When Fear Overtakes You

We know there are people that are very scared at this time–whether they are conservative investors or not.

No matter how great the bargains are in the market, folks that are laying awake at night because of fear of their ‘stash’ disappearing must do some thoughtful selling–it is human nature, and laying awake at night is not necessary – one has to do what they have to do.

I’m scared, but I am trying to stay mainly in either high quality, or very short duration (term preferreds and short dated baby bonds). While I may sustain some short term asset value hits I believe in the end it will work out because of high quality.

If one leaves the market the problem is when to get back in. I believe there are quite a few folks that left the market in the 2009-2010 that never re-entered which was a costly move, but folks have to sleep at night so everyone must do what they have to do.

59 thoughts on “When Fear Overtakes You”

  1. Take a look at ESGRIP. It’s been very resilient until today.

  2. A day for nibbling.
    At least I went for a run to burn a few calories first..
    ALLY-A
    GAIN-L
    VER-F
    THGA
    And thanks to Grid, EP-C
    All nibbled at or below par.
    Its like Dec 2018…but with commision free trades. A 50 share nibble here and there.
    What else are you sizing up?

  3. Entergy Texas ETI- is selling at par today. Nobody got that chance when it was issued last year. I nibbled too early Friday at $26.18, so playing the ol double down game at par today….I can finally get over the jealously of others buying NRUC when issued so made amends buying at $25.75 today. Also bought some DTY at 25.51 today. Glad I am tidying up the ship with quality. Aint doing cartwheels from losses in prices on some issues though, lol..
    Not losing sleep over it though…Well I havent went to bed yet today so maybe that part isnt true, ha.

    1. Grid, Your old friend ERRAF is around 12, I got 400 today!! Seems like a good opportunity.

      1. MFZ, That was my original reset purchase a couple years ago, but I am long gone there. Im too busy taking a spanking from reentering Fairfax Series E a couple days ago. In fact I liked the beating so much I bought 300 more at $8.45 today. Damn thing will yield about 7% until June 2025. Maybe it will recover some time between now and then ha.

    2. Just curious as to why to find the preferred ETI- more attractive than 1st mortgage bonds EZT or EMP also from Entergy that are trading close to par today?

      1. Good question, TEF. I dont consider if more attractive. I prefer the preferred for longer call protection and the QDI though. The debt may be better value for someone who is willing to not have duration protection and receive interest income.

          1. Not to be nitpicky but I remember an Entergy Mississippi Secured bond paying a coupon of 6% (maturity was scheduled for 2032) trading down to $19 in 2008. Rebounded fast in 2009 but def dropped more than 20% a couple of times in 2008. And those were insured by Ambac also.

            Ahh goodness, those were the times… Literally couldn’t eat that day.. No appetite.. The only reason why I still remember those Entergy Mississippi Mortgages.. So yeah things can get more painful from here.. Not to a fear monger but weird, painful things happen..

            1. Gray, Dont be scaring the children with your horror stories, ha. Heck this sell off isnt even sniffing close to Dec 2018 sell off let alone 08 and 09. IPLDP was in 22 range then and it barely has broke par now.

              1. Grid–yes it could get more scary but I think maybe we will see some bouncing around in here–at least I am hoping so. My sock drawer stuff isn’t moving–in fact I put in some low ball bids on some preferreds but nothing doing there. Did add a taste of 1 CEF preferred at 24.99 Gabelli Multimedia 5.125%–sock drawer material–it closed at 25.46.

                1. Tim, yes the majority of my beat down was in two issues EP-C and Fairfax E. Though I did cheat and sell out of some early today that later got pummeled like RPT-D that I dumped and saved myself almost $3 a share. I actually sold of CHSCN at opening and bought it back about 50 cents cheaper than I sold it.
                  I am thrilled to death to have got NRUC at $25.75 and SR-A at 25.95 and 26.02, ETI- down at par on chasing down, and DTY at 25.51. These prices havent been around in a long while and treasuries are considerably lower. If they go lower so be it I guess. I reinvest all proceeds anyways so I can lower my cost basis slowly…very slowly, ha.

      1. Jim, I debated trying to sneak a sell order at open and then try to rebuy. But its just too goofy and trades with fits and spurts of liquidity and illiquidity. Being pipeline debt I knew it would get a spanking, but it is what it is. The 2028 maturity makes it not an issue for me. If one thinks KMI will stay solvent its money good. But I have enough of this, so I am not buying more. I own what I own. The credit rating and duration are great features. But look at its 5 year chart its not without sin in terms of price volatility movement.

