Worn Out for the Week

After a really busy week we are really worn out (of course at my age that isn’t too unusual).  Earlier today I was doing some deep due diligence on one of my new favorites REITs—American Homes 4 Rent (AMH).  No I am NOT talking the common shares–I am talking the preferred issues–all 5 of them.

With the fall in income issues in the last month or two we are looking for safety that is consistent with our own risk/reward targets.  We always are looking for that security that will provide us with +7% with a bunch of safety.  That is a tall order–still.

We want to own some of the max safety issues–i.e. CEF preferreds, but we also want to ‘blend’ them with some issues with the +7% issues.

We had noted a week or two ago that we tiptoed into the AMH-D 6.50% issue, which now has a current yield of 7.25%.  There are also 4 other issues with current yields in the 7.23% to 7.40% yields.

Next week (or sometime in the next week) we are going to write in depth on AMH and why we love these preferreds.  Remember that AMH was co-founded by billionaire B Wayne Hughes who founded cash machine REITs Public Storage (PSA) and PS Business Parks (PSB).  I have studied the balance sheet of AMH twice in the last month and quite honestly am pretty delighted with the strength of it and the amount of free cash flow that AMH tosses off.  Very similar to the PSA and PSB balance sheets.

Look for some indepth writing on AMH next week.

50 thoughts on “Worn Out for the Week”

  1. My portfolio is holding at 7.75% return for the year (bets SP500 -7.75%), going to be writing a lot of just OTM calls on a bunch of my winners, if they edge up ITM, I will let them get assigned and take the profit. I too think we are seeing the selling of everything, good and bad. Many of the dividend aristocrats along with strong preferreds have been sold off. I mean how high of yield are we going to see on AT&T? Anybody think they are going to not pay the dividend? They yield 7.12% as I write this.

  2. Hi new to this site and discussions are.great. Just picked up some UZA – us cellular 6.95% notes – at $21.90 this week. Having a hard time thinking of anything negative about this issue at this level. Any thoughts? I saw someone had posted on US Cellular notes earlier. Thanks!

  3. Tim, I look forward to your article on AMH next week. It has been awhile since I looked at the financials for the company, but seem to remember they valued their preferreds on the balance sheet at .01 per share, at not at $25. Just took a quick look at their latest SEC filing and my memory was correct. If my math is right, it appears they have 35,350,000 preferred shares outstanding at $25 each for total of $883,750,000. However, as listed on the balance sheet at .01, it only shows up as a total of $354,000. While a completely different company, this is also how Ladenburg shows their preferreds on the balance sheet.

    1. In the interest of furthering my education kaptain lou, what can a potential investor infer from this massive difference on the balance sheet?

      1. Mikeo, when looking at the balance sheet, investors just need to be aware of the fact that the total preferreds outstanding (if they were to be redeemed) is actually $884M and not the $354,000 listed on the balance sheet. When looking at the leverage ratios for REITs, I normally calculate this by taking the total debt + preferrreds and then dividing this by the original cost basis of the real estate. This calculation assumes the real estate is actually worth at least the original purchase price, so it cannot be done with the mall REITs. In the case of AMH, the debt + preferreds divided by the cost of the real estate is only about 35%, so leverage is still pretty low. However, if you just took the numbers as listed on the balance sheet, leverage would appear to be on about 27%, so this is a big difference.

        Just to note, for some of the older REITS that have been around for a long time (such as NNN), many of the properties are probably worth much more that their original cost basis, but my calculation still gives me a general idea of the amount of leverage a company is using.

          1. Glad you found the information helpful, Mikeo. We are all here to help each other learn a little more about fixed income investments and the comments here have been helpful to me too.

        1. KL,
          In looking at their financials, it looks to me like AMH has recorded the difference between the .01 par value and 25.00 liq pref of their preferred stock as paid in capital.
          There appears to be one account in the equity portion of their balance sheet for PIC which probably represents PIC for both common and preferred. In other parts of the 2017 10-K (supplemental schedules) they clearly state the liq pref value of preferreds in presenting their capital stack. I also note that in their prospectus it appears they reserve the right to exchange preferred equity for common equity in the event of a change of control. Perhaps this is why they are presenting their preferred amounts in their financials differently than some other firms do. In any event it looks to me like the preferred stock is correctly accounted for in AMH financials though perhaps the presentation is not as clear as that of some other firms. Certainly could make ratio calculations a little more tedious.

