It may seem like there would be no question in ones mind whether investors should be invested in interest rate sensitive securities right now–there are not too many questions in my mind about it. The ability to garner 6-9% current yields and many times to have potential for capital gains in the next 12 months should be a strong argument to get invested.
On the other hand one doesn’t want to willy-nilly throw their investment funds at just any old preferred and/or baby bond. I am at just 60% (more or less) in preferreds and baby bonds–heading to an eventual 70%, but it might take me a month or so to get there. Based upon my personal beliefs on interest rate cuts by the FOMC the capital gains I miss and the reduced coupons I collect should be minimal (assuming I am even close to correct in my personal forecast).
Yesterday I made an add to a current position–I bought more RLJ Lodging $1.95 preferred (RLJ-A). I intended to go out of my comfort zone and add a REIT or shipping preferred, but the high pricing on some of the issues–in particular the shippers deterred me from executing–I continue to look. Currently I have quite a few ‘full’ positions in my portfolios and some overweight positions–I am comfortable in these holdings and if not an intention to stay diversified I would buy more–it is a struggle to not add more, but I need to resist.
Economic news released today was pretty darned good–fewer jobless claims than expected and retail sales which showed the consumer to still be in a spending way–even if they are just racking up more debt on their credit cards. These numbers don’t argue strongly for interest rate cuts–BUT Powell is in a corner and should deliver the 1/4% cut next month.
I have been in RLJ for six months. I like “busted converts” because they can’t be redeemed ( unless the stock price exceeds the striking price for a period of time.) I suspect that next year as rates fall (at least temporarily) many of us will be struggling with depressed reinvestment rates? I also own ETi and Lexington Industrial Trust.
Tim when you say you have been considering a REIT, can I ask what type?
Not looking at MREITS are you? Or it’s Property REIT’s your thinking about?
As soon as I heard the news on the radio about both Amazon sales were up on Black Friday and Walmart sales were up with well off consumers shopping to save money I knew it would call into question any rate cut in September.
Like Tim, I still am expecting only a 1/4% cut in September and the market must think it’s still on as they are up. I wonder how the markets will react when they do announce a cut?
I am grateful R2S mentioned HTLFP this morning and I didn’t have much time to search this morning, but I would say I am back on the hunt for something to replace it with now rather than later.
for your info, I don’t see rlj in your list of holdings though i could have missed it.
Hi bob—I found the same thing when I went in to update. I added it now with info.
Got me to thinking and looked at my Google Docs spreadsheet for some statistics to compare to Tim. I’m 85% preferred and baby bonds. Portfolio earns 7.8% return. Cash on hand is 3.3%. 47% of portfolio is in a Roth. The Roth has the high earners in it as I converted those first and they out earn what’s left in the IRA to convert. Cash on hand sounds small, but it is a tidy sum due to portfolio size. I’ll answer the question of one of our candidates am I better off now than four years ago? The answer is yes (this website has really helped!) plus i am blissfully retired! Life is good……
Thanks for the recap Dj. Sounds like you are doing good!!
I’d be curious to know your after tax return.