This Too Shall Pass

Investor mood is greatly affected by losses that are incurred day in and day out as income issues grind lower.  After all these years of investing we have finally reached a good point in our ‘investing life’ – we accept that there are going to be periods where investing is frustrating and money is lost.  We still dislike losing money with a passion, but such is life when investing in securities.  We don’t wring our hands or lay awake at night.

We know that we have new income investors entering the market each day-we have some who have commented on the website the last few days-and the period of time we are in right now tends to scare these new folks off for a long time.

It is likely, although not guaranteed, that there is opportunity for income investors right now (or maybe next week) to buy quality issues at discounted prices.  The CEF preferreds and the high quality REIT preferreds (for instance Public Storage preferreds) have not given us the opportunity to buy for current yields of 6% and more for years.

We have to be out of the office this morning so will miss a few hours of excitement and it is always good to be away from computer screens.

43 thoughts on “This Too Shall Pass”

  1. One “class” of preferred’s that have taken it really hard on the chin are the smaller banks including FIXED to Floating rate issues that were trading during 2018 at one point near $29 a share. The are down over 20% from their high’s

    3 examples, VLYPP, NYCB-A, and PBCTP.

    This is why I don’t believe this is just a “rate hike” tantrum. These have protection with the caveat that they float a little too far in the future.

  2. This too shall pass indeed. As a newbie to income investing I very much appreciate the heads up Tim. Much gratitude for the way you organized the data as well. As you suggested I am focusing on CEF preferred along with the term preferred and short/medium maturity issues.

    I aspire to someday become an income investor as good as GridBird 🙂

    1. There you go Jay–stick around gridbird and you’ll need to pick out a ‘sock drawer’ for all your low liquidity utility issues like he has salted away.

      1. Tim, HE-U is such a venerable issue… Funny how things change…This summer I was buying selloffs at $25.80 and selling into illiquidity a few weeks later at $26.50. Rinse and repeat…Market is resetting everything though as this purchase basically at $24 since it goes exD in about a week or so.

    2. Jay, trust me, my head isnt swelling, as NSS and CHSCN is keeping me humbled. Every profitable trade I am swinging last couple days is going to cover my NSS and CHSCN daily losses, lol..
      If I had a brain in my head I would consider selling HE-U right now and locking in 80 cent gain on current bid…I wont this is a great issue to hold at my 24.50 price…Plus I get the interest payment at the end of the month.

      1. Grid, at the current bid of $25.30, you are up around 3% on just this morning’s buy of HE-U. Congrats!!

        Yeah, you could flip now and laugh all the way to the bank. But the $0.40 dividend next week is pretty enticing, yes?

        I will not sell the 100 shares I picked up today, it goes into the sock drawer with the other HE-U shares that I bought a year ago at — drum roll, please — $26.45 !!! Boo. Hiss.

        1. Inspy, I will hold to get the divie….And to keep me from doing something I may regret with the money if I did sell. Its a landmine out there!

        2. I too bought 200 this morning. I don’t trade this. More than glad to hold onto my 600 shares for income.

      2. I am sure it’ll all work out. This point was discussed under a different post but I try not to worry about daily movements as long as these (financially solid!) holdings keep paying their distributions. Short term market prices tend to overshoot on sentiments rather than fundamentals and I’ve never had a good record timing short term moves.

  3. I am getting smashed on a two recent buys of NSS and GLOP-A. Did a pipeline explode or a GLOP boat sink? I am not sure if I should add any more today or wait. I have plenty of dry powder but maybe there are better issues to buy? Yesterday I got two short dated term preferred’s (ECCA and GAINM) under par and ALLY-A at 25.20 and all are holding steady, for now.

    1. 35spline–I was just reviewing a Shell LNG presentation last night and the growth in LNG is pretty phenominal. GasLog Partners has most all of their ships leased to Shell for the next 3-13 years.

      1. It doesn’t get any more solid than Shell as far as third party risk is concerned. I placed a limit order order to add some more GLOP-A but it might not go thru at my bid.

      2. Gaslog is a very reputable company as demonstrated by their charters with Shell. The oil majors have extremely stringent requirements for their chartered vessels so one can assume that the vessels themselves are maintained and operated at very high standards. However the LNG market itself may present a real risk, I feel comfortable with a small chunk invested here for the long term (although I’m generally leery of most shippers). Just trying to figure out if the better investment is GLOP or GLOG preferreds.