          RB

          1. Oops! Any reference to paid in capital in my previous post should be read
            as a reference to additional paid-in-capital.

            My bad.

            RB

            1. For balance sheet lovers, QDI term preferreds are interesting. They are put on the liability side of the ledger instead of capital. I have a couple of those in CNIGO and LANDP…CNIGP is even more unusual because its an owner optional convertible with an end date maturity of the QDI. They cannot even determine how many will be converted because that will depend on what the owner does.

          2. Thanks Razorback for your comments, much appreciated. Always looking to learn from other investors here. But overall, I think the leverage on the company is still pretty low at around 35%.

        2. I second the “very helpful” comment. Thanks for posting more information on the basics!

    2. I bought huge number of shares of AMH-E plus AMH-D on the IPO believing that the Co Founder of PSA should have the know-how plus the former Canadian PSA COO as his co-founder of American Home 4 Rent. Luckily, AMH-E gapped up, I sold them all taking profit except a few hundred shares of remnants. Moody downgraded their new shares to junk. I believe that AMH does not have existential threat. They were quite sloppy. Failed to insure their homes in an earlier quarter losing some houses in a fire, paying more than the market price in California in the boom time etc. Yes, I look forward to getting Tim’s analysis. Thank you, Tim. Thank you, Kaptain Lou

    3. Preferreds are always shown on the balance sheet at ‘par value’ kaptain. Not wanting to be a nit picker I don’t correct people including Doug le Du and many other that refer to $25 par–hardly any of the preferreds have a $25 par value–it is anywhere from 1 penny to a dollar.

      $25 is the liquidation preference.

      1. Its largely a nothing burger to me. Take holding company Ameren (AEE)…Their Ameren Illinois preferreds are listed as $100 par value for all series, while the Ameren Missouri preferreds are listed as no par value…I give that no concern either way.

  4. Still sitting on my hands. This volatility is creating a great opportunity for income investors who focus less on price and more on income quality. Retirees have been waiting for this opportunity for a long time.

    1. I’m one of those retirees Marc, and without the experience and expertise of Tim and others here it would be impossible for me to gainfully take advantage of this opportunity in the near future. Thanks to all of you! You are my guiding light as a novice in preferreds and BBs.

  5. NOT FOR POSTING
    Tim, you can use this analysis if you want to make it a separate post. If so, you do NOT need to give me any attribution:

    Title: How Long Will the Pain Last?

    The database has 159 baby bonds that traded both on Thursday and Friday (12/20-12/21) , which were heavy down days. I averaged the volume for both days and expressed it as a percentage of total shares issued. If a high percentage of the total shares has traded, this might indicate we are closer to exhausting all of the willing sellers. Unfortunately, the data did NOT show that in aggregate. The median percentage of shares traded was 0.36% per day. If we guess that investors holding say 20% of the shares will decide to sell, we would have 55 more days of selling pressure. Not exactly what we would like to hear. Obviously, if only 10% of the shares were traded, that would still be 28 days. I think we should expect more sellers to feed off the downward pressure and capitulate .i.e. hit the sell button. Obviously, this is not an exact science, but would not be surprised to see broad selling pressure for many more weeks. Also, there is a wide range of volumes, all the way from 0.05% to 4.33% of outstanding shares, so we will likely see a wide spread of price pain amongst the issues.