        1. Thanks Grid. I guess I’m a bit worried about the big oil sell off and KMI. I should have developed a better understanding of the long term viability of EP-C. I’m not worried about price fluctuations. I’d be happy to hold it to maturity in what looks to be a low interest environment for some time.

  4. WHOOOHOO! Can’t take my eyes off of the rodeo!
    Had an open order six percent below the already low prices from last week and it filled ON OPEN ten percent below MY OPEN ORDER! WOW!
    When interest rates are completely worn out that’s when the grinding will really begin on equities and can last years. I really do not believe ANYONE is prepared for that.
    Good luck and I hope everyone got prepared during the phat years. JA

  5. My financial advisor A. Neuman called to assure me the only reason Occidental Petroleum (Oxy) is off slightly is that today it went ex-dividend.

    On a more serious note…volume of First Bancorp Series D (FBPRN) is through the roof, looks like someone is unloading a large position.

  6. The share loss list is impressive today with more than 50 preferreds off by $2 a share.

    It’s mostly low quality stuff though that I don’t want any part of.

  7. Just bought 3,500 shares of “VOYA+B”. Its a 5.35% and not callable until 9/15/29. Good solid company rated BBB-. Been wanting to own it for about 3 months. My how things have changed. Three months ago it was $27.21 and I got my 3,500 shares at $24.84. BLOOD RUNNETH IN THE STREETS.

    1. Please be careful with VOYA-B. The implications of it being a reset have not occurred to most Americans as it’s a new product here. The Canadians know it much better.

      Calculate yield both at present coupon rate and at the reset rate, based on where the issue would reset at present 5-year Treasury. That 5.39% yield on cost drops to 3.74% and the price is wacked probably by 40%.

      That’s what happened to many of the Canadian resets.

      1. One of the few benefits of old age. I’ll probably be dead when VOYA resets and I also won’t need a new roof in the interim. (-:

      2. To Bob-in-De; Tell me if Iam correct or not. They cannot call it until 9/15/2029 and after that the “reset” occurs of the 3.21% plus the 5 Year Treasury kicks in. If Iam correct I have plenty of time to get out as thats over 9 years down the road. Hope to hear from you. THANK YOU.

  8. When I see EAB, an A2/A- rated 1st mortgage bond trading at under par at $24.63, now with a yield of 5%, and the reason is not inflation or treasury yields way up, then something is nuts. I’m using this opportunity to get quality issues cheap.

  9. Tim- What is ” very short duration” and lowest quality for you in times like these?

    1. tomastv–for short maturities I like those maturing in the 2-8 year range (mostly term preferreds and some baby bonds) and quality I like the A1 A2 and A3 CEF preferreds–even though they are perpetual. I didn’t think I would buy today, but did nibble on the Gabelli Multimedia Fund 5.125% preferred (GGT-E) at just under $25–rated A2 and call protected until 9/2022.

  10. Interesting tug of war going on in preferred stocks/baby bonds:
    ultra low interest rates versus overall market plunge (the plunge team is pulling the low interest rate team a little closer to the mud right now).

  11. Right now is not the time to get too caught up, although if this continues for another 60 days or so, then it may go from a “problem” to a “crisis”. The stock market can take hits, but if the credit markets start freezing then I’d be more concerned.

    Currently, one area that I have been questioning for quite some time is Europe and specifically the European banks which are very weak/average at best (i.e. Deutchebank). With regards to the virus which I don’t think is that big of a deal, but if you do….there is minimal/no testing and at this point no vaccine. Once a vaccine becomes available it will be several months before this situation can even begin to turn itself a lot.

    Expect things to continue to be turbulent for a while.

    1. Yields on European banks are quite high – I wouldn’t touch DB with a 10-foot pole, though. Barclays, Lloyds, ING, etc.

  12. Not selling anything. Might do small nibbling, but nothing large- I believe this will get worse.
    So far, no change in re-fi rates at WFargo- strange. Maybe they can’t make money going lower- ha.

  13. Accidentally bought some UZA at $24.15 on an old open order that got filled. Not bad but have to remember to keep an eye on those in a plunging market i guess.

  14. Buying BP, Chevron, and Exon this morning, keeping my fingers crossed it was a panic sell off.

      1. Chevron +5.22, Exon +3.51, BP +1.86, Risk reward paid off this time

    1. My only hope is Saudi and Russians will realize before too late they did a big mistake. Energy is the “too big to fail” industry at the moment in the US. The lack of accord and then the war on price they started is a declaration of war to the US. It’s a negative or zero-sum game due to demand destruction; the only aim is to kill US producers.

