Waiting on the Fed

Wednesday has a chance to be exciting–or it could be as boring as watching paint dry. Regardless of what the FED does with the Fed Funds rate (no cut, 1/4% cut or even a 1/2% cut) we won’t react to it. Our investment methods do not really allow us to react quickly to interest rate changes and our personal experience is that quick reactions are most bound to be a mistake.

With a stack of cash if we did see movements in income issues over the next couple of days we will look for bargains–but we are in no rush to make rash buys.

In the last week we added more Kayne Anderson 3.50% monthly pay term preferred (KYN-F) when opportunity presented itself down around $25.06. The issue has a mandatory redemption on 4/15/2020. I now hold around 1500 shares–in lieu of cash, but there are limits and I will buy no more.

The Fido Government Cash Reserves (FDRXX) is paying 1.91% right now and the Gabelli US Treasury Money Market (GABXX) is right at 2% so the large stashes of cash continue to work for us–albeit in a modest way.

9 thoughts on “Waiting on the Fed”

  1. Many of us are using KYN-F as a holding spot but with redemption coming in six months, what’s our next KYN-F ?

    1. I use recently past call IG issues trading within a few cents of stripped par. There are usually 1 or 2 such issues at any point in time. But then you have a lot of turnover due to calls.

      For a lot less work but with some sacrifice in yield MINT is good.

  2. If there’s a 1/2% cut I’ll react to it by selling the rally. It’s a sign of bad news that the shortsighted would interpret as good news.

  3. Tim – apologies if this has been asked but is KYN-F a K-1 issue? I know the common stock is so I am assuming the preferred is as well but could find nothing specific in literature. Thanks !

    1. Proto, its QDI…per prospectus page S-20
      https://www.sec.gov/Archives/edgar/data/1293613/000119312513130120/d506515d497.htm#stx506515_8

      Such dividends generally will be taxable as ordinary income to holders but are expected to be treated as “qualified dividend income” that is generally subject to reduced rates of federal income taxation for noncorporate investors and are also expected to be eligible for the dividends received deduction available to corporate stockholders under Section 243 of the Code. Under federal income tax law, qualified dividend income received by individual and other noncorporate stockholders is taxed at long-term capital gain rates, which currently reach a

    2. The common is?
      I have never heard of an issuer doing that.
      I’ll bet the common is a div reportable, and that you are mistaken.

    3. KYN is a partnership but has elected to be treated as a corporation for federal income tax purposes. No K-1 on the units or the preferred.

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