    Ten lowest volume issues:

    OXSQL 0.05%
    TVE 0.05%
    TVC 0.05%
    AFHBL 0.05%
    DTQ 0.08%
    EAB 0.09%
    TANNL 0.09%
    HWCPL 0.11%
    CPTAL 0.11%
    EZT 0.12%

    Ten highest volume issues:

    LTSF 1.07%
    HCAPZ 1.12%
    TBC 1.23%
    HCXZ 1.30%
    NEWTZ 1.46%
    JMPD 1.66%
    RILYZ 1.87%
    RILYL 2.52%
    MDLX 3.71%
    MDLQ 4.33%

    Thanks,

    Tex

    1. The question to me Tex and Tim is this just a selloff? There is a possibility that we are fundamentally repricing the asset class due to the fact that corporate debt has gone from 4.7 trillion in 2007 to 9.0 trillion in 2018. Corporate Cash to Debit is at it’s lowest ever ratio.

      https://www.cnbc.com/2018/11/21/theres-a-9-trillion-corporate-debt-bomb-bubbling-in-the-us-economy.html

      it is not a question of cash being king. It may be a question of debt being a piranha. If we are fundamentally changing how we reprice the asset class for the next 5 years or so then investors will want higher yields to cover the risks. That of course, means lower prices. We reportedly have a lot of marginal rated Investment grade companies that really are more junk than IG which would require pricing also. The aggressive nature of the Fed coupled with a failure to be definitive about 2019 has light a fuse. The question becomes can we stop the fuse at this point? Unclear to me. So, yes this shall pass and prices will recover but if fundamentally repricing the asset class, it may not be months it may be years. Tim was a damn genius being mostly in short maturity term issues. I have no intention of abandoning all preferred issues or baby bonds, but if debt is now hated, need to adopt a different strategy and a new set of expectations and prepare for longer recovery periods. Maintaining a broad market approach to preferreds/baby bonds may not be the best decision. This was a decision Tim was wise enough to take early. Others like me, may need to simply take some losses and adjust. The markets do shift, investors need to have conviction but also need to recognize market shifts (hardest thing to do). Is this a selloff or a asset class repricing? You all know this sure, after it’s occurred. Not sure, you can determine this before it’s occurred because it’s may be sentiment based. You at least have to consider the possibility we are repricing to cover risk driven by record levels of debt.

      1. Steve, on a relative fundamental level many preferreds on a comparative basis are still overpriced anyways. Almost every preferred that existed in 2013 is still 5%-10% higher now than they were back then. So one cannot say they are absolute bargains now. Preferreds really shot up for a couple years without any fundamental change in long end.
        As you mentioned debt is a concern, and a lot of these trashy preferreds have been taken to the cleaners to better match the risk. If price was reset correctly the pain isnt evident. Take my cited NISOP 6.5% that just went to market a couple weeks ago and is right at par today…This past summer they issued a smaller private placement preferred of similar terms. They got it placed at 5.6%….Less than a half year later they send a competitive 6.5% yield with higher adjustable kicker also. 2006 was the last plus 6% QDI Ute preferred issued and it is long gone. So its not surprising this has been well received. Nothing short of financial stress or total market collapse do I see it dropping to $21 in future. If it does, most others will be in a world of hurt.

        1. I absolutely agree and the percentage on my portfolio in NISOP is currently 5%. If I restructure, this stays in my portfolio I have recently started to buy AGO-B at par. Maybe will be able to buy some below par. State budgets looks reasonable. BAA2 Moody’s rated. A rated by S&P paying 6.875%.

          So there are issues, I can hold for many years. Is CTAA one of them? No, it looks like I eat some losses and move on. I think, I need to narrow down to fewer select issues and if that means not overweighting issues like NISOP and going to MM and waiting, so be it.

          1. Steve, I certainly agree that respecting capital is always wise, and if that means MM and wait until one is comfortable, so be it. Personally, I really like NISOP issue, and will hold long term, but Im not starry eyed over it. Say like my AILLL…I used to turn this 6% issue into an annual 12% returner by flipper for 40-50 cents a quarter and collecting divi for several years.
            But I made a “mistake” by getting some wealthier older income seekers into the game and they have over the past years bought this thing up and wont ever sell. I know one guy who bought over a quarter million of it over a year and wont let it go. $12 million floats that was issued 25 years years ago, naturally becomes institionalized over time. Then you throw in a few like I mentioned buying them up and it just gets too hard to flip as no shares are available. So I largely just hold my large over-allotment also, as I cant risk not getting them back at a respectable price. I saw 400 come available at 26.52 and buy the time I opened up my buying account, Inspbudget already stole some more and I only got 195 more to add to the big sock drawer.