    2. Anything floating on water starts sinking when things get dicey. Very simple. Just how it is from my long time experiences and observations. Nustar is a different story. I have been itchy o buy but resisting. They were on shaky ground earlier this year but have made meaningful strides since. The BB and PFD held up through the shaky times but somewhat ironically have collapsed since. They sold a big private PFD at 9.75% right before this collapse. Those guys probably not too happy right now either. I chalk it up to risk off right trade now.

      1. I have been in and out of NSS several times. Mostly buying around par and selling over 25.70. Looks like I got back in way too early.

    1. Jay, I have played that one for some easy money flips before. But that was when oil was stable. Oil price is dragging everything down again. It actually has traded under $25 before when oil dropped to $30. I dont have the nerve to play here. And mostly because I already have NSS and EBBNF. That is enough oil related for me. Im not much help here. Im not a real high yield chaser by nature. Im just looking to tweak a few issues with quality that might drop.

    2. Jay–I had CPE-A for quite some time, but let it go a month ago after I scoured their balance sheet-pretty dicey for me (not that I don’t own some that are dicey already). They best hope for a bounce in crude prices in the next 24 months or they will join the the other small producers (mostly MLPs) in the garbage can.

  4. SteveA

    My two cents on JSM. I’m long and a fan of the security (although I’m underwater).

    The stock is cheap and selling at ~90% of tangible book value. It’s rated a Hold from CFRA (the old S&P) and OutPerform from Credit Suisse.

    I am very confident I’ll receive my coupon but the duration of the bond is long (mandatory call in 2043) and that may be hurting the price.

  5. Talk about having the ‘jitters’…

    Another doozey from SA: Private bankers at Credit Suisse are advising clients to consider moving assets out of the U.K. before a rescheduled Brexit deal vote takes place in parliament, FT reports. There are fears of both a no-deal Brexit and the possibility of a leftwing party being elected. Labour leader Jeremy Corbyn has floated a “wealth tax” in a previous manifesto.

  6. From SA: China cut its holdings of U.S. Treasury’s – by $12.5B in October – for a fifth consecutive month, amid a broader decline in foreign demand for U.S. government debt due to a strong dollar. Beijing’s Treasury appetite has garnered attention due to its continued trade dispute with Washington, which has contributed to the renminbi falling toward the RMB7 threshold vs. the greenback for the first time since the financial crisis.

    1. Hey G…any word on where all this Chinese money coming out of US treasuries is going to? Its slim pickings for government bonds in Europe, Germany and Japan are negative yields, and Great Britain has its own set of unique risks. Australia is the only place to get somewhat comparable yields and its a resource driven economy. Maybe the giant Panda needs to go on a diet?

      1. CW, I cant even keep my preferreds under control let alone the Chinese govt, lol…You one thing that does bother me though long term…Sounds like the Russians and Chinese are working behind the scenes to get the dollar off as the worlds currency. And you know that isnt being done to benefit us. And with our deficits running wild, there is no way we could be pulling this off without having the worlds currency. Not much to do about that though, so instead I will kick my computer watching NSS go down, lol..

        1. NSS is trading on triple volume today Grid…looks like someone puked up a fairly large position. Maybe someone’s margin got called, lots of that going on in this market.

        2. The Russians in particular want to get the dollar destroyed as the world’s currency. It hurts the price of oil. This has been a long standing objective of both Russia and China

  7. Anybody familiar with Navistar? JSM – Moody’s rated at Ba3 has dropped a whopping -33.2% (high to low drop). As of last night, It’s 6% coupon is now paying a yield of 9.38%.

