced yesterday they will suspend the 1st quarter, 2020, divs on the common and preferred stocks. Two-D was scheduled to pay today. Flakey management.

    1. Better to suspend and have cash than get margin call like mfa and mitt. Been holding for years now. Definitely, didn’t expect this out of mfa. Then again I didn’t realize in 2019 that they began shifting from MBS to Russian roulette. Just absolute complacency on my part.

      1. Hello Smitty
        No, it is better when management acts responsibly to manage their business so that they don’t get hammered into cutting divs we trust them to deliver. I hold mgt. responsible but they will never be spanked. After this mess is over, they will probably give themselves a bonus the Linn mgt did when they steered their company through BK. A $25 million bonus to the retiring CEO!!!

  20. I sold NRZ, Chimera and AGNC preferreds today – they were way up today. I will buy them back when the relief bill Euphoria is over.

    Took a page out of your playbook Tim and bought SDS when the market was up 1,000 today. I am no longer a shorting virgin 🙂

  21. GLOP-C Tim, you’ve had this preferred in your model portfolio for a couple of years. Have you looked at it recently? Still plan to hold? See any particular issues with it? Can you tell I have some, too? Thanks, as always.

  22. Thanks Tim, I’ve sold a few things today. This is your second chance to rebalance. I expect we see one more lower low around 2060 fib Spx. ATB

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