            1. Grid
              What I hear you say is revision to ~6% mean on quality over the last 20-30 years without all the fireworks shows in the market. I agree, with or without the fireworks, over time it’s been ~6% on quality for quite awhile. No future guarantees. I can remember 15% mortgages. I did a quick tally of my last 3 years investment return, added a zero for this year (close enough I hope). I carry more cash and cash-like securities than most do but had good trading profits so I called those a wash, close enough, and got 6.5%. We are seeing the market reprice a lot of stuff right now, that’s not surprising given a decade of Fed and Wall Street mechanizations. Your faithful favorites soldier on at~6%. I don’t know what comes next, nobody does. I’ll deal with it as best I see fit. I have a single story house so the other option won’t work anyway.

      2. SteveA said: “You at least have to consider the possibility we are repricing to cover risk driven by record levels of debt.”

        Steve, I think the market is broadly repricing risk. Consider that the corporate Baa rate has increased from a short term low of 4.71% on 8/20/18 up to 5.07% on 12/20/18. The Baa rate is what is most commonly used to determine interest rate spreads on preferreds and baby bonds. So you plug that increase into your pricing model and it will forecast that yields go up/prices go down. No magic here.

        What we are seeing is a wide variation in how much prices have declined on each issue. It does NOT seem rational like investors are doing the calculation of what the new yield should be. They are in many cases hitting the sell button, regardless of yield/price. And they are also not doing a default risk calculation like using the Z score.

        Assuming most of the rapid drops are irrational, the questions are how much longer will it go and how long until the prices recover to what we think ARE rational?

        My original post argued that the irrational selling might persist anywhere from weeks to months. On these thinly traded preferreds/babies, literally a handful of sellers can drive the prices down irrationally. And yes, I have done that experiment a few times by mistake. I argued that it is likely that more sellers see the downfall and hit the sell button, i.e. becoming a self-reinforcing price drop regardless of price.

        I agree with you, that the recovery to rational prices is likely months to years. In that time frame, we might have a recession where the default risk broadly increases. GE is the elephant in the room with their ~ $170 Billion in debt. If/when they get downgraded to junk, it will likely cause a major disruption at least in fixed income when many funds are forced to sell the bonds.

        Assuming this analysis of weeks to months of increased pain, followed by months to years to recover, each investor will have to decide their best course of action. I am working on a separate model that hopefully will help guide that decision.

        1. Tex, I fully agree with you with one difference. I am now forecasting a recession. Investors look at the 10 year treasury rate inverting with short term rates as a clear signal of a recession. In the last few days, we have reached a more significant inversion to me. My analysis of the numbers is when Jay Powell took office, the 90 day LIBOR was 1.79%, it has reacted properly to 4 rates and is now 2.82%. The 10 year TBILL was 2.79%. It is 2.79% today. The fed policy of rate normalization has to be labeled as a failure. When you do 4 rate hikes without impacting the 10 yr TBILL, you break the economy. The only weigh to get the needed yields on the preferred stocks is to lower prices.

          As we all know, the inversion of TBill rates impacts investors. The inversion of LIBOR hurts business and people who will have higher bank loan rates, credit card rates, student loan rates, and adjustable home mortgage rates. Can the damage be repaired by simply saying you’ll stop making things worse by not raising rates more? Maybe for an experienced Fed chair but Jay Powell has no track record, so I doubt it. The Fed now has tipped the economy and needs to stop asset sales purchases or cut rates. If it were Yellen or Bernanke with proven track records, words may have a 50/50 chance of working. Powell needs to take action and seems too stubborn and adamant to do it. I don’t expect people to agree with me. It is how I am changing my portfolio to deal with – a recession of reasonable magnitude

  6. It seems that rationale is not there anymore. People are dumping everything.
    Is cash the king…? I started to make more trades than usual. It reminds me a little bit of a time 10 years ago. Was selling issues that drops less and buying that drops more within the same risks categories. Later flip them again, the others will catch up eventually on the downfall.

