We now have had a couple up days in the S&P500–and just 30 minutes ago equity futures were green by a bit, but now (7:30 a.m.) the index is red–so maybe Santa is running out of gas.
The final read on GDP for the 3rd quarter has just been released at a surprising 3.2% which is an upward adjustment from 2.9%. Initial jobless claims rose just 2,000 – neither number indicates the softness that the Fed needs to change interest rate increases ahead. We are on the runway now for the 1/31/2023 FOMC meeting–so the initial data points indicate another 50 basis point hike–lots more data to come.
The 10 year treasury yield is fairly flat at this time at 3.68%–we had a couple days of 10 basis point moves which was plenty detrimental to income investors- so flat is good at this point–just give us stability.
PS Business Parks, which is owned by a Blackstone company, announced their results of their tender for preferred shares. A really quick look at the numbers shows that more than 25-30% of the shares will remain outstanding after the delisting of the shares. The last day of trading of the shares will be on or around 1/13/2023. The article is here.
I did nothing yesterday–barely looked at our accounts, but with a tiny amount of money available now I am looking for 1 more regional/community bank–with a current yield of 7-8% to buy today or tomorrow.
So Blackrock swoops in and buys out PS that has a very healthy balance sheet with no debt, turns around and leverages up $2B and crunches the preferred shares! The tender offer is a spit on your shoe. So is the story of Wall Street.
I had just picked a few hundred shares and bailed with a small loss before it goes to the dark side.
Whether the Santa rally happens or not it doesn’t matter concerning next year as it going to be a volatile year. Recession will happen next year.
Stocks – Down
Rates – Up
Treasuries – When the fed pauses at peak rates, buy treasuries & TLT or IEF.
MERRY CHRISTMAS EVERYONE.
Tim – Do you ever go into CEFs at all????? if you’re looking specifically to go into the regional/community bank area, have you ever heard of BANX? It used to be a pure play way to invest in community banks, but when Arrowmark took it over, it’s changed focus to include not only investments in community bank area, but also “money center banks through regulatory capital securities.” I can’t say I actually recommend it or that I fully understand it, but I’ve kept a small position since Arrowmark took over and it’s held up relatively well. https://ir.arrowmarkfinancialcorp.com/static-files/cd8e8eaa-b790-4bf1-9724-8becf81e1c75.. Anyone follow this one? It’s trading at 17.9% discount to NAV with 8.97% distribution rate according to cefconnect…. cefconnect does have its most current NAV incorporated into their stats… I’m not really sure what to think, but I’m keeping my small investment. Leverage = 25%. I;m not quite sure what or who to compare it to…
2WR–generally I haven’t followed them much (except their preferreds). I’ll take a look at BANX and see what I see. I do have a small position in the Royce Value Trust (RVT)–but it is quite small. Thanks for the ‘tip’.
Full disclosure, my family owns a decent amount of shares, and have for several years. I think the fund is well positioned for a stagnant economy with rising rates (83% floating rate assets). Regulatory capital securities have a history of very small losses, they are backed by pools of loans made by the large banks. Sounds like it might be risky, but the fund’s track record is good. Earnings and dividend both increased this year. NAV is reported monthly, based on actual market quotes of its holdings. Most reg cap securities are held by institutional funds, so there is not a great public market stock or CEF fund to really compare them to. They do use some leverage, but NAV has been very stable. Investor presentation is available here:
https://ir.stonecastle-financial.com/static-files/1a0baca7-3596-40d8-844b-5b2ab3154a39
2whiteroses, I’ve held this since early 2016, but sold about half this summer as I lightened up a bit on community banks. I’m about flat on the share price of that remainder, but the dividends have been much appreciated. Their investments in unlisted preferreds of those banks has seemed solid to me. I’m a bit embarrassed to say that I haven’t been tracking much on the evolution since Arrowmark, so thanks for the reminder to catch up on that better.
And after reading yesterday’s Seeking Alpha article, I’m even more embarrassed to see that the community bank part of the portfolio is now apparently only 17% of the whole. JMeek’s comment above is most useful.
I wouldn’t want to be any remaining PS park preferred holders that are not the company. If greater than 2/3 were tendered, they will now not only delist but amend stripping dividends and everything else. Worthless issues
I kept 400 shares to diversify and make 9% off an investment. I think there were hundreds of “what if” questions and you can play that all day long. The average investor does think the worst of things and it does pay to be cautious. If I am gambling, this is the kind of gambling that I like to do.
For that type of move I would probably want a yield of cost to be 20% (even 30%) or higher to justify the risk. 9% is peanuts for forced delisting with 2/3 tendered.
Interesting to see what happens.
The thing is… i wouldn’t buy anything with a yield of 20%. There would be smoke somewhere and that would really be gambling. Having a company pay 20% on a bond or preferred is a company in desperate need of cash. I am treating this like all the other investments that I own that went dark. And…. they are still paying me money. SLMNP, KTBA, etc. I cant imagine that one of the worlds largest asset holders perform some type of shenanigans. I did the math several weeks ago, but getting millions in savings by a reduction in 40% of the original value is a lot of money. That is the gamble, and I dont think it is much of one. It also helps, that I can treat this as play money regardless.
Im not a player here, but as I understand anyways (and I could be wrong), but the tender came from what is the old PSB, not BX. So the shares would be retired and returned to treasury. There are parent holding companies that acquire subsidiary preferreds and hold them, but I didnt interpet the presser as BX purchasing.
Grid–no it is not BX directly, but you know who is pulling the strings.
Yes, certainly I agree, but my point (without knowing with certainty) is retired shares going back to treasury have no say in anything. They are gone.
I kept 400 of X too. No way I was handing them back at 15 ish. Likewise, I think odds are favorable these keep paying. Building up quite an annuity of trapped issues now…KTBA, SLMNP, OCESP
Perhaps we need to come up with a new collective term for these. The Locked Drawer perhaps, located right next to the Sock Drawer?
Adrian–I can set something up on this – since it is starting to become a bigger category.
Sock Drawer sounds good