  15. It will be interesting to watch the US financial system grapple with the fear and reality of extremely low rates that could stick around for a long time. New debt issues will be rare for awhile I expect as issuers look around to see where firm ground is. Funny to watch a bunch of fixed income pros sit around and discuss the world of hurt their profession holds for them.

    Are we seeing fixed income peak? The Fed cannot fix this.

  16. I just bought some more of “FCIZP”, EQH+A, and EPD”. Due your own due dilligence but I think we’ll look back in 12 t0 24 months and be happy we bought them when they were truly on sale. Go to the website of EQH, they certainly look like a rock solid company. All of these are really on sale today.

    1. been buying EPD as well…..Concern as own quite a bit of mortgage reit preferred now dropping PMT NYMT NLY AGNC CIM etc selling half and waiting looking for further drops this week to buy utility and bank quality preferrerd

  17. I think it was from the book Dune–look into your fear.
    Bought VER-F at 24.88. Doesn’t help my HMLP-A position though.

    1. RE: HMLP-A

      Not something I follow. Question: Do you think this one is down because it is in shipping or energy…or both?

      Nat Gas is actually up and I see producers are up.

  18. I put in a “I’m scared” bid of $24.00 on WRB-B this morning. Boom – hit it almost immediately. Wow… by the end of today there will be many less babies and much less bath water to toss out when you see dual IG rated securities like this getting clobbered.

    1. Especially in the insurance industry. Shouldn’t their book values be going higher due to the drop in rates? Insurance companies usually own high quality bonds and agency MBS.

    2. couldnt get IB to take my WRB-B 24$ bid this morning, system kept freezing and kicking me out. I see its already back up of course. I’ll get it next time. Maybe tomorrow?

      1. I entered mine in at about 815am EST today, so I guess I was in the right place at the right time. Of course, with the DOW now leaning down again, it’ll have another shot at being back there again soon.

  19. Tim,
    I am scared of roller coaster rides, like Magic Mt. and Disneyland they make me sick to my stomach. Today and maybe this week everything will be down except my CD’s am I worried ?
    No, I am going to work and focus on that. I will keep doing that until they close the doors or lay me off like that last time. Then I will be worried.
    I am looking forward.
    I spent yesterday helping my group making new trees to sell at our plant sale in July and I will be going on vacation to Portland next week with the wife to see family and help another group with their scion exchange. I am certainly concerned about travel and the Covid-19 but I am not worried enough to change my plans.
    Everyone stay calm!

    1. Too late to sell. I should have sold the CEQPPR, energy. Then this is a relatively large cap. The preferred followed the common with drastic 14+% drawdown. The renewables including Brookfield also followed the ok coral shoot out between the Saudis and Putin.

      A good SA article from Lynn Schwartzer explained well IMHO. For what Doug Le Du calls it VALUE investing, these people have already eaten the enormous cake, 30+% market gain. It was overvalued and this seems to be time for pay-back. I will hold onto all positions. Someone reported GLOP or GLOG 4th quarter is not as bad as it may seem. He wrote his SA article before the oil price tanking.
      https://seekingalpha.com/article/4330550-u-s-is-vulnerable?utm_medium=email&utm_source=seeking_alpha&mail_subject=lyn-alden-schwartzer-the-u-s-is-vulnerable&utm_campaign=rta-author-article&utm_content=link-1
      I will hold on small amount of CASH and definitely will not buy any bargain. The odds are not good. FCIZP and BEP-A are just a few examples. Old issues are not necessarily good, momentarily TSCBP was trading at par. Even Gridbird’s solid SLMNP declined a bit. This shall also pass. Funny thing is Rida Morwa has an article pushing EPR common. No one is rushing to see a movie. And the CNBC pundits are urging people to buy what used to be good, tech etc.

  20. When this happened in 2009 – 2010 I left everything as it was. I did not sell anything. If I had foresight I would have sold everything early on, but I did not (just like the rest of us). I did not look at my portfolio for 6-12 months (can’t remember). Then things came back.

    This too shall pass. At worst we have economic disruption for about a year. We can survive that. As long as you do not need to sell your assets in order to pay your bills, I would not worry (although that is very hard to do and I understand the fear that many people have). I did see some good news in the past 24 hours. I saw that a vaccine was going into clinical trial in April instead of July. I also saw that Bill Gates is going to mass develop and distribute home testing kits. We have the most innovative society in the world and we have great technology – have faith everyone!!!

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