WOW!! No Wonder We Can’t Find Bargains

We have a spreadsheet which we use–but it is not posted on the “preferred stock” page that is “$25 Preferreds At or Near New Highs” which is a listing of all preferred stocks and it compares current price to the 25 week high for the shares.

This spreadsheet is now showing 154 of 462 issues followed within 1% of a new high.

When I reset the formula to show all issues within 2% of a new high 250 issues show up. More than 1/2 the $25 preferred issues are within 2% (50 cents) of a new high–no wonder we search in vain for “bargains”.

Of course we see that in our own holdings–in particular in the investment grade CEF preferreds. Our AllianzGI Convertible and Income 5.62% Preferred (NCV-A) is now trading at $25.81. Some of this quality issue (rated AAA by Fitch) we purchased last December in the $23.50 area and more of it we purchased in March/April for around $24.50. Never dreamed we would have such capital gains in these issues.

I hate to wish for an “event” of some sort, but honestly we either need an event to set prices lower or we need to recalibrate our expectations. Patience I keep saying–patience.

We will try to post this “new high” spreadsheet in the next day or 2.

32 thoughts on “WOW!! No Wonder We Can’t Find Bargains”

  1. Can some folks please comment on how much you allocate to
    1) preferreds, 2) equities, and then 3) all these rest, ie bonds, cash, cd
    I’m at 12% prefereds, 30% equities (mostly SPY), 58% bonds & cash.
    ps I had a Barrick Gold Bond 4.95%, due 01/15/2020 get called on 7/15/19.

  2. I’ve been experiencing some interesting activity in bonds I hold lately. I own a number of bonds and recently JP Morgan called a 2028 3.25% yielding bond at par. I had purchased it for 92 last year and it was about 97 when called in April/May. Today, FHLB called 2028 3.9% bond at par. I’m beginning to think the big money is expecting long term interest rates go go much lower which has been my view for the past year and the reason I loaded up on a number of long term high IG bonds. I am in no way bragging, just pointing out that it’s interesting these instruments are being called. I considered taking profits on my NCZpA and GVVpH but these actions have given me pause. I’m now scouring for long term non-callable bonds.

    Just my humble opinion.

    1. I too am filling out a foundation core of bonds like this in IRA vehicles as I have about 8 years to RMD. I want some compounding instead of CONFOUNDING. Calls and IG are suddenly are important. Remember when everyone’s concern was go to Fix/Float which brought on Dec ’18 sell off of perps and longer terms? Who were the buyers? Interesting to see bonds under 4% getting called. I believe the CFO teams are telegraphing what you see. Japan, Euro, US new Samurai money policy… The rules of money have changed since Bernanke; money is a fabrication relative to creative policies for those in control of it…the problem comes when contracts are seen as solid too. So much for theory. Good Positioning! J

    2. DI2000 – I, too, own a lot of conventional bonds but I’ve not experienced what you are experiencing, perhaps because in general I’ve tried to buy n/c bonds but for make whole provisions… My last bond to be called was a Lazard 4 1/4 due 11/14/2020 and it was called under the make whole on 4/10. That got me thinking about the math of a make whole call…. If I understand it correctly, the lower interest rates go, the more draconian the execution of a make whole call becomes, right? Of course, on a short maturity bond it probably doesn’t make much difference but I think a bond maturing say 5 years out that’s only callable under a make whole provision becomes even more economically non-callable the lower interest rates go.. Do I have that right????

      1. Camroc, I probably need somebody to manage my funds, learn to pay attention….So 2 days ago I unwinded a bit under half my SR-A about 1500 shares at over 26.70 thinking price was too high yesterday and day before. Then at end of day yesterday I, turned right back around about bought them all back at 26.46 (or .48 cant remember) which was not the plan. Then I wake up this morning before heading out to course, I apparently thought I had sold 2000 combined, because I bought back 2000 late yesterday. So I realized I got almost 500 shares on freaking margin and didnt notice. So I looked at price today and it was already back to 26.73, so I just sold the 500 on margin at 26.73. Over a $100 one day profit just for being dumb. As any intelligent person would not buy a 5.5% preferred on 8% annual margin, lol….Lesson learned…Pay attention to details!
        Now SR-A is already back above my sell price, so I should be selling again…Nah, felt kind of naked without my over sized SR-A security blanket on. Maybe at if they hit $27, I will reconsider.

    3. I suspect a lot of companies, in particular banks, have more money than they can loan out. Calling in bonds, even 3% ones is still a way for them to make money on otherwise idle cash.

    1. Big Lou…from the KYN-F prospectus: Our distributions that are treated as dividends generally will be taxable as ordinary income to holders, but (i) are expected to be treated as “qualified dividend income” that is subject to reduced rates of federal income taxation for noncorporate stockholders, and (ii) may be eligible for the dividends received deduction available to corporate stockholders, in each case provided that certain holding period requirements are met.

  3. Gee, I’m not alone!

    As of a few weeks ago my philosophy was to buy the better quality new preferred issues on the OTC to get a good price and then just hold them for the income. I’ve had to change my approach in the last few weeks as the capital gains were too good to ignore. I guess when the facts change, I have to change my mind.