    1. LYR, that is basically what I do except I try to stay in illiquids where everything moves in slow motion and not in tandem. But geez the liquids have been fast and furious…IPL-D traded in a range on 21.81 to $23.03 and it was up and down the entire day. I planted my tree at 21.83 and it took all day to get my 400 as they came in dribs despite heavy volume of 13,000. I basically have flipped my cost basis of SRC-A almost to break even after a disasterous first entry purchase a little over a week ago at $21.70.
      Just this week I bought and could have sold the same $25 par issue for a buck a share profit in an hours time…But I held these instead. I am always looking to hunt down HE-U at a good price point and sometimes I have had to sit out a year to wait. At $24.50 purchase I am just not going to let them go that easy. I wont that damn interest payment capture in 10 days and will hold indefinitely unless it goes back over $26 and another better relative trade is there to switch out of.
      BTW, I am seeing how the mechanics of EBBNF are going to be…Before previous week or two, it would only trade a couple times a month so it many times will not be in sync with its proper trading price as set by the TSX trading. EBBNF locked up today with no trades so last purchase price was $17.89. It closed today on TSX at $18.40 on 11,000 shares trading hands.

  7. Investors. Pretty subdued group right now. Record fund outflows in December and buyers already hunkered down coming into it. Something had to give….prices of course. I had a few green shoots pop up today but I know they can get crushed next week. That’s just how the game works. For what it’s worth, I always keep a 4 rung ladder of 1 yr CDs. The 1yr was 2.85% last week, 2.75% today. I call it my Capital Conservation Fund and I pocket the management fees. It drags down my total return until this kind of stuff happens.

    1. I do the same thing with CD’s in an IRA. My 4 rung ladder has one mature every three months with the next one maturing the last week of January. If prices for preferred stocks and baby bonds stay in the dumps, it’s going to be tempting to not reinvest that CD in another CD. The CD holdings have kept my losses in the account to about 2% this quarter.

    2. P,
      Just to give an idea here, not advice…But since I got heavy into preferreds after taper tantrum, I have largely been investing for this occassion and being prepared to avoid the calamity. People largely have forgotten 2008-09 and 2013 Taper Tantrum. I read every scary article there was about preferreds before I bought..The center point being..They are the worst of both worlds..Trade like bonds when they sink, and trade like stocks when they sink. And clearly there is truth in this. So I largely built a preferred stash that were “veteran preferreds” that have been through the battles and scars.
      The evidence was overwhelming, that higher quality illiquids held up infinitely better than liquid and lower quality. Mutual funds dont own them, algos dont follow them, people cant short them, and stronger hands hold them…Look for example (there are many) at NSARO. Would you pay $2 over par for a 4.78% perpetual preferred? Somebody did yesterday…CNTHO somebody today bought 400 shares at $51.40 for a current 5.28% yield…
      And people are dumping 7%-8% fair quality issues indiscriminatly now…Makes no sense, until one factors in quality, scarcity, par relationship, and company ability to redeem. Now those arent my choices of comfort but on same vein that is why I own the CNIGO, KTN, AILLL, and FIISOs of the world. They are either high quality or a duration I can comfortably hold until maturity with a more than solid expectation of payment and/or principal at maturity if appropriate. This is largely why I am up on the year along with some fortunate buys and flips also.

      1. Grid
        I hear you. I got some of that stuff, and remember I asked you about GJV? Mine has mold on it but paid me 7% the whole time. I saw quality being dumped this week to yield over 7% and I bought a bit of it. I’ll sit on it and buy more if it goes enough lower. I don’t think the world is ending or that interest rates will be shooting up over 7% soon. High yield is what’s really getting gutted and I stay away from it. I flip stuff too and historically that had juiced my returns a bit to offset some short term bonds and CDs I ladder. I knew the last 3 years were too good to be true and that payback would come around to level things off to a reasonable level overall. Here we are. I’m still smiling in aggregate for now. I was very fortunate (lucky?)to have sold a lot of my “riskier” holding a couple months ago and so have cash for this adventure. I remember sitting in my office one night during the crash looking at Key Bank (my bank at the time) preferred paying 15% and I entered a big order in, then froze and didn’t hit “confirm”. That was scary times, this is nothing yet.

