It’s nice to have a long weekend coming up–some days without political headlines–at least I hope.
I already have some plans for the weekend–hopefully I can execute without getting distracted with lawn work etc. I need to work on portfolio construction.
I have studied our portfolios closely, and it becomes obvious that I still have some issues that are highly susceptible to being knocked lower if interest rates continue to march higher (and thus far, I see no reason why that would not be the case). This would include some perpetual preferreds and some long dated baby bonds.
Next week I will begin to weed out any issues that are going to destroy my capital. As always I will do the selling in a slow measured way. As many of you know I am a ‘total return’ person—I simply want to maintain capital while earning a fair return. Simply put I want to stay green–sometimes a near impossible task. Thus fair it has worked well–the last red month was April 2024, although April 2025 was just barely green. When I reach a point when I am actually withdrawing from accounts I will want to maximize income, but now with rising interest rates I am about total return.
Tim, you have me going over my list and questioning holdings.
One I have is in your sock drawer holdings. I caught MGR on April 11th at 20.30 for a nice yield of 7.2%
Now I am questioning why it hasn’t recovered along with the rest of the market?
If we are worrying about storm clouds on the horizon like Westie then I have to ask the questions,
#1 should I hold and add more if it drops
#2 being a longer dated call a lot can happen. Would it be better to sell and move the money into a similar yield short term Baby bond like SAJ with a 2yr call which I consider a higher risk even though Egan Jones says it’s a BBB+
#3 On a longer dated call, there is a higher risk of capital loss. Is it worth it to ride out the highs and lows for the income? If you look at the chart over 5yrs MGR has significant high and low movement. This gives the patient investor the opportunity to buy and sell but is it what a long term income investor really wants?
Charles, Not that you asked but I thought I would say one of my most stringent requirements for entering into a position is it has to be something I’d be willing/wanting to buy more if the price were to fall. It’s a rather simplistic method that has had very good results for me in the past so will continue it going forward. I always make an assumption that I’m buying at the wrong time (as it turns out, it works out to be half and half); as I do not attempt to time markets or pretend there is “certainty” at any given time.
Pig you told me that before and of course I go and forget this simple rule. If it was a utility I would have no concern about buying more.
Just thinking out loud.
This is for most of you later on…..You probably don’t know this but once you are on medicare something comes into play with your tax situation…it’s called a medicare surcharge…I won’t go into details but look it up and just be aware of it….we’re going to have to deal with it in 2026…tax laws do change but for now this is how it works for retired seniors….
Craig; Yes, fully agree with you 100%. The shocking thing to me was what I call the UP CHARGES made by medicare as your income shoots up when you start taking those RMD’s. Between the B, D, etc which they gave a fancy names of IRMAA (Income Related Monthly Adjustment Amount)–ain’t they cute!!!!!! They nailed myself & my wife to the cross on these charges. It actually destroys the SOC. SEC. amount you receive.
RE IRMAA, your income from 2024 will determine your IRMAA for 2026. 2025 income will determine 2027 IRMA, etc
Plus it is MAGI, so Tax Exempt interest is included for the calculation.
The brackets do move with inflation, but a single $1 over will pay the next IRMAA bracket. There are 5, about $60K-$70K between each.
Yep—never really a “free gift,” is there? LOL. But honestly, it’s still a lot better than the ACA’s 8.5% additional premium “contribution” for going over that paltry $125K MAGI. IRMAA is a bit more forgiving with its income thresholds, at least. The step increase system is annoying though—kind of feels like a kick in the lower region when you bump up a bracket by a few bucks. I’ve got a few more years before I’m eligible for Medicare, but I think I can manage.
Especially knowing that it’s based on income from two years earlier.
Fl guy, I am glad people brought this up. My wife was going to withdraw funds to pay for a roof replacement. I was having a discussion with her about taking out a home loan or line of credit but I was losing as she likes having the house paid off and no other debts. This could kick us into the next level and of course you get 2 years to forget your going to be looking at a Medicare cost increase.
I don’t want to assume, but does anyone know if your income goes down and drops you a bracket does this MAGI reset? I would guess the same would apply if you decided to be generous and withdraw funds to take the extended family on a vacation to someplace like Europe?