    Normally, I’d be about 60 -70% individual preferred stocks and baby bonds. Right now I’m at zero% those instruments. “0%”.

    I’m down to holding ICSH, IVV, VGT, FDN, CSQ, PCI, UTF, QQQX and 65% cash in Fidelity money market and cash reserve funds SPRXX, FDRXX.

    Just going to sit and wait for Tim’s “event”.

    1. Sold NI-B @ 27 for a 13% profit yesterday.

      Will try to buy back in when it goes a little lower and see if I can play that game for a bit.

      Really wish I had bought more than a full position.

      1. My NI-B, just sold at $27.35, owned for 10 days, 3% – just entered a GTC order to buy it back at $26 – this is just crazy!

    2. Retired, do you have any concerns about the leverage in some of the closed end funds you own? CSQ has 33% leverage, PCI 45%. I would think that a typical preferred selling $1 above par would would be less volatile than a fund with 33-45% leverage. Thoughts?

      1. You’re probably right but I don’t worry about it because except for PCI they are such small positions. If the market sours, they will probably be shown the door also…except for PCI which I would add to. I like the Pimco CEF’s. If they didn’t trade at such high premiums I’d own more.

  4. I don’t wish to be a killjoy, but there is ‘life’ beyond preferred issues, notes , and bonds. I understand that this site is primarily for those types of issues, but I can find many fine products beyond those sectors. There are CEF’s, ETF’s, Reits. LP’s, MLP’s, Royalty Trusts, Utilities, and so forth that are worthy of investing in. Just sayin’. Readers here seem to have blinders on. Three I own are BEP, UTG, AY, as examples. Why push against the string ? Look elsewhere. Approx 65% of my holdings are within the scope of this website, but I don’t limit myself to just those type of issues.
    If prices are too high and yields too low, I buy elsewhere. **As most of your understand, there are CEF’s and ETF’s whose primary, or total, holdings consist of preferred or similar issues, so one gets diversification in one holding, including foreign issues if one wishes.

    1. I think other than energy related, all types of income producing stocks are at their high.

    2. just point out as a grammarian, Howard, that your exceptional liberality with apostrophes (ETF’s, for instance) is contrary to every traditional use of English

        1. Camroc, so you wear the Curmudgeon tshirt M-W-F and the Grammar Nazi tshirt on T-Th? If an investment has an apostrophe in it, its probably too complicated for me to understand and invest in. 🙂

  5. closed out a few positions in the past couple of days — IPPLF, SF-A, KYN-F. know it’s going to be hard to beat those performers, but solid profit makes sense for me (IPPLF yielded more than 11% in about six weeks). don’t mind moving some of that into higher quality, lower yield vehicles for a while. who knows what the next gyration will be? a bird in the hand . . .

    1. D…I recently took profits in NRUC for the same reasons you mentioned, but I am curious about your selling KYN-F which I consider to be a proxy for holding cash. It currently only trades 23 cents over par, did you buy it much lower than that?

      1. CW, just wanted to raise cash in a non-qualified account, may have a funeral to pay for in near future — no kidding. enjoyed the payout for quite a while, made a small but welcome gain on the holding. everyone has their particular circumstances. as Nomad might say, coniugem et liberos et nepotes protegam futurum. ciao

        1. I got a cumulative D in Latin for a cumulative four year grade…yep they forced me for FOUR years…chinchin! to Google translate!
          pluet super illum, ut non armis!

          1. Im a dinosaur, Joel. Nomad’s Latin goes over my head. Im probably one of the few people who graduate HS, and several levels of college without one minute of foreign language. No Mas is the only foreign words I know…And if it wasnt for Roberto Duran, I wouldnt know that either.

      2. forgot to mention, also had a GTC sell on for NRUC at c 26.80 for a while but decided to hang on to it for a while. it’s a smaller holding for me. ciao

        1. That was a great buy, D. Wish I had joined you all there. Cant blame lack of knowledge as the reason, as I knew…Just poor decision making….

          1. a hike in the woods, a walk by the river, puts it all in perspective. I’ve learned so much from your commentary, Grid, really appreciate it, staying tuned in.
            all thanks to Tim McP

  6. Likewise, I’m panning the same tailings everyday Added two 100 lots to existing positions and reinvested some ‘small’ of last quarter’s QDI into STT-E and IPWLK but held my nose. I don’t want cash right now as I am liquidating other assets I have held very long term for this retirement thing and hope to have near future cash to HAVE to plow in somewhere.
    “We’re turning Japanese, I think we’re turning Japanese…I really think so…”
    Patience will be rewarded…thank gods we are not in a zoom inflation.

  7. Add to that the credit spread is pathetic and worse yet the YTW on almost all issues is miniscule or negative. In the land of the blind the one eyed man is the king.

  8. I nibbled on GGT-E at issue. Only a 5.125% coupon but issued by a CEF. It’s been below par for most of its life but has been over par lately. I’ve been trying to sell it at 25.25 but the orders haven’t hit yet.

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