        1. Yes, P, I doubt I could have pulled the trigger then. I didnt really follow preferreds in 08-09 crisis, but I studied the hell out of it, and darn near wouldnt get in them, until I stumbled onto old illiqid preferreds. I knew their brands and reliability and many with 70-80 years of uninterupted payments. I needed that comfort to start. Of course riding the interest rate tailwind for 4 years after taper tantrum didnt hurt the cause either, lol.. See I am like you…6-7% is great with the right quality…Take AILLL…It went to market in 1993 as a 6.625% par when 10 year was around 5%. Now its 6.25% or so with a sub 3% 10 year. Heck its better relative value on yield basis today than it was then…Same as HE-U I just picked up at $24.50. I went to market as a 6.5% when 10 year was around 4%. Now I am collecting 6.63% on a sub 3%. Values are there, prices will rise and fall but quality will eventually bounce back to norm after craziness subsides.

          1. I didn’t always pull the trigger back in 08-09 but I did sometimes and it was scarier than hell. That stuff made me money many times over but I foolishly sold most off over the years. I could do without a repeat of that whole thing.

  8. Gentlemen, It’s been a long quarter. PFF preferred stock “index” is now down -6.33% YTD as per Morningstar. Total Stock Market Index is down -8%, World Stock market down -12.15%, Gold down -4%, Total US market bond ETF down -0.6%, US deficits going through the roof, Businesses given highest tax incentives (stimulus) perhaps in US history tariffs on the horizon, Yield curve slightly inverted, bitcoin down, and Fed has just completed 4 interest rate hikes but will not rule out more next year with GDP estimated at less than 3%. Sounds very pessimistic but to deny any asset class is working other than Cash is to deny the facts. Of course, very smart people like Tim may make money in this environment but from a macro perspective, this is

    With that said, with my personal YTD -3.5% and I am pleased with that. But as Captain Kirk would say – it is time for yellow alert. VMMXX – Vanguard Money Market at 2.37% headed to 2.5% which is close to 5 year TBILL is becoming compelling and nothing is much safer.

    I will likely close out the year where I am. But yellow alert means, it MAY be time to move some assets out to Cash in early January. Some may call me a nervous nellie, so be it. I am simply looking at which asset classes are currently working. The only one that working in 2018 turned out to be cash.

    1. Steve; You are exactly right. For my portfolio, the switch was flipped on September 1st. The high point of the year was marked on August 31 and it has been downhill from there with nowhere to hide except cash. With money market and CD rates rising, that will provide real competition for investment dollars.

  9. AMH is internally managed but they do have a GP/LP structure, which I’ve never examined in detail. I am always wanting to know if management, in any fashion, gets a cut off the top, other than usual salary. If they do, with very few exceptions, that’s a disqualifier for me.

    1. Anything wrong with these issues? The preferreds were hit much more than the common, which may indicate someone is dumping.

      1. I had one today OFSSL that dropped .68 or 2.82 percent while the common only dropped .02 cents.Also the sister bond OFSSZ was up .44 and both are due 2025 with almost identical interest rates near 6.375 People are selling at any price and there is no buyers everyone is waiting to buy when the craziness stops.

    2. Right now 42% of my capital losses for the year come from 4 issues. These 4 issues represent 20% (average 5% each). Normally I would have at 16% (average 4% each). The issues are AT&T, VOD common stock (my only common) and TDJ and CTAA.