Yes, it resets.
Tim, as you work on your portfolio construction will you be looking at your weighting in the various market segments? A diversified portfolio is something that most investors strive to achieve. I am surprised to see that in your Laundry List you show a 40% weighting in CEF/Specialty Finance. I understand that CEF preferreds are some of the safest investments. Please help me understand how you are comfortable with such a heavy loading in one market segment.
I attempt to limit my investments to 10% in any given market segment. The one notable exception is with utilities (10% target) and illiquids (10% target) where there is a significant overlap.
Falling price is not a loss If they keep paying dividends you’re getting what you paid for. As a trader I try to play the moving prices but the only way I consider it a loss is if they default. That’s my philosophy.
Martin, I agree with your statement that an investment is not considered a loss as long as the investment continues to pay a regular dividend. As a retiree, my primary objective is cash flow. However, if the price drops more than 10% it causes me to question the basis of my original investment and how do I change my investment philosophy going forward to minimize the likelihood of it recurring.
With fixed income investments, the loss is often just a result of rising interest rates, not always a reflection of the underlying security. Though significant losses can also indicate that you have too much exposure to longer duration securities (like perpetuals).
This weekend I am going to remember my fellow veterans who gave the ultimate sacrifice to help protect the freedom we have today…I lost three of my classmates to Vietnam…I was lucky…Right out of high school I joined the Army and was sent to Vietnam when I was 18…..I just can’t imagine todays 18 yearold doing the same….I am a proud Veteran of the 101st Airborne Infantry and feel very fortunate to be sitting here writing this…my big highlight in the last five yrs was being to escort a 92 yearold Navy Veteran on an Honor Flight to Washington DC…it was truely a lifetime experience for me…if you know of someone who served, thank them…we have alot to be thankful for…take care
Amen, Craig. Thank you for your service!
Craig – “Welcome Home”
Thank you for your service. I enlisted in the United States Army too … 1966,,, turned 18 while doing “fire guard” duty in basic training. Again, welcome home brother.
I was a member of the 101st Airborne Assault Helicopter Battalion and served at Camp Evan’s during 1971. Our Company was called the Ghostriders. Did you ever come through Evan’s? Thank you for your service.
Thanks for your service TexPaul…I was with the 1/506 Company A and Camp Evans was our base but I rarely was there…I was either in the jungle or at a Firebase…(Currahee, Rakkason, Blaze, Bastogne or Eagles Nest)…My stay was 2/69-2/70…..We used Hueys to deploy on our missions…
I have about 30% of my funds in 5-yr fixed annuities (MYGAs) with a combined yield of about 5% or so. I’m still working so this is great for me. If I decide to give up the day job I still have a small consulting gig and the income from my preferreds and CDs, with the option to take the income from the annuities if I would want or need to.
So, while I don’t like the preferreds (and preferred ETFs) not doing to well with rates on the rise, I’m able to wait them out or buy more over time. If the ten-year gets to 6%, I may change my mind. LOL. Enjoy the holiday weekend everyone, and thank you to all the veterans out there.
Rocky,
I have a bunch of MYGA’s also. I’m a great “tell” for when rates are going to rise, because they always shoot up right after I purchase a MYGA. It happened again 2 weeks back after I bought a new 5.5 five -year MYGA from Mass Mutual Ascend.
I do see Corebridge raised their rate on their 3 year MYGA to 5.4 for amounts over 250k. That rate is well above Corebridge’s 3 year unsecured debt. I believe that’s an indication –to me at least–that corporate debt is too expensive.
I’m going to read a little about Busey and Wintrust. Busey was rated BBB- by Kroll and Wintrust was rated BB by Fitch. Excluding Egan Jones, are the ratings from the various agencies comparable at all?
I am similar to you in wanting some chance at capital gains. My largest account is my traditional IRA – I don’t want to draw from that till I have to (RMD) in 7 years. I took SS last year at age 64 because my analysis for my situation showed it was the best risk/reward…I am fortunate in that I paid max into it every year since the mid-90s so it’s a decent chunk of change every month. I am also fortunate to have a pension that roughly matches SS…NASA was my “second career” and I spent 23 years with them before retiring.