  8. The spread between the high and the low for QVCD is -12.4%. High was $24.45, low is $21.41(as of yesterday). The average I calculate from the data provided on spreadsheets on this site is about -13.4%. So QVCD has not really dropped more than the average issue. I don’t see a “bargain” in the drop. If you want to buy QVCD, I would ignore the drop and buy it based upon your review of the issue. I see no indication based upon the entire selloff that it will recover more than other issues

  9. Tim and Company,
    Usually do not comment too much, but in the Holiday Spirit share a bit of hopeful personal insights:
    Long term patience is usually rewarded. In the meantime we develop the ‘Eye’ that people talk about here. Also, we learn what NOT to pay attention and what our REAL investment personality is all about. This has been critical for me.
    I put my first money in the ‘market’ in 1983 and my old neighbor (who was quite a success) refused my newbie securities sales offer with a short bond lesson regarding the 13-15% long govts he was already leaning on forever. He was all-in. Quite simple and TIMELY. Did I ‘LISTEN’.?..yes. Did hotshot ‘HEAR’?…I wish I had! Luckily, I am still standing, now in the place Clyde was in age and experience. Of course, the whole trend has shifted and this is a great place to ‘hear’.
    Happy Hunting!

    1. Ooopps…I flipped ‘hear’ and ‘listen’! HAha. Still having to slow it way down!!
      Tim has the permission to edit me!

    2. Joel A – the best bonds I ever bought was in the 1980 area–doubled my money–but I had no idea what I was doing at the time, but it did work good–maybe ignorance is bliss sometimes.

  10. Some of the newer, longer stuff is getting flushed out. Whoever bought the QVCD at listing has gotten hammered as the thing is off $4. BTW, what is it? I know it’s a baby bond, but is it senior secured or unsecured? Quantum says its secured, then says it isn’t. I might bite a point or two lower.

    Nibbled NSS yesterday as mentioned. ETP preferreds are probably next on list. TRGP monthly preferred is interesting below par. several others I watch.

  11. Tim, and all those who comment. I want to say a sincere thank you for the time, effort, energy, devotion and honesty that you dedicate to this website! I pray that you don’t stop because I know you are a great help to retired, conservative, small investors like me who are just trying to stay ahead of the wolves. I’m on your page throughout the day and everyday. I read and I learn from you and other experienced folks like Gridbird etc. In the end, I know I’m responsible for my decisions, but I gain confidence from you and all those who submit comments.
    Ps: Bigbear was my hunting nickname, but it seems appropriate here too.

    1. Bigbear–glad to have you here. Yes – bigbear seems appropriate right now. Our goal (everyones) is to share and larn from each other so feel free to contribute no matter what the question/idea might be.

    2. Big Bear, its definitely hunting season. Just dont shoot the wrong animal or it may come back to bite you in the rear! Best of luck!

  12. We certainly have a bit of excitement Tim! But for newbees, remember everything is relative. We get a bit skewed with most veteran preferreds long gone and lower yield coupons going to market that may distort a true value of par…Nothing actionable just a bit informative…Here is some examples of “veteran preferreds” that have been around the block to show, that prices can indeed go lower…Not saying they will, just showing low price points from these issues since 2013…And it isnt now, either. Market forces and company specific forces effect,of course, all issues differently.
    KIM-I $23.80 ($20.31 Dec. 2013)
    IPL-D $23.28 ($20.44 Dec. 2013)
    CHSCO $25.65 ($24.40 Sept. 2013)
    ALLY-A $25.13 ($22.77 Feb. 2016)
    NSS $24.20 ($16.37 Jan. 2016)
    WFC-L $1259 ($1093 Dec. 2013)

    1. Gbird,
      Do I see there is no debt over at CENEX/CHSCP? Only preferreds for financing? After a review and visit to their site there in not Investor breakout on their site, but that appears to be the fact?

      1. Joel, CHS has had all sorts of problems and malfeasence plaguing it. I will have to check…But I just bought an assload of HE-U right now at around 24.50…This one has been a true friend through the years for me.. This illiquid went crazy on a dump today.

      2. As per above comment 10Q on CENEX is a good review of company and worth a quick scan/read.

        1. Joel, this is a year old, so its already well known by market. But this is a great primer article showing how CHS management was running around with their pants down clueless for quite a while..

          Wow. Making good money on HE-U already. That was a steal at $24.50…I really dont know how much I have..Around a couple thousand spread in 3 accounts.

    2. Gridbird, I was finally able to pick up one of your favorites today, AILLL. Unfortunately, I forgot to put All or None and I got a partial fill of 163 shares at 26.50.

      1. Alan, I have bought less before, lol… Compared to a couple times, that was a haul! 🙂

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