      It looks like sector. I owned BT telecomm common stock before TDJ. I booked profits from BT telecomm to have less risk with perferred’s. Who know. I went into CTAA when common stock recovered from 15 to 22 since it looked like it recovered. Head fake

    3. Steve,
      I have huge positions on CTL, I sold my CTAA and CTZ taking profits when Jeffrey K. Storey, the new CEO from Level 3 Communication had a fantastic Earnings Call and bought 4 CTL bonds @93.2 (bond language) on 7/3/2018 for $3,728. Bought 150 shares of CTL common and added more in Nov @$21.145. CTL tanked on the news that their CFO who sort of hums along on Earning Call to Jeff Storey’s script that they intentionally reduced their footprint, calling quite a few of their preferreds getting rid of their old legacy lackluster biz moving forward.. Obviously the market does NOT buy their story or Storey (pun intended). I subscribe to Morningstar Premium. You can get their abbreviated analysis on Schwab.com if you have account with Schwab. I just took a peak at MStar update on 11/14/2018. It remains positive. Storey was CEO of Level 3 since 2013 and proven track record, i.e. Level 3 stock price more than doubled before CTL bought them out. Level 3 has enterprise technology is well subscribed. MStar considers FAIR VALUE for CTL @ $22. They continue to pay huge dividends to the commons. I have 948 shares of CTAA in my wife’s IRA and daugher’s IRA accounts. 800 shares of CTDD. This underwater position is the least of my worries as long as Jeff Storey is CEO and in good health.
      TDS. I never bought their commons but had huge positions on its preferreds plus preferreds to USM (their subsidiary selling cell phone service at rock bottom price). Once upon a time, decades ago, all their preferreds were rated IG, then Moody and SP gave them 2 level downgrade. I held on and they survived and I sold them near par or below par offset by dividends received. I bought 115 shares of UZC above par. plus 273 share of UZB at $24.9 on 10/4/2018, with huge unrealized loss. Their recent quarters were good. They had a very bad quarter before the last one as I recall, they managed to roar back. I sold all my TDS preferreds long ago and have not looked at the financials recently. If I recall correctly, the prices were okay until the dropped like falling off a cliff. I sold my CIM (unrelated) at a 3+% loss on this mREIT common (the only mREIT common I own). This was a mistake. Yesterday, it roared back with 2+% gain. I intend to hold tight. Like Doug Le Du would say in the prior Taper Fear in 2013, “you still get the SAME dividend or interest. Do you want to buy at higher price? His sarcastic remark was intended for his subscribers to buy more to average the cost down. Unlike Razorbackea, I subscribe to Doug for his Engine, tabulating all the 230+ names I track daily with dividend history and Moody and SP rating. It is our money, we surely need to do our own DD. Except for Maiden non cumulative preferreds, I will wait out the storm. J Powell will surely cease his ambitious rate increase once the Street shows (if not already) a clear bad market and perhaps the economy is NOT as strong as he thinks. LOL.

      1. JohnKCal. Not sure the issue with CTL is an individual stock issue. It seems like the market is taking down all high debt issues across the board. Storey knows and is reducing debt. I specifically brought CTAA at 7% coupon because Storey called issues at this coupon rate in Sept of this year. He is reducing company debt levels. The problem is not the logic, the problem is JackAss Jay. If we don’t get 90 day Libor back down, the bank loan’s CTL has will cost more because they float off Libor. A 90 day LIBOR currently 2.82% exceeds every other developed nations long term 30 yr treasuries and our 10 year TBILL. I am no ecconomist but for sure this is extreme. Does he stops rate hikes ? No. Does he get rid of forecasts for 2019? No.

        I don’t know how markets can continue to operate normally when 90 day LIBOR (short termm lending) exceeds 10 year TBILL in US and 30 year bonds for every other developed nations

        1. Steve,
          My thinking is: CTAA is a note, junior to all bank loans. According to MStar, their debt load is controlled, after they called in their high coupon baby bonds actually ETDS. The bond I bought is their legacy bond, no new issue when I searched for CTL bond on Vanguard and FIDO. IF J Powell should trigger a full fledged recession, CTL will not fold. They probably will reduce their staff to remain whole. The Number 1 concern for preferreds and ETDS is the likelihood of bankruptcy. Their technology has established need in the industry. A couple of years ago, someone at SA or was it Richard Lejeune who does have knowledge on bonds, to buy bond which gives you higher yield. At this time, CTAA is the best of the ETDS, unlike my CTBB. You need to calculate how much money would you lose selling CTAA to plow the proceeds to NISOP. If the result is positive and perhaps the net positive should be your primary determinant. Basically, it all depends on your fear on CTL survival as a Company IMHO.