If I HAD TO, I could fairly easily live off those two incomes. But, I like to travel and have fun too, not to mention spoiling my grandtwin boys who are 7 years old! Plus, in the event, one of them would disappear, I like having back-up. Right now, my IRAs bring in divvy/interest equal to about 1.0x the collective SS/pension income and I generate a nice little stipend from my trading account which is only 5% of my collective accounts in value.
My strategy is to draw down my taxable savings first and then my Roth. My Traditional IRA is in boring old perferreds, treasuries, BBs and bonds and nets me about 7%. My Roth is more aggressive with some of the boring stuff but also some common stocks – usually beaten down blue chips that have a divvy and allow me to sell call options against for protection and added income.
Even my worst case analysis tells me those two accounts should last me 10+ years of drawdowns, if not much longer. I did put into my strategy to never withdraw more than half of my collective yield income to hopefully offset any inflationary impacts. So far, 17 months into retirement, I have only withdrawn a very small amount; mainly for nice vacations with the GF and the kids and some fine pinot noir – going to Scandinavia this summer. My health is excellent – at age 65, I still run marathons (even ultra-M’s) and can beat 90% of the field, regardless of age, at local 5K events…knock on wood that the health stays good for another 30-40 years!
Like you, Tim, I adjust things every month or so to keep tabs on my goals. I am not rich by any means but perfectly content with the finances at this point. Thanks for having this site and good luck to all!
Cheers!
Yaz! Keep at it, man! I’m 59 and I podiumed at a trail rucking event recently (3rd male) at 59 years old (albeit at a small event). Anyway, very impressive with your 5k finishes and other events.
I love to travel as well. For us, we live a very modest lifestyle, so spending a little cash on travel really isn’t that big of a deal. I’m always fascinated that people think we are something special because we go to Europe. Meanwhile, those same people take themselves and their kids to Disney for a week and spend 3x what we spend for 2 weeks in Europe. To each his own, I guess.
Enjoy your time in Scandinavia.
Anyone have any info or opinion on GMLPF. This was a once a very safe preferred until NFE took it over and drained all of it assets. It seems like this sort of thing happens to preferred holders all the time and nothing ever happens. I have started to sell off most of preferreds because of this sort of thing but am stuck with these losers wondering if there will be any recourse.
I’m starting to come around to the idea that 4.3% isn’t too bad, at least until I have a better sense of which way the wind’s blowing.
I was able to get a Merrick Bank 4.35% CD this week (8/29/25). I did not even notice till later that it pays monthly as well.
Tim, mjtroll and rocks2stocks have commented long dated bonds and etd have started to lose value with yields rising. We are seeing 7% yield returning on the junior sub. The jump we saw in rates when the House passed the new budget indicates the bond market expects higher yields in return to hold US debt and this spills over into the commercial bond market.
How high the yields go and conversely how much capital value is lost we can only guess.
I think a year ago Private linked an article about the fear at the time that a collapse in China ‘s mkt would ripple around the world. This last week I read the PM of Japan warning with over 220% of debt to gdp that they are close to being another Greece. The story said the Bank of Japan can’t continue to buy their treasuries. The article mentions that Great Britain owns a lot of Japanese debt and any collapse would affect their country.
But having said that, my wife is already withdrawing from her account and the affect of capital loss is evident already with the decline in value of a few holdings. The most important thing is not to see any loss in income at this stage in the game. I was reaching for yield these last few years but now I think it is coming to me.
I can start moving up to higher quality or buy what we already hold to cost average down while increasing the income.
I agree with you it’s time to rearrange the deck chairs but more for income in our case.
TIM; Am I allowed to have a little fun with you this morning regarding your very first sentence??? TOO LATE!!!! Trumps announcement of a 50% tariff on the entire EU took care of a nice peaceful weekend–LOL. Iam conservative as you know but the man is a walking wrecking ball–LOL again. I added a few shares of existing holdings about 10 minutes after his post at very good prices. There are some very “good prices” in the preferred arena of good quality names right now.
Chuck, your posted before I was able to get mine in. Just too dang long winded!
I expect we are going to see even better prices to add some good quality to our holdings.
Watch the utilities now for some good deals.