The Baby is Getting Tossed Out With the Bath Water

It was bound to happen–all common stocks have been pounded lower and now the baby (preferreds and baby bonds) is getting tossed out with the bath water.

Since last Friday the average $25/share preferred and baby bond has fallen 50 cents (2% more or less).

Of course shipping is the worst being down $1.20 since 2/24/20, while CEF preferreds are off just 16 cents.

Here is the loser list No particular theme–but a bunch of issues off 2% or more.

42 thoughts on “The Baby is Getting Tossed Out With the Bath Water”

  1. Human beings aren’t comfortable with uncertainty. It’s way too early and too complex to decide anything. Not good to be certain based on incomplete info and understanding. Personal bias tends to dominate belief in these situations. That’s my biased view.

    PS. Not a political comment but, first case in Mexico.
    Consider Mexico City
    Consider our porous southern border.

  2. I still don’t get it, and not just in the context of investing.

    Why do people seem to be reacting much more strongly to the Wuhan Virus than they do to flu, which at this point still looks to be much more prevalent and much more deadly?

    1. “The current death rate globally for the coronavirus is about 3.4%. The flu, meanwhile, has an average death rate of less than .2%”

      The flu may be more prevalent, but it is NOT more deadly. There is a lot of uncertainty as to how wide spread coronavirus will get.

      As for the markets, growth will be affected by this, but it’s uncertain how much.

      1. Where are you getting 3.4%? My guess is that is way too high. So many people with very minor symptoms probably had this is China and even elsewhere at this point.

        I find it very weird that this spread so fast in that cruise ship and how many deaths out of that so far? China’s death total number %s are so much higher than everywhere else besides Iran. Don’t trust either but death reports are likely way more accurate than number of cases.

        1. I know if I had this thing in those countries and my symptoms were minor I wouldn’t be telling anyone. I’d lock myself in my room for a week. Only the very sick going to a hospital. Inflates the percentages.

          Unfortunately this thing spreading fast because it is not that deadly.

      2. The death rate for people with the flu who are hospitalized is around 10%, but only 1% of people with the flu ever get hospitalized, so the fatality rate is around .1%. With covid-19, we don’t know how many people have it. Many have mild or no symptoms. It is way too early to say that covid-19 has a death rate anywhere approaching 3.4%. The numbers being thrown out are mostly to scare people. If you aren’t old and/or have a compromised immune system, you have very little to worry about.

    2. The one thing bothering me is that Utility preferreds/commons of all types are moving down. Do people/businesses stop using electricity ? A large portion of my holdings are in these types of companies. I can’t figure that one out. People that stay home instead of traveling use MORE power. I expect many on this site can explain.

      1. Fear driven sell-offs are never rationale. I am 34% in utilities looking to buy more at the right price.

        1. Fully agree with Steve. The underlying reasons for the selloff is Fear. Fear of the future. Fear of companies revenues being lower. Fear of seeing profits accumulated over many months disappear in a week.

          I have divested myself of those holdings I consider risky, and will hunker down with the ones I have decided to keep.

          Let us hope the various organizations working on a vaccine will be successful, and soon.

      2. Sometimes everything falls with the tide. Good time to buy those that shouldn’t have fallen much.

      3. Exactly, why is the stock of gas utility companies like OKE and insurance companies like MetLife down around 15-20%? They aren’t going to close down any operations. Why would their earnings be impacted? The only thing that makes sense is funds having to sell anything. This is the baby getting thrown out with the bathwater.

  3. Is anybody surprised by how agressively fast investment grade preferreds are selling off?

    The pain is getting numb now :^/ and I’ve been diligently buying following gridbird’s comments and from Tim’s spreadsheet filtered to Utes. I still only have a 4 pack of IPLDP. Picked up DUKH and STAG-C yesterday which surprisingly held on today preventing me from adding more. Added one serving of NEE-I.

    Good luck everybody tomorrow. Sustaining losses back to back to back is mentally exhausting but it’s good to still be buying even if only a little. I’ve been limiting myself to buying 2% a day as one doesn’t know how long this can go on.

    1. Hster, Its tough to know what to do as that depends individually on what your trying to accomplish. A quick hit cap gain? High yield? Safer lower yielding issues? Ones around call date? Longer call protection?
      One can get a modest sell off to buy at par, but if it gets redeemed in 3-6 months that may not accomplished ones goals. So many things factor in including ones individual biases that may work for or against one. For example, I am not going to look at Mreits, BDC’s, or shippers no matter what. I may be missing out and they will work well for others, but they just arent in my personal wheelhouse whatever that is. I like to buy things that if they dropped I would be willing to buy more of. Not ones that will freak me out and want to dump.
      I thought the STAG-C fall off was a gift for someone looking for a most likely year duration play with almost 5.5% YTC meat on the bone yesterday so I bit pretty good. Hopefully that was your goal. If one loads up on too many that dropped near par and get called in shorter manner, one may be faced with cash back at you and yields may be lower yet at that time. I try to spread them out a bit if I can.

      1. Gridbird- I’like to hoard socks but it’s been way hard to fill out the drawer. This volatile market appears to reward flipping more than holding so I’ll attempt some intermediate holds. Fed will have to cut at least once this year. I’ll keep an eye open but the call date, even the election seems an eternity away.

        1. Hster, there is absolutely nothing wrong with that. Matching your buys/trades to your goals and expectations are the only thing that matters, and those are very individual based.

      2. I understand staying away from shipping and I wouldn’t touch any common. Any thoughts on HMLP-A?

    2. Initiated a position in IPLDP here as well and in honor of Gridbird nibbled on some SR-A.

    3. Good morning HSTER; I bought 3,200 shares of IPLDP at $25.08. Its my lowest yielding preferred but thats ok because I doubt it will trade all over the place like my oily MLP’s. LOL May I ask what is a “4 Pack”???? I’ve not heard that term used regarding investing.

  4. Best line of the day….”Panic is not an investing strategy”. The fact it came from Liz Ann Sonders resonated with me better since beauty and brains combined always causes me to listen better.

    1. Lol – Grid, the ladies on CNBC are easy on the eyes and best reason to watch, ha. SLMNP held strong today 👍. I like buying fear as my Best Buy’s are after a Vix spike, however I usually wait for a Vix reversal back inside the bollinger bands to play it safe. ATB

  5. Be it right or be it wrong after reading alot of your guys posts I did buy against my better judgement a low yielder today. I bought 3,200 shares of “IPLDP” at $25.08. So even if they call it down the road I will still make a little money on it. Atleast it does look like a solid company to me.

    1. Chuck its my biggest position now, granted a defensive play. They just got their rate increase, so all is good.

    2. EAE – A2 rated by Moody’s closed at $25.09. This is a 1st Mortgage Bond which places it at the top of the debt structure.

      1. Yes 85% of stores have re opened. BUT Bloomberg was more interested in creating a panic. They had guggenheims Minerd on saying this was THE WORST MARKET EVENT OF HIS LIFETIME.

        I can’t wait to give the wholesaler a piece of my mind!!!

    3. Wow,
      I thought I was all in with 500 @ 25.05
      Hospitality Reit’s taking a hit I can’t decide between HT-C or PK.
      PK just sold several Hotels so cash in the bank and was doing better than last year until this virus hit

  6. I see IRETpC crashing down today to near-par (25.10). Does anyone have bad news or a call announcement on it?

  7. Tim, Credit spreads have widen considerably over the last few days. Some (very) long-standing bids on higher IG issues are finally hitting. Received a partial fill on CKNQP at 107.77 with divvy two weeks out. Never owned so many past call issues – made possible as they plunge toward “par”. Picked up PSA-X, BK-C and AGO-F under or very near “par” + accrued. Sold EP-C about ten days ago at 51.79 bought back today at 50.01.

  8. I wanted BEP/PRA under PAR (BBB-).

    Came out hot at about $25.40.

    Was able to get today under PAR.

    A 25% starter position.

    1. SteveA–I wanted it also–but am going to take stock of the situation tonight before getting in.

      1. This is why I went in at a 25% position.

        I am hedging that we have more downside and can average down.

  9. Looks like some of the investment grade ones are getting close to my sweet spot, which is < $25.

  10. Feels like Dec 2018 where everything was getting dumped, it was a great buying opp for me, particularly for prefs. Thanks to you Tim I kept my emotions in check.

    I am waiting for signs of capitulation before committing more cash.

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