      2. Steve,
        Moody offers no new info on CTL. I refuse to pay some $400 (my guess) for their 2018 updated info. Long Term Not on watch. Following Gridbird’s advice, I will NOT post their rating. You can probably find it on FIDO or register with Moody for their free service.

        1. John, My concerns are macro-economic at this point. CEO’s of all but
          a few highly rated companies rarely can execute their plans if macro-economics are a strong headwind. 10 year TBILL rates down close to 500 basis points since Sept. Short term rates (LIBOR) exceeding 10 year TBILL is not acceptable. And although I am not sure of this, I believe the LIBOR rate has not yet fully priced in the last rate increase. So the gap between the 90 day overnight rate and 10 year may yet grow. JackAss Jay by doubling down on his rush to normalization this week has IMHO lit the fuse. Not increasing in 2019 is not longer good enough. He needs to cut rates. So all high debt companies are at risk. I may be 100% wrong but that’s my view. Since he didn’t back down on 2019 dot plots, I strongly doubt he will cut rates anytime soon

          1. Steve,

            I went back to re read the Earnings Call of CTL which I saved in pdf format plus Form 10Q. Increasing EBITDA, increasing Free Cash Flow, $130 New Debt for the 9 months ended on 9/30/2018 vs. $6,608 Millions of USD for the prior year (from 10Q). They had a fantastic 2nd Q, which pushed the stock with sharp rise. Q3 has lower revenue by low single digit percentage, small increase in EBITDA and Free Cash Flow.
            Guidance for EBITDA for Q 4 is quite nice. They do not give guidance on revenues. They rather get rid of unprofitable old biz (including the decreased biz with the state and local gov biz). Concentrate on the enterprise new biz. Margin is still good and did not forecast significant decrease except perhaps very small increase.

            I do not believe that the LBOR rate is OUT OF CONTROL. I listened to FAST MONEY on CNBC. Only one hedge manager opined on Thursday that 2019 would be a much worse year with BIGGER drawdown than the 10% or so for YTD on the SP 500 index. I realize that our drawdown on preferreds and ETDS are larger. Then please don’t forget the dividend offset. Then I have ZERO experience in investing in the rising interest rate environment. Went through the entire Q and A on the Earnings Call and did not detect problem. My knowledge of reading financial statements is LIMITED, self learning from old AAII articles plus the retirement book written by Bruce Miller. I am not trying to discourage to keep your CTAA. Best of luck to you and all of us in this challenging environment.

  10. Tim,

    Someone at Doug’s called SPKE investors relations with his large holdings and asked many probing questions. From what I can gather, they fired some VP of legal affairs, made a Form 8K and the news can be found on Schwab and FIDO. That guy was concerned that the Preferred experienced larger drawdown than the commons. Today, SPKEP gapped up and positive on SPKEP. Today, the put/call ratio for 1 is none, 10 for 30 days. If I recall correctly, it has calmed down. Earlier, before the market experienced another down day, both SPKE are doing just fine.

  11. Like many other readers, I’m looking forward to that analysis. Given the carnage that we’ve seen in the markets in the last two months, my portfolio is now over 70% cash – no common shares left, only some income issues. So I have a lot of cash to deploy but only on those issues with a “bunch of safety”. Thanks for all your work, Tim.

  12. I will be waiting eagerly to read you analysis, Tim.

    If the economy tanks and we have fears of a recession, there could be a lot of layoffs and re-location as companies trim their staff or consolidate facilities. This could stimulate the rental market, a positive for AMH.

    Used to own one of their preferred series, but sold that a while back. Would be willing to re-visit this based on what you write.

    So bring it on!! Thanks